----

----

| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

|   Stewardship Financial Corporation |
|------------------------------------------|

| New Jersey                                                     |   | 22-3351447                           |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State of other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |
|                                                           |   |                                 |
| 630 Godwin Avenue, Midland Park, NJ                            |   | 07432                                |
| (Address of principal executive offices)                       |   | (Zip Code)                           |

| Large accelerated filer | o | Accelerated filer         | o |
|-------------------------|---|---------------------------|---|
| Non-accelerated filer   | o | Smaller reporting company | x |

----

----

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FORM 

| PART I   |   |                                                                                                             |   |
|----------|--------|------------------------------------------------------------------------------------------------------------------|--------|
|     |   |                                                                                                             |   |
| Item 1.  |   | Business                                                                                                         | 4      |
|     |   |                                                                                                             |   |
| Item 1A. |   | Risk Factors                                                                                                     | 11     |
|     |   |                                                                                                             |   |
| Item 1B. |   | Unresolved Staff Comments                                                                                        | 14     |
|     |   |                                                                                                             |   |
| Item 2.  |   | Properties                                                                                                       | 15     |
|     |   |                                                                                                             |   |
| Item 3.  |   | Legal Proceedings                                                                                                | 16     |
|     |   |                                                                                                             |   |
| Item 4.  |   | [Removed and Reserved]                                                                                           | 16     |
|     |   |                                                                                                             |   |
| PART II  |   |                                                                                                             |   |
|     |   |                                                                                                             |   |
| Item 5.  |   | Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 16     |
|     |   |                                                                                                             |   |
| Item 6.  |   | Selected Financial Data                                                                                          | 18     |
|     |   |                                                                                                             |   |
| Item 7.  |   | Management's Discussion and Analysis of Financial Condition and Results of Operations                            | 19     |
|     |   |                                                                                                             |   |
| Item 7A. |   | Quantitative and Qualitative Disclosures About Market Risk                                                       | 36     |
|     |   |                                                                                                             |   |
| Item 8.  |   | Financial Statements and Supplementary Data                                                                      | 36     |
|     |   |                                                                                                             |   |
| Item 9.  |   | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                             | 75     |
|     |   |                                                                                                             |   |
| Item 9A. |   | Controls and Procedures                                                                                          | 75     |
|     |   |                                                                                                             |   |
| Item 9B. |   | Other Information                                                                                                | 75     |
|     |   |                                                                                                             |   |
| PART III |   |                                                                                                             |   |
|     |   |                                                                                                             |   |
| Item 10. |   | Directors, Executive Officers and Corporate Governance                                                           | 75     |
|     |   |                                                                                                             |   |
| Item 11. |   | Executive Compensation                                                                                           | 76     |
|     |   |                                                                                                             |   |
| Item 12. |   | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                   | 76     |
|     |   |                                                                                                             |   |
| Item 13. |   | Certain Relationships and Related Transactions, and Director Independence                                        | 76     |
|     |   |                                                                                                             |   |
| Item 14. |   | Principal Accountant Fees and Services                                                                           | 77     |
|     |   |                                                                                                             |   |
| PART IV  |   |                                                                                                             |   |
|     |   |                                                                                                             |   |
| Item 15. |   | Exhibits and Financial Statement Schedules                                                                       | 77     |
|     |   |                                                                                                             |   |
|     |   | Signatures                                                                                                       |   |

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| § | Impairment charges with respect to securities. |
|--------|------------------------------------------------|

| § | Unanticipated costs in connection with new branch openings. |
|--------|-------------------------------------------------------------|

| § | Further deterioration of the economy. |
|--------|---------------------------------------|

| § | Decline in commercial and residential real estate values. |
|--------|-----------------------------------------------------------|

| § | Unexpected changes in interest rates. |
|--------|---------------------------------------|

| § | Inability to manage growth in commercial loans. |
|--------|-------------------------------------------------|

| § | Unexpected loan prepayment volume. |
|--------|------------------------------------|

| § | Unanticipated exposure to credit risks. |
|--------|-----------------------------------------|

| § | Insufficient allowance for loan losses. |
|--------|-----------------------------------------|

| § | Competition from other financial institutions. |
|--------|------------------------------------------------|

| § | Adverse effects of government regulation or different than anticipated effects from existing regulations. |
|--------|-----------------------------------------------------------------------------------------------------------|

| § | Passage by Congress of a law which unilaterally amends the terms of the Treasury’s investment in us in a way that adversely affects us. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| § | A decline in the levels of loan quality and origination volume. |
|--------|-----------------------------------------------------------------|

| § | A decline in deposits. |
|--------|------------------------|

| § | Other unexpected events. |
|--------|--------------------------|

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|   | · | Centralize responsibility for consumer financial protection by creating a new agency, the Consumer Financial Protection Bureau, responsible for implementing, examining, and enforcing compliance with federal consumer financial laws; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Apply to most bank holding companies the same leverage and risk-based capital requirements applicable to insured depository institutions. The Corporation’s existing trust preferred securities will continue to be treated as Tier 1 capital; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Change the assessment base for federal deposit insurance from the amount of insured deposits to consolidated assets less tangible equity, eliminate the ceiling on the size of the Deposit Insurance Fund (“DIF”) and increase the floor of the size of the DIF, which generally will require an increase in the level of assessments for institutions with assets in excess of $10 billion; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Implement corporate governance revisions, including with regard to executive compensation and proxy access by shareholders, that apply to all public companies, not just financial institutions; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Make permanent the $250,000 limit for federal deposit insurance and increase the cash limit of the Securities Investor Protection Corporation protection from $100,000 to $250,000 and provide unlimited federal deposit insurance until January 1, 2013 for non-interest bearing demand transaction accounts at all insured depository institutions; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Repeal the federal prohibitions on the payment of interest on demand deposits, thereby permitting depository institutions to pay interest on business transactions and other accounts; and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Restrict the interchange fees payable on debit card transactions for issuers with $10 billion in assets or greater |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

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|   | · | actual or anticipated fluctuation in operating results; |
|--------|--------|---------------------------------------------------------|

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|   | · | changes in interest rates; |
|--------|--------|----------------------------|

|   | · | changes in legal or regulatory environment; |
|--------|--------|---------------------------------------------|

|   | · | press releases, publicity, or announcements; |
|--------|--------|----------------------------------------------|

|   | · | changes in expectation of our future financial performance; |
|--------|--------|-------------------------------------------------------------|

|   | · | future sales of our common stock; |
|--------|--------|-----------------------------------|

|   | · | changes in economic conditions; and |
|--------|--------|-------------------------------------|

|   | · | other developments affecting us or our competitors |
|--------|--------|----------------------------------------------------|

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Item 

| Location                    | Leasedor Owned | Date of Lease Expiration                                                           |
|-----------------------------|----------------|-----------------------------------------------------------------------------------------|
|                        |           |                                                                                    |
|                        |           |                                                                                    |
| 612 Godwin Avenue           | Owned          |               --- |
| Midland Park, NJ            |           |                                                                                    |
|                        |           |                                                                                    |
| 630 Godwin Avenue           | Owned          |               --- |
| Midland Park, NJ            |           |                                                                                    |
|                        |           |                                                                                    |
| 386 Lafayette Avenue        | Owned          |               --- |
| Hawthorne, NJ               |           |                                                                                    |
|                        |           |                                                                                    |
| 87 Berdan Avenue            | Leased         |     06/30/14                                                        |
| Wayne, NJ                   |           |                                                                                    |
|                        |           |                                                                                    |
| 64 Franklin Turnpike        | Owned          |               --- |
| Waldwick, NJ                |           |                                                                                    |
|                        |           |                                                                                    |
| 190 Franklin Avenue         | Leased         |     09/30/12                                                        |
| Ridgewood, NJ               |           |                                                                                    |
|                        |           |                                                                                    |
| 121 Franklin Avenue         | Leased         |     01/31/15                                                        |
| Ridgewood, NJ               |           |                                                                                    |
|                        |           |                                                                                    |
| 311 Valley Road             | Leased         |     11/30/13                                                        |
| Wayne, NJ                   |           |                                                                                    |
|                        |           |                                                                                    |
| 249 Newark Pompton Turnpike | Owned          |               --- |
| Pequannock, NJ              |           |                                                                                    |
|                        |           |                                                                                    |
| 1111 Goffle Road            | Leased         |     05/31/11                                                        |
| Hawthorne, NJ               |           |                                                                                    |
|                        |           |                                                                                    |
| 400 Hamburg Turnpike        | Leased         |     04/30/14                                                        |
| Wayne, NJ                   |           |                                                                                    |
|                        |           |                                                                                    |
| 2 Changebridge Road         | Leased         |     06/30/15                                                        |
| Montville, NJ               |           |                                                                                    |
|                        |           |                                                                                    |
| 378 Franklin Avenue         | Leased         |     05/31/26                                                        |
| Wyckoff, NJ                 |           |                                                                                    |
|                        |           |                                                                                    |
| 200 Kinderkamack Road       | Leased         |     05/30/26                                                        |
| Westwood, NJ                |           |                                                                                    |
|                        |           |                                                                                    |
| 33 Sicomac Avenue           | Leased         |     10/31/14                                                        |
| North Haledon, NJ           |           |                                                                                    |

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Item 

|                         |   | Sales Price |   |   |   |   |
|------------------------------|--------|-------------|--------|--------|--------|--------|
|                         |   | High        |   |   | Low    |   |   | Cash Dividend |   |
| Year Ended December 31, 2010 |   |        |   |   |   |   |   |   |   |
| Fourth quarter               |   | $           | 8.50   |   |   | $      | 5.75 |   |   | $ | 0.05 |   |
| Third quarter                |   |        | 9.49   |   |   |   | 5.45 |   |   |   | 0.05 |   |
| Second quarter               |   |        | 9.49   |   |   |   | 7.01 |   |   |   | 0.09 |   |
| First quarter                |   |        | 9.44   |   |   |   | 8.46 |   |   |   | 0.09 |   |

| Year Ended December 31, 2009 |   |   |   |   |   |   |   |   |   |
|------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Fourth quarter               |   | $      | 10.50  |   |   | $      | 8.26   |   |   | $ | 0.09 |   |
| Third quarter                |   |   | 10.45  |   |   |   | 7.95   |   |   |   | 0.09 |   |
| Second quarter               |   |   | 11.21  |   |   |   | 8.33   |   |   |   | 0.09 |   |
| First quarter                |   |   | 11.41  |   |   |   | 7.09   |   |   |   | 0.09 |   |

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|                              |   |     |   |   | Period Ending |   |   |     |   |
|-----------------------------------|--------|----------|--------|--------|---------------|--------|--------|----------|--------|
| Index                             |   | 12/31/05 |   |   | 12/31/06      |   |   | 12/31/07 |   |   | 12/31/08 |   |   | 12/31/09 |   |   | 12/31/10 |   |
| Stewardship Financial Corporation |   | $        | 100.00 |   |          | $      | 98.15  |     |   | $ | 105.73 |   |   | $ | 86.14 |   |   | $ | 79.36 |   |   | $ | 56.20 |   |
| NASDAQ Composite                  |   | $        | 100.00 |   |          | $      | 110.39 |     |   | $ | 122.15 |   |   | $ | 73.32 |   |   | $ | 106.57 |   |   | $ | 125.91 |   |
| NASDAQ Bank                       |   | $        | 100.00 |   |          | $      | 113.82 |     |   | $ | 91.16 |   |   | $ | 71.52 |   |   | $ | 59.87 |   |   | $ | 68.34 |   |
| Peer Group 2009                   |   | $        | 100.00 |   |          | $      | 105.48 |     |   | $ | 91.62 |   |   | $ | 53.76 |   |   | $ | 49.41 |   |   | $ | 63.58 |   |
| Peer Group 2010                   |   | $        | 100.00 |   |          | $      | 111.94 |     |   | $ | 95.72 |   |   | $ | 53.68 |   |   | $ | 52.76 |   |   | $ | 62.94 |   |

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Item 

|                                                                |   | December 31,                                     |    |
|---------------------------------------------------------------------|--------|--------------------------------------------------|---------|
|                                                                |   | 2010                                             |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                |   | (Dollars in thousands, except per share amounts) |    |
| Earnings Summary:                                                   |   |
|                                                                |   |
| Net interest income                                                 |   | $                                                | 24,206  |   |   | $ | 23,345 |   |   | $ | 22,303 |   |   | $ | 19,430 |   |   | $ | 19,084 |   |
| Provision for loan losses                                           |   |                                             | (9,575  | ) |   |   | (3,575 | ) |   |   | (3,585 | ) |   |   | (530 | ) |   |   | (264 | ) |
| Net interest income after provision for loan losses                 |   |                                             | 14,631  |   |   |   | 19,770 |   |   |   | 18,718 |   |   |   | 18,900 |   |   |   | 18,820 |   |
| Noninterest income                                                  |   |                                             | 4,387   |   |   |   | 3,133 |   |   |   | 4,217 |   |   |   | 4,414 |   |   |   | 4,189 |   |
| Noninterest expense                                                 |   |                                             | 17,950  |   |   |   | 17,790 |   |   |   | 17,986 |   |   |   | 16,629 |   |   |   | 15,629 |   |
| Income before income tax (benefit) expense                          |   |                                             | 1,068   |   |   |   | 5,113 |   |   |   | 4,949 |   |   |   | 6,685 |   |   |   | 7,380 |   |
| Income tax (benefit) expense                                        |   |                                             | (165    | ) |   |   | 1,479 |   |   |   | 1,448 |   |   |   | 2,078 |   |   |   | 2,627 |   |
| Net income                                                          |   |                                             | 1,233   |   |   |   | 3,634 |   |   |   | 3,501 |   |   |   | 4,607 |   |   |   | 4,753 |   |
| Dividends on preferred stock and accretion                          |   |                                             | 550     |   |   |   | 504 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Net income available to common stockholders                         |   | $                                                | 683     |   |   | $ | 3,130 |   |   | $ | 3,501 |   |   | $ | 4,607 |   |   | $ | 4,753 |   |
|                                                                |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common Share Data: (1)                                              |   |
|                                                                |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic net income                                                    |   | $                                                | 0.12    |   |   | $ | 0.54 |   |   | $ | 0.60 |   |   | $ | 0.79 |   |   | $ | 0.82 |   |
| Diluted net income                                                  |   |                                             | 0.12    |   |   |   | 0.54 |   |   |   | 0.60 |   |   |   | 0.79 |   |   |   | 0.81 |   |
| Cash dividends declared                                             |   |                                             | 0.28    |   |   |   | 0.36 |   |   |   | 0.34 |   |   |   | 0.31 |   |   |   | 0.26 |   |
| Book value at year end                                              |   |                                             | 7.24    |   |   |   | 7.50 |   |   |   | 7.31 |   |   |   | 7.02 |   |   |   | 6.42 |   |
| Average shares outstanding net of treasury stock                    |   |                                             | 5,843   |   |   |   | 5,832 |   |   |   | 5,854 |   |   |   | 5,836 |   |   |   | 5,812 |   |
| Shares outstanding at year end                                      |   |                                             | 5,846   |   |   |   | 5,835 |   |   |   | 5,854 |   |   |   | 5,851 |   |   |   | 5,809 |   |
| Dividend payout ratio                                               |   |                                             | 132.68  | % |   |   | 58.15 | % |   |   | 56.18 | % |   |   | 39.35 | % |   |   | 32.19 | % |
|                                                                |   |
| Selected Consolidated Ratios:                                       |   |
|                                                                |   |                                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                            |   |                                             | 0.18    | % |   |   | 0.57 | % |   |   | 0.58 | % |   |   | 0.86 | % |   |   | 0.96 | % |
| Return on average common stockholders' equity                       |   |                                             | 1.55    | % |   |   | 7.25 | % |   |   | 8.34 | % |   |   | 11.76 | % |   |   | 13.41 | % |
| Average stockholders' equity as a percentage ofaverage total assets |   |                                             | 7.99    | % |   |   | 8.23 | % |   |   | 6.98 | % |   |   | 7.34 | % |   |   | 7.19 | % |
| Leverage (Tier-I) capital (2)                                       |   |                                             | 8.58    | % |   |   | 9.22 | % |   |   | 8.01 | % |   |   | 8.56 | % |   |   | 8.85 | % |
| Tier-I risk based capital (3)                                       |   |                                             | 12.20   | % |   |   | 11.99 | % |   |   | 10.50 | % |   |   | 10.76 | % |   |   | 11.25 | % |
| Total risk based capital (3)                                        |   |                                             | 13.45   | % |   |   | 13.24 | % |   |   | 11.60 | % |   |   | 11.76 | % |   |   | 12.28 | % |
| Allowance for loan loss to total loans                              |   |                                             | 1.88    | % |   |   | 1.50 | % |   |   | 1.18 | % |   |   | 1.06 | % |   |   | 1.11 | % |
| Nonperforming loans to total loans                                  |   |                                             | 5.01    | % |   |   | 4.98 | % |   |   | 1.46 | % |   |   | 0.11 | % |   |   | 0.41 | % |
|                                                                |   |
| Selected Year-end Balances:                                         |   |
|                                                                |   |
| Total assets                                                        |   | $                                                | 688,118 |   |   | $ | 663,844 |   |   | $ | 611,816 |   |   | $ | 571,905 |   |   | $ | 519,749 |   |
| Total loans, net of allowance for loan loss                         |   |                                             | 443,245 |   |   |   | 453,119 |   |   |   | 434,103 |   |   |   | 415,690 |   |   |   | 365,443 |   |
| Total deposits                                                      |   |                                             | 575,603 |   |   |   | 529,930 |   |   |   | 506,531 |   |   |   | 472,299 |   |   |   | 434,223 |   |
| Stockholders' equity                                                |   |                                             | 52,132  |   |   |   | 53,511 |   |   |   | 42,796 |   |   |   | 41,090 |   |   |   | 37,306 |   |

| (1) | All share and per share amounts have been restated to reflect 5% stock dividends paid November 2006, 2007, 2008 and 2009. |
|-----|---------------------------------------------------------------------------------------------------------------------------|

| (2) | As a percentage of average quarterly assets. |
|-----|----------------------------------------------|

| (3) | As a percentage of total risk-weighted assets. |
|-----|------------------------------------------------|

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|                                                                                 |   | 2010                   |    |   | 2009                   |   |   | 2008                    |   |
|--------------------------------------------------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|-------------------------|--------|
|                                                                                 |   | AverageBalance         |    |   | InterestIncome/Expense |   |   | AverageRatesEarned/Paid |   |   | AverageBalance |   |   | InterestIncome/Expense |   |   | AverageRatesEarned/Paid |   |   | AverageBalance |   |   | InterestIncome/Expense |   |   | AverageRatesEarned/Paid |   |
|                                                                                 |   | (Dollars in thousands) |    |
| Assets                                                                               |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                             |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)                                                                            |   | $                      | 460,721 |   |                   | $      | 27,336 |                    |   |   | 5.93 | % |   | $ | 445,586 |   |   | $ | 26,981 |   |   |   | 6.06 | % |   | $ | 437,812 |   |   | $ | 28,664 |   |   |   | 6.55 | % |
| Taxable investment securities                                                        |   |                   | 142,146 |   |                   |   | 4,593  |                    |   |   | 3.23 |   |   |   | 138,514 |   |   |   | 6,131 |   |   |   | 4.43 |   |   |   | 102,930 |   |   |   | 5,377 |   |   |   | 5.22 |   |
| Tax-exempt investment    securities (2)                          |   |                   | 31,107  |   |                   |   | 1,587  |                    |   |   | 5.10 |   |   |   | 30,057 |   |   |   | 1,590 |   |   |   | 5.29 |   |   |   | 27,765 |   |   |   | 1,482 |   |   |   | 5.34 |   |
| Other interest-earning assets                                                        |   |                   | 2,055   |   |                   |   | 26     |                    |   |   | 1.27 |   |   |   | 124 |   |   |   | 9 |   |   |   | 7.26 |   |   |   | 2,624 |   |   |   | 66 |   |   |   | 2.52 |   |
| Total interest-earning assets                                                        |   |                   | 636,029 |   |                   |   | 33,542 |                    |   |   | 5.27 |   |   |   | 614,281 |   |   |   | 34,711 |   |   |   | 5.65 |   |   |   | 571,131 |   |   |   | 35,589 |   |   |   | 6.23 |   |
|                                                                                 |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning assets:                                                         |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                                                            |   |                   | (8,399  | )      |                   |   |   |                    |   |   |   |   |   |   | (6,193 | ) |   |   |   |   |   |   |   |   |   |   | (5,045 | ) |   |   |   |   |   |   |   |   |
| Other assets                                                                         |   |                   | 45,886  |   |                   |   |   |                    |   |   |   |   |   |   | 34,474 |   |   |   |   |   |   |   |   |   |   |   | 34,799 |   |   |   |   |   |   |   |   |   |
| Total assets                                                                         |   | $                      | 673,516 |   |                   |   |   |                    |   |   |   |   |   | $ | 642,562 |   |   |   |   |   |   |   |   |   |   | $ | 600,885 |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders'    Equity                          |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                                        |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand    deposits                              |   | $                      | 237,616 |   |                   | $      | 2,904  |                    |   |   | 1.22 | % |   | $ | 190,522 |   |   | $ | 2,549 |   |   |   | 1.34 | % |   | $ | 164,000 |   |   | $ | 2,731 |   |   |   | 1.67 | % |
| Savings deposits                                                                     |   |                   | 47,251  |   |                   |   | 169    |                    |   |   | 0.36 |   |   |   | 42,328 |   |   |   | 206 |   |   |   | 0.49 |   |   |   | 37,750 |   |   |   | 237 |   |   |   | 0.63 |   |
| Time deposits                                                                        |   |                   | 171,745 |   |                   |   | 3,551  |                    |   |   | 2.07 |   |   |   | 191,738 |   |   |   | 6,038 |   |   |   | 3.15 |   |   |   | 187,195 |   |   |   | 7,566 |   |   |   | 4.04 |   |
| Repurchase agreements                                                                |   |                   | 15,221  |   |                   |   | 736    |                    |   |   | 4.84 |   |   |   | 15,315 |   |   |   | 754 |   |   |   | 4.92 |   |   |   | 16,259 |   |   |   | 626 |   |   |   | 3.85 |   |
| FHLB borrowings                                                                      |   |                   | 38,486  |   |                   |   | 970    |                    |   |   | 2.52 |   |   |   | 44,651 |   |   |   | 979 |   |   |   | 2.19 |   |   |   | 44,350 |   |   |   | 1,145 |   |   |   | 2.58 |   |
| Subordinated debentures                                                              |   |                   | 7,217   |   |                   |   | 448    |                    |   |   | 6.21 |   |   |   | 7,217 |   |   |   | 285 |   |   |   | 3.95 |   |   |   | 7,217 |   |   |   | 466 |   |   |   | 6.46 |   |
| Total interest-bearing liabilities                                                   |   |                   | 517,536 |   |                   |   | 8,778  |                    |   |   | 1.70 |   |   |   | 491,771 |   |   |   | 10,811 |   |   |   | 2.20 |   |   |   | 456,771 |   |   |   | 12,771 |   |   |   | 2.80 |   |
| Noninterest-bearing liabilities:                                                     |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                                                      |   |                   | 98,507  |   |                   |   |   |                    |   |   |   |   |   |   | 93,030 |   |   |   |   |   |   |   |   |   |   |   | 97,316 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                                    |   |                   | 3,649   |   |                   |   |   |                    |   |   |   |   |   |   | 4,870 |   |   |   |   |   |   |   |   |   |   |   | 4,830 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                                 |   |                   | 53,824  |   |                   |   |   |                    |   |   |   |   |   |   | 52,891 |   |   |   |   |   |   |   |   |   |   |   | 41,968 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders'    equity                    |   | $                      | 673,516 |   |                   |   |   |                    |   |   |   |   |   | $ | 642,562 |   |   |   |   |   |   |   |   |   |   | $ | 600,885 |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (taxable    equivalent basis)                |   |                   |    |   |                   |   | 24,764 |                    |   |   |   |   |   |   |   |   |   |   | 23,900 |   |   |   |   |   |   |   |   |   |   |   | 22,818 |   |   |   |   |   |
| Tax equivalent adjustment                                                            |   |                   |    |   |                   |   | (558   | )                       |   |   |   |   |   |   |   |   |   |   | (555 | ) |   |   |   |   |   |   |   |   |   |   | (515 | ) |   |   |   |   |
| Net interest income                                                                  |   |                   |    |   |                   | $      | 24,206 |                    |   |   |   |   |   |   |   |   |   | $ | 23,345 |   |   |   |   |   |   |   |   |   |   | $ | 22,303 |   |   |   |   |   |
|                                                                                 |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread (taxable    equivalent basis)                |   |                   |    |   |                   |   |   |                    |   |   | 3.57 | % |   |   |   |   |   |   |   |   |   |   | 3.45 | % |   |   |   |   |   |   |   |   |   |   | 3.43 | % |
|                                                                                 |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net yield on interest-earning                                                        |   |                   |    |   |                   |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     assets (taxable equivalent    basis) (3) |   |                   |    |   |                   |   |   |                    |   |   | 3.89 | % |   |   |   |   |   |   |   |   |   |   | 3.89 | % |   |   |   |   |   |   |   |   |   |   | 4.00 | % |

| (1) | For purpose of these calculations, nonaccruing loans are included in the average balance. Fees are included in loan interest. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

| (2) | The tax equivalent adjustments are based on a marginal tax rate of 34%.  Loans and total interest-earning assets are net of unearned income. Securities are included at amortized cost. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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|                               |   | 2010 Versus 2009                    |   |   | 2009 Versus 2008 |   |
|------------------------------------|--------|-------------------------------------|--------|--------|------------------|--------|
|                               |   |                                |   |   |             |   |   | (In thousands) |   |   |   |   |   |   |   |
|                               |   |                                |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   | Increase (Decrease)Due to Change in |   |   |             |   |   | Increase (Decrease)Due to Change in |   |   |   |   |
|                               |   | Volume                              |   |   | Rate             |   |   | Net |   |   | Volume |   |   | Rate |   |   | Net |   |
| Interest income:                   |   |                                |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |                                |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                              |   | $                                   | 905    |   |             | $      | (550 | ) |   | $ | 355 |   |   | $ | 502 |   |   | $ | (2,185 | ) |   | $ | (1,683 | ) |
| Taxable investment securities      |   |                                | 157    |   |             |   | (1,695 | ) |   |   | (1,538 | ) |   |   | 1,662 |   |   |   | (908 | ) |   |   | 754 |   |
| Tax-exempt investment securities   |   |                                | 55     |   |             |   | (58 | ) |   |   | (3 | ) |   |   | 121 |   |   |   | (13 | ) |   |   | 108 |   |
| Other interest-earning assets      |   |                                | 30     |   |             |   | (13 | ) |   |   | 17 |   |   |   | (103 | ) |   |   | 46 |   |   |   | (57 | ) |
|                               |   |                                |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest-earning assets      |   |                                | 1,147  |   |             |   | (2,316 | ) |   |   | (1,169 | ) |   |   | 2,182 |   |   |   | (3,060 | ) |   |   | (878 | ) |
|                               |   |                                |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                  |   |                                |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                               |   |                                |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits   |   |                                | 590    |   |             |   | (235 | ) |   |   | 355 |   |   |   | 402 |   |   |   | (584 | ) |   |   | (182 | ) |
| Savings deposits                   |   |                                | 22     |   |             |   | (59 | ) |   |   | (37 | ) |   |   | 26 |   |   |   | (57 | ) |   |   | (31 | ) |
| Time deposits                      |   |                                | (579   | )      |             |   | (1,908 | ) |   |   | (2,487 | ) |   |   | 180 |   |   |   | (1,708 | ) |   |   | (1,528 | ) |
| Repurchase agreements              |   |                                | (5     | )      |             |   | (13 | ) |   |   | (18 | ) |   |   | (38 | ) |   |   | 166 |   |   |   | 128 |   |
| FHLB borrowings                    |   |                                | (145   | )      |             |   | 136 |   |   |   | (9 | ) |   |   | 8 |   |   |   | (174 | ) |   |   | (166 | ) |
| Subordinated debentures            |   |                                | -      |   |             |   | 163 |   |   |   | 163 |   |   |   | - |   |   |   | (181 | ) |   |   | (181 | ) |
|                               |   |                                |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total interest-bearing liabilities |   |                                | (117   | )      |             |   | (1,916 | ) |   |   | (2,033 | ) |   |   | 578 |   |   |   | (2,538 | ) |   |   | (1,960 | ) |
|                               |   |                                |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net change in net interest income  |   | $                                   | 1,264  |   |             | $      | (400 | ) |   | $ | 864 |   |   | $ | 1,604 |   |   | $ | (522 | ) |   | $ | 1,082 |   |

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|                                                                                  |   | December 31,   |    |
|---------------------------------------------------------------------------------------|--------|----------------|---------|
|                                                                                  |   | 2010           |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                                  |   | (In thousands) |    |
| Real estate mortgage:                                                                 |   |           |    |
| Residential (1)                                                                       |   | $              | 43,020  |   |   | $ | 36,246 |   |   | $ | 40,337 |   |   | $ | 44,719 |   |   | $ | 47,020 |   |
| Commercial (1)                                                                        |   |           | 248,527 |   |   |   | 246,212 |   |   |   | 226,183 |   |   |   | 209,082 |   |   |   | 177,411 |   |
|                                                                                  |   |
| Commercial loans                                                                      |   |           | 109,527 |   |   |   | 114,893 |   |   |   | 100,282 |   |   |   | 89,845 |   |   |   | 72,606 |   |
|                                                                                  |   |
| Consumer loans:                                                                       |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Installment (2)                                                                       |   |           | 29,522  |   |   |   | 41,006 |   |   |   | 51,290 |   |   |   | 56,796 |   |   |   | 52,389 |   |
| Home equity                                                                           |   |           | 20,965  |   |   |   | 21,779 |   |   |   | 21,208 |   |   |   | 19,723 |   |   |   | 20,010 |   |
| Other                                                                                 |   |           | 305     |   |   |   | 340 |   |   |   | 356 |   |   |   | 424 |   |   |   | 560 |   |
|                                                                                  |   |
| Total gross loans                                                                     |   |           | 451,866 |   |   |   | 460,476 |   |   |   | 439,656 |   |   |   | 420,589 |   |   |   | 369,996 |   |
| Less: Allowance for loan losses                                                       |   |           | 8,490   |   |   |   | 6,920 |   |   |   | 5,166 |   |   |   | 4,457 |   |   |   | 4,101 |   |
| Deferred loan fees                                                                    |   |           | 131     |   |   |   | 437 |   |   |   | 387 |   |   |   | 442 |   |   |   | 452 |   |
| Net loans                                                                             |   | $              | 443,245 |   |   | $ | 453,119 |   |   | $ | 434,103 |   |   | $ | 415,690 |   |   | $ | 365,443 |   |
|                                                                                  |   |
| (1) Includes construction loans.                                                 |   |
| (2) Includes automobile, home improvement, second mortgages and unsecured loans. |   |

|                 |   | Within 1 Year  |   |   | After 1 Year But Within 5 Years |   |   | After 5 Years |   |   | Total   |   |
|----------------------|--------|----------------|--------|--------|---------------------------------|--------|--------|---------------|--------|--------|---------|--------|
|                 |   | (In thousands) |   |
|                 |   |           |   |   |                            |   |   |          |   |   |    |   |
| Real estate mortgage |   | $              | 29,740 |   |                            | $      | 8,486  |          |   | $      | 253,321 |   |   | $ | 291,547 |   |
| Commercial           |   |           | 55,003 |   |                            |   | 26,604 |          |   |   | 27,920  |   |   |   | 109,527 |   |
| Consumer             |   |           | 1,621  |   |                            |   | 3,808  |          |   |   | 45,363  |   |   |   | 50,792 |   |
| Total gross loans    |   | $              | 86,364 |   |                            | $      | 38,898 |          |   | $      | 326,604 |   |   | $ | 451,866 |   |

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|                 |   | PredeterminedRates |    |   | Floating or Adjustable Rates |   |    | Total  |   |
|----------------------|--------|--------------------|---------|--------|------------------------------|--------|---------|--------|--------|
|                 |   | (In thousands)     |    |
|                 |   |               |    |   |                         |   |    |   |   |
| Real estate mortgage |   | $                  | 52,115  |   |                         | $      | 209,692 |   |   | $ | 261,807 |   |
| Commercial           |   |               | 31,401  |   |                         |   | 23,123  |   |   |   | 54,524 |   |
| Consumer             |   |               | 29,286  |   |                         |   | 19,885  |   |   |   | 49,171 |   |
|                 |   | $                  | 112,802 |   |                         | $      | 252,700 |   |   | $ | 365,502 |   |

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|                                                  |   | December 31,           |   |
|-------------------------------------------------------|--------|------------------------|--------|
|                                                  |   | 2010                   |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                  |   | (Dollars in thousands) |   |
| Nonaccrual loans: (1)                                 |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction                                          |   | $                      | 2,303  |   |   | $ | 8,581 |   |   | $ | 2,575 |   |   | $ | - |   |   | $ | - |   |
| Residential real estate                               |   |                   | 1,106  |   |   |   | 1,131 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate                                |   |                   | 10,540 |   |   |   | 5,109 |   |   |   | 291 |   |   |   | 73 |   |   |   | 123 |   |
| Commercial                                            |   |                   | 7,722  |   |   |   | 3,638 |   |   |   | 825 |   |   |   | 307 |   |   |   | 167 |   |
| Consumer                                              |   |                   | 829    |   |   |   | 1,197 |   |   |   | 539 |   |   |   | 75 |   |   |   | 154 |   |
| Total nonaccrual loans                                |   |                   | 22,500 |   |   |   | 19,656 |   |   |   | 4,230 |   |   |   | 455 |   |   |   | 444 |   |
|                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans past due 90 days or more and accruing: (2)      |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction                                          |   |                   | -      |   |   |   | 415 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate                                |   |                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 840 |   |
| Commercial                                            |   |                   | -      |   |   |   | - |   |   |   | 353 |   |   |   | 25 |   |   |   | 241 |   |
| Consumer                                              |   |                   | -      |   |   |   | - |   |   |   | - |   |   |   | 1 |   |   |   | 9 |   |
| Total loans past due ninety days or more and accruing |   |                   | -      |   |   |   | 415 |   |   |   | 353 |   |   |   | 26 |   |   |   | 1,090 |   |
|                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restructured loans:                                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate                                |   |                   | -      |   |   |   | 665 |   |   |   | 1,483 |   |   |   | - |   |   |   | - |   |
| Commercial                                            |   |                   | 130    |   |   |   | 2,181 |   |   |   | 372 |   |   |   | - |   |   |   | - |   |
| Consumer                                              |   |                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total restructured loans                              |   |                   | 130    |   |   |   | 2,846 |   |   |   | 1,855 |   |   |   | - |   |   |   | - |   |
| Total nonperforming loans                             |   |                   | 22,630 |   |   |   | 22,917 |   |   |   | 6,438 |   |   |   | 481 |   |   |   | 1,534 |   |
|                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other real estate owed                                |   |                   | 615    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total nonperforming assets                            |   | $                      | 23,245 |   |   | $ | 22,917 |   |   | $ | 6,438 |   |   | $ | 481 |   |   | $ | 1,534 |   |
|                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonaccrual loans to total gross loans                 |   |                   | 4.98   | % |   |   | 4.27 | % |   |   | 0.96 | % |   |   | 0.11 | % |   |   | 0.12 | % |
|                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming loans to total gross loans              |   |                   | 5.01   | % |   |   | 4.98 | % |   |   | 1.46 | % |   |   | 0.11 | % |   |   | 0.41 | % |
|                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Nonperforming loans to total assets                   |   |                   | 3.29   | % |   |   | 3.45 | % |   |   | 1.05 | % |   |   | 0.08 | % |   |   | 0.30 | % |
|                                                  |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses to nonperforming loans      |   |                   | 37.52  | % |   |   | 30.20 | % |   |   | 80.24 | % |   |   | 926.61 | % |   |   | 267.34 | % |

| (1) | Restructured loans classified in the nonaccrual category totaled $4.0 million, $23,000, $22,000 and $73,000 for the years ended December 31, 2010, 2009, 2008 and, 2007, respectively. There were no restructured loans classified as nonaccrual for the year ended December 31, 2006. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | There were no restructured loans classified in the past due 90 days or more and accruing for any years presented. |
|-----|-------------------------------------------------------------------------------------------------------------------|

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|                                                                             |   | December 31,           |   |
|----------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                             |   | 2010                   |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
|                                                                             |   | (Dollars in thousands) |   |
|                                                                             |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at beginning of period                                                   |   | $                      | 6,920  |   |   | $ | 5,166 |   |   | $ | 4,457 |   |   | $ | 4,101 |   |   | $ | 3,847 |   |
|                                                                             |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans charged off:                                                               |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction                                                                     |   |                   | 1,231  |   |   |   | 1,003 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential real estate                                                          |   |                   | 25     |   |   |   | 85 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate                                                           |   |                   | 1,241  |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial                                                                       |   |                   | 5,082  |   |   |   | 623 |   |   |   | 2,841 |   |   |   | 82 |   |   |   | 7 |   |
| Consumer                                                                         |   |                   | 519    |   |   |   | 215 |   |   |   | 61 |   |   |   | 103 |   |   |   | 33 |   |
| Total loans charged off                                                          |   |                   | 8,098  |   |   |   | 1,926 |   |   |   | 2,902 |   |   |   | 185 |   |   |   | 40 |   |
|                                                                             |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recoveries of loans previously charged off:                                      |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Construction                                                                     |   |                   | 72     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial                                                                       |   |                   | 10     |   |   |   | 93 |   |   |   | - |   |   |   | - |   |   |   | 23 |   |
| Consumer                                                                         |   |                   | 11     |   |   |   | 12 |   |   |   | 26 |   |   |   | 11 |   |   |   | 7 |   |
| Total recoveries of loans previously charged off                                 |   |                   | 93     |   |   |   | 105 |   |   |   | 26 |   |   |   | 11 |   |   |   | 30 |   |
|                                                                             |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loans charged off                                                            |   |                   | 8,005  |   |   |   | 1,821 |   |   |   | 2,876 |   |   |   | 174 |   |   |   | 10 |   |
| Provisions charged to operations                                                 |   |                   | 9,575  |   |   |   | 3,575 |   |   |   | 3,585 |   |   |   | 530 |   |   |   | 264 |   |
| Balance at end of period                                                         |   | $                      | 8,490  |   |   | $ | 6,920 |   |   | $ | 5,166 |   |   | $ | 4,457 |   |   | $ | 4,101 |   |
|                                                                             |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net charge offs during the period to average loans outstanding during the period |   |                   | 1.74   | % |   |   | 0.41 | % |   |   | 0.66 | % |   |   | 0.05 | % |   |   | - | % |
|                                                                             |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance of allowance for loan losses at the end of year to gross year end loans  |   |                   | 1.88   | % |   |   | 1.50 | % |   |   | 1.18 | % |   |   | 1.06 | % |   |   | 1.11 | % |

|                            |   | 2010                   |   |   | 2009                 |   |   | 2008   |   |   | 2007                 |   |   | 2006   |   |
|---------------------------------|--------|------------------------|--------|--------|----------------------|--------|--------|--------|--------|--------|----------------------|--------|--------|--------|--------|
|                            |   | Amount                 |   |   | Percent to Total (1) |   |   | Amount |   |   | Percent to Total (1) |   |   | Amount |   |   | Percent to Total (1) |   |   | Amount |   |   | Percent to Total (1) |   |   | Amount |   |   | Percent to Total (1) |   |
|                            |   | (Dollars in thousands) |   |
| Real estate –Residential  |   | $                      | 188    |   |                 |   | 9.5    | %      |   | $      | 155                  |   |   |   | 7.9    | % |   | $ | 245 |   |   |   | 9.2 | % |   | $ | 256 |   |   |   | 10.6 | % |   | $ | 298 |   |   |   | 12.7 | % |
| Real estate – commercial  |   |                   | 4,038  |   |                 |   | 55.0   | %      |   |   | 2,677                |   |   |   | 53.5   | % |   |   | 2,164 |   |   |   | 51.4 | % |   |   | 1,900 |   |   |   | 49.7 | % |   |   | 1,705 |   |   |   | 48.0 | % |
| Commercial                      |   |                   | 3,745  |   |                 |   | 24.2   | %      |   |   | 3,148                |   |   |   | 24.9   | % |   |   | 2,086 |   |   |   | 22.8 | % |   |   | 1,640 |   |   |   | 21.4 | % |   |   | 1,407 |   |   |   | 19.6 | % |
| Consumer                        |   |                   | 512    |   |                 |   | 11.3   | %      |   |   | 940                  |   |   |   | 13.7   | % |   |   | 671 |   |   |   | 16.6 | % |   |   | 661 |   |   |   | 18.3 | % |   |   | 691 |   |   |   | 19.7 | % |
| Unallocated                     |   |                   | 7      |   |                 |   | -      | %      |   |   | -                    |   |   |   | -      | % |   |   | - |   |   |   | - | % |   |   | - |   |   |   | - | % |   |   | - |   |   |   | - | % |
| Total allowance for loan losses |   | $                      | 8,490  |   |                 |   | 100.0  | %      |   | $      | 6,920                |   |   |   | 100.0  | % |   | $ | 5,166 |   |   |   | 100.0 | % |   | $ | 4,457 |   |   |   | 100.0 | % |   | $ | 4,101 |   |   |   | 100.0 | % |

| (1)  | Represents percentage of loan balance in category to total gross loans. |
|-----------|-------------------------------------------------------------------------|

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|                                   |   | December 31,           |    |
|----------------------------------------|--------|------------------------|---------|
|                                   |   | 2010                   |    |   | 2009 |   |   | 2008 |   |
|                                   |   | Carrying Value         |    |   | Percent |   |   | Carrying Value |   |   | Percent |   |   | Carrying Value |   |   | Percent |   |
|                                   |   | (Dollars in thousands) |    |
| Securities available for sale:         |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury                          |   | $                      | 9,249   |   |   |   | 6.7 | % |   | $ | - |   |   |   | - | % |   | $ | - |   |   |   | - | % |
| U.S. government-sponsored agencies     |   |                   | 13,586  |   |   |   | 9.8 |   |   |   | 32,286 |   |   |   | 31.3 |   |   |   | 49,660 |   |   |   | 55.2 |   |
| Obligations of state and               |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions                 |   |                   | 4,279   |   |   |   | 3.1 |   |   |   | 5,397 |   |   |   | 5.3 |   |   |   | 5,820 |   |   |   | 6.4 |   |
| Mortgage-backed securities-residential |   |                   | 108,327 |   |   |   | 78.1 |   |   |   | 62,228 |   |   |   | 60.4 |   |   |   | 31,670 |   |   |   | 35.2 |   |
| Other equity investments               |   |                   | 3,187   |   |   |   | 2.3 |   |   |   | 3,115 |   |   |   | 3.0 |   |   |   | 2,873 |   |   |   | 3.2 |   |
| Total                                  |   | $                      | 138,628 |   |   |   | 100.0 | % |   | $ | 103,026 |   |   |   | 100.0 | % |   | $ | 90,023 |   |   |   | 100.0 | % |
|                                   |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities held to maturity:           |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies     |   | $                      | 4,208   |   |   |   | 9.3 | % |   | $ | 19,921 |   |   |   | 29.4 | % |   | $ | 10,290 |   |   |   | 21.0 | % |
| Obligations of state and               |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions                 |   |                   | 26,148  |   |   |   | 57.6 |   |   |   | 27,038 |   |   |   | 39.9 |   |   |   | 23,048 |   |   |   | 47.2 |   |
| Mortgage-backed securities-residential |   |                   | 15,038  |   |   |   | 33.1 |   |   |   | 20,758 |   |   |   | 30.7 |   |   |   | 15,518 |   |   |   | 31.8 |   |
| Total                                  |   | $                      | 45,394  |   |   |   | 100.0 | % |   | $ | 67,717 |   |   |   | 100.0 | % |   | $ | 48,856 |   |   |   | 100.0 | % |

|                                             |   | Within1 Year           |   |    | After 1 Year Through5 Years |   |   | After5 YearsThrough10 Years |   |   | After10 Years |   |   | Total  |   |
|--------------------------------------------------|--------|------------------------|--------|---------|-----------------------------|--------|--------|-----------------------------|--------|--------|---------------|--------|--------|--------|--------|
|                                             |   | (Dollars in thousands) |   |
|  U.S. Treasury:                             |   |                   |   |    |                        |   |   |                        |   |   |          |   |   |   |   |
| Carrying value                                   |   | $                      | -      |    |                        | $      | 9,249  |                        |   | $      | -             |   |   | $      | -      |   |   | $ | 9,249 |   |
| Yield                                            |   |                   | -      | %       |                        |   | 1.46   | %                           |   |   | -             | %      |   |   | -      | % |   |   | 1.46 | % |
| U.S. government-sponsored agencies:              |   |                   |   |    |                        |   |   |                        |   |   |          |   |   |   |   |   |   |   |   |   |
| Carrying value                                   |   |                   | -      |    |                        |   | 11,677 |                        |   |   | 959           |   |   |   | 950    |   |   |   | 13,586 |   |
| Yield                                            |   |                   | -      | %  |                        |   | 1.89   | %                           |   |   | 2.45          | %      |   |   | 3.50   | % |   |   | 2.05 | % |
| Obligations of state and political subdivisions: |   |                   |   |    |                        |   |   |                        |   |   |          |   |   |   |   |   |   |   |   |   |
| Carrying value                                   |   |                   | 303    |    |                        |   | 152    |                        |   |   | 2,026         |   |   |   | 1,798  |   |   |   | 4,279 |   |
| Yield                                            |   |                   | 3.26   | %       |                        |   | 3.75   | %                           |   |   | 3.52          | %      |   |   | 3.85   | % |   |   | 3.65 | % |
| Total carrying value                             |   | $                      | 303    |    |                        | $      | 21,078 |                        |   | $      | 2,985         |   |   | $      | 2,748  |   |   | $ | 27,114 |   |
| Weighted average yield                           |   |                   | 3.26   | %       |                        |   | 1.72   | %                           |   |   | 3.18          | %      |   |   | 3.73   | % |   |   | 2.10 | % |

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|                                                        |   | Within 1 Year          |   |   | After 1 Year Through 5 Years |   |   | After5 YearsThrough10 Years |   |   | After10 Years |   |   | Total  |   |
|-------------------------------------------------------------|--------|------------------------|--------|--------|-----------------------------------|--------|--------|-----------------------------|--------|--------|---------------|--------|--------|--------|--------|
|                                                        |   | (Dollars in thousands) |   |
| U.S. government-sponsored agencies:                         |   |                   |   |   |                              |   |   |                        |   |   |          |   |   |   |   |
| Carrying value                                              |   | $                      | 400    |   |                              | $      | -      |                        |   | $      | 264           |   |   | $      | 3,544  |   |   | $ | 4,208 |   |
| Yield                                                       |   |                   | 5.14   | %      |                              |   | -      | %                           |   |   | 4.53          | %      |   |   | 4.01   | % |   |   | 4.15 | % |
| Obligations of state and  political subdivisions: |   |                   |   |   |                              |   |   |                        |   |   |          |   |   |   |   |   |   |   |   |   |
| Carrying value                                              |   |                   | 590    |   |                              |   | 11,871 |                        |   |   | 11,979        |   |   |   | 1,708  |   |   |   | 26,148 |   |
| Yield                                                       |   |                   | 3.05   | %      |                              |   | 3.05   | %                           |   |   | 3.71          | %      |   |   | 4.03   | % |   |   | 3.42 | % |
| Total carrying value                                        |   | $                      | 990    |   |                              | $      | 11,871 |                        |   | $      | 12,243        |   |   | $      | 5,252  |   |   | $ | 30,356 |   |
| Weighted average yield                                      |   |                   | 3.89   | %      |                              |   | 3.05   | %                           |   |   | 3.73          | %      |   |   | 4.01   | % |   |   | 3.52 | % |

|                       |   | December 31,           |    |
|----------------------------|--------|------------------------|---------|
|                       |   | 2010                   |    |   | 2009 |   |   | 2008 |   |
|                       |   | Amount                 |    |   | Percent |   |   | Amount |   |   | Percent |   |   | Amount |   |   | Percent |   |
|                       |   | (Dollars in thousands) |    |
|                       |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing demand |   | $                      | 99,723  |   |   |   | 17.3 | % |   | $ | 88,427 |   |   |   | 16.7 | % |   | $ | 99,099 |   |   |   | 19.6 | % |
| Interest-bearing demand    |   |                   | 248,240 |   |   |   | 43.1 | % |   |   | 218,284 |   |   |   | 41.2 | % |   |   | 160,768 |   |   |   | 31.7 | % |
| Saving deposits            |   |                   | 47,692  |   |   |   | 8.3 | % |   |   | 45,783 |   |   |   | 8.6 | % |   |   | 39,627 |   |   |   | 7.8 | % |
| Certificates of deposit    |   |                   | 179,948 |   |   |   | 31.3 | % |   |   | 177,436 |   |   |   | 33.5 | % |   |   | 207,037 |   |   |   | 40.9 | % |
| Total                      |   | $                      | 575,603 |   |   |   | 100.0 | % |   | $ | 529,930 |   |   |   | 100.0 | % |   | $ | 506,531 |   |   |   | 100.0 | % |

| Three months or less               |   | $      | 15,314  |   |
|------------------------------------|--------|--------|---------|--------|
| Four months through six months     |   |   | 11,201  |   |
| Seven months through twelve months |   |   | 23,773  |   |
| Over twelve months                 |   |   | 50,416  |   |
|                               |   |   |    |   |
| Total                              |   | $      | 100,704 |   |

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|                                           |   | Three Months or Less   |     |   | More than Three Months Through One Year |   |     | After One Year |   |   | Noninterest Sensitive |   |   | Total  |     |
|------------------------------------------------|--------|------------------------|----------|--------|-----------------------------------------|--------|----------|----------------|--------|--------|-----------------------|--------|--------|--------|----------|
|                                           |   | (Dollars in thousands) |     |
|                                           |   |                   |     |   |                                    |   |     |           |   |   |                  |   |   |   |     |
| Assets:                                        |   |                   |     |   |                                    |   |     |           |   |   |                  |   |   |   |     |
| Loans:                                         |   |                   |     |   |                                    |   |     |           |   |   |                  |   |   |   |     |
| Real estate mortgage                           |   | $                      | 37,802   |   |                                    | $      | 21,248   |           |   | $      | 232,498               |   |   | $      | -        |   |   | $ | 291,548 |   |
| Commercial                                     |   |                   | 53,742   |   |                                    |   | 9,705    |           |   |   | 46,080                |   |   |   | -        |   |   |   | 109,527 |   |
| Consumer                                       |   |                   | 20,927   |   |                                    |   | 3,213    |           |   |   | 26,652                |   |   |   | -        |   |   |   | 50,792 |   |
| Mortgage loans held for sale                   |   |                   | 9,818    |   |                                    |   | -        |           |   |   | -                     |   |   |   | -        |   |   |   | 9,818 |   |
| Investment securities (1)                      |   |                   | 17,561   |   |                                    |   | 26,987   |           |   |   | 141,971               |   |   |   | -        |   |   |   | 186,519 |   |
| Other assets                                   |   |                   | 145      |   |                                    |   | -        |           |   |   | -                     |   |   |   | 39,769   |   |   |   | 39,914 |   |
| Total assets                                   |   | $                      | 139,995  |   |                                    | $      | 61,153   |           |   | $      | 447,201               |   |   | $      | 39,769   |   |   | $ | 688,118 |   |
|                                           |   |                   |     |   |                                    |   |     |           |   |   |                  |   |   |   |     |   |   |   |   |   |
| Source of funds:                               |   |                   |     |   |                                    |   |     |           |   |   |                  |   |   |   |     |   |   |   |   |   |
| Interest-bearing demand                        |   | $                      | 248,240  |   |                                    | $      | -        |           |   | $      | -                     |   |   | $      | -        |   |   | $ | 248,240 |   |
| Savings                                        |   |                   | 47,692   |   |                                    |   | -        |           |   |   | -                     |   |   |   | -        |   |   |   | 47,692 |   |
| Certificate of deposit                         |   |                   | 28,592   |   |                                    |   | 65,709   |           |   |   | 85,647                |   |   |   | -        |   |   |   | 179,948 |   |
| FHLB of NY advances                            |   |                   | 3,000    |   |                                    |   | -        |           |   |   | 33,000                |   |   |   | -        |   |   |   | 36,000 |   |
| Repurchase agreements                          |   |                   | 14,642   |   |                                    |   | -        |           |   |   | -                     |   |   |   | -        |   |   |   | 14,642 |   |
| Subordinated debenture                         |   |                   | -        |   |                                    |   | -        |           |   |   | 7,217                 |   |   |   | -        |   |   |   | 7,217 |   |
| Other liabilities                              |   |                   | -        |   |                                    |   | -        |           |   |   | -                     |   |   |   | 102,247  |   |   |   | 102,247 |   |
| Stockholders' equity                           |   |                   | -        |   |                                    |   | -        |           |   |   | -                     |   |   |   | 52,132   |   |   |   | 52,132 |   |
| Total source of funds                          |   | $                      | 342,166  |   |                                    | $      | 65,709   |           |   | $      | 125,864               |   |   | $      | 154,379  |   |   | $ | 688,118 |   |
|                                           |   |                   |     |   |                                    |   |     |           |   |   |                  |   |   |   |     |   |   |   |   |   |
| Interest rate sensitivity gap                  |   | $                      | (202,171 | )      |                                    | $      | (4,556   | )              |   | $      | 321,337               |   |   | $      | (114,610 | ) |   |   |   |   |
| Cumulative interest rate sensitivity gap       |   | $                      | (202,171 | )      |                                    | $      | (206,727 | )              |   | $      | 114,610               |   |   | $      | -        |   |   |   |   |   |
|                                           |   |                   |     |   |                                    |   |     |           |   |   |                  |   |   |   |     |   |   |   |   |   |
| Ratio of GAP to total assets                   |   |                   | -29.4    | %      |                                    |   | -0.7     | %              |   |   | 46.7                  | %      |   |   | -16.6    | % |   |   |   |   |
| Ratio of cumulative GAP assets to total assets |   |                   | -29.4    | %      |                                    |   | -30.1    | %              |   |   | 16.6                  | %      |   |   | -        | % |   |   |   |   |

| (1)  | Includes securities held to maturity, securities available for sale and FHLB-NY stock. |
|-----------|----------------------------------------------------------------------------------------|

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|                                                                             |   | Years Ended December 31, |    |
|----------------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                             |   | 2010                     |    |   | 2009 |   |
|                                                                             |   | (In thousands)           |    |
| Cash and cash equivalents – beginning                                      |   | $                        | 8,871   |   |   | $ | 12,814 |   |
| Operating activities:                                                            |   |                     |    |   |   |   |   |   |
| Net income                                                                       |   |                     | 1,233   |   |   |   | 3,634 |   |
| Adjustments to reconcile net income to net cash provided by operating activities |   |                     | 302     |   |   |   | 113 |   |
| Net cash provided by operating activities                                        |   |                     | 1,535   |   |   |   | 3,747 |   |
| Net cash used in investing activities                                            |   |                     | (14,643 | ) |   |   | (56,406 | ) |
| Net cash provided by financing activities                                        |   |                     | 24,220  |   |   |   | 48,716 |   |
| Net increase (decrease) in cash and cash equivalents                             |   |                     | 11,112  |   |   |   | (3,943 | ) |
| Cash and cash equivalents – ending                                         |   | $                        | 19,983  |   |   | $ | 8,871 |   |

|                                                             |   |           |    |   | Payment Due By Period |   |
|------------------------------------------------------------------|--------|----------------|---------|--------|-----------------------|--------|
|                                                             |   | Total          |    |   | Less than 1 Year      |   |   | 1 – 3 Years |   |   | 4 – 5 Years |   |   | After 5 Years |   |
|                                                             |   | (In thousands) |    |
| Contractual obligations                                          |   |           |    |   |                  |   |   |   |   |   |   |   |   |   |   |
| Operating lease obligations                                      |   | $              | 6,075   |   |                  | $      | 939 |   |   | $ | 1,817 |   |   | $ | 927 |   |   | $ | 2,392 |   |
| Total contracted cost obligations                                |   | $              | 6,075   |   |                  | $      | 939 |   |   | $ | 1,817 |   |   | $ | 927 |   |   | $ | 2,392 |   |
|                                                             |   |           |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other long-term liabilities/long-term debt                       |   |           |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Time deposits                                                    |   | $              | 179,948 |   |                  | $      | 94,290 |   |   | $ | 67,883 |   |   | $ | 17,775 |   |   | $ | - |   |
| Federal Home Loan Bank advances                                  |   |           | 36,000  |   |                  |   | 3,000 |   |   |   | 18,000 |   |   |   | 5,000 |   |   |   | 10,000 |   |
| Subordinated debentures                                          |   |           | 7,217   |   |                  |   | - |   |   |   | - |   |   |   | - |   |   |   | 7,217 |   |
| Total other long-term liabilities/long-term debt                 |   | $              | 223,165 |   |                  | $      | 97,290 |   |   | $ | 85,883 |   |   | $ | 22,775 |   |   | $ | 17,217 |   |
|                                                             |   |           |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other commitments - off balance sheet                            |   |           |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Letter of credit                                                 |   | $              | 3,237   |   |                  | $      | 3,024 |   |   | $ | 213 |   |   | $ | - |   |   | $ | - |   |
| Commitments to extend credit                                     |   |           | 26,742  |   |                  |   | 26,742 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Unused lines of credit                                           |   |           | 73,334  |   |                  |   | 73,334 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total off balance sheet arrangements and contractual obligations |   | $              | 103,313 |   |                  | $      | 103,100 |   |   | $ | 213 |   |   | $ | - |   |   | $ | - |   |

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|               |   | Actual |   |   | Required for Capital Adequacy Purposes |   |   | To Be Well Capitalized Under Prompt Corrective Action |   |
|--------------------|--------|--------|--------|--------|----------------------------------------|--------|--------|-------------------------------------------------------|--------|
|               |   |   |   |   |                                   |   |   |                                                  |   |
| Leverage ratio *   |   |   |   |   |                                   |   |   |                                                  |   |
| Corporation        |   |   | 8.58   | %      |                                   |   | 4.00   | %                                                     |   |   | N/A |   |
| Bank               |   |   | 8.01   | %      |                                   |   | 4.00   | %                                                     |   |   | 5.00 | % |
|               |   |   |   |   |                                   |   |   |                                                  |   |   |   |   |
| Risk-based capital |   |   |   |   |                                   |   |   |                                                  |   |   |   |   |
| Tier I             |   |   |   |   |                                   |   |   |                                                  |   |   |   |   |
| Corporation        |   |   | 12.20  | %      |                                   |   | 4.00   | %                                                     |   |   | N/A |   |
| Bank               |   |   | 11.34  | %      |                                   |   | 4.00   | %                                                     |   |   | 6.00 | % |
| Total              |   |   |   |   |                                   |   |   |                                                  |   |   |   |   |
| Corporation        |   |   | 13.45  | %      |                                   |   | 8.00   | %                                                     |   |   | N/A |   |
| Bank               |   |   | 12.60  | %      |                                   |   | 8.00   | %                                                     |   |   | 10.00 | % |

Item 

Item 

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|   | Crowe Horwath LLP |
|--------|-------------------|

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|                                                                    |   | December 31, |        |
|-------------------------------------------------------------------------|--------|--------------|-------------|
|                                                                    |   | 2010         |        |   | 2009 |   |
| Assets                                                                  |   |         |        |   |   |   |
| Cash and due from banks                                                 |   | $            | 19,838,000  |   |   | $ | 8,840,000 |   |
| Other interest-earning assets                                           |   |         | 145,000     |   |   |   | 31,000 |   |
| Cash and cash equivalents                                               |   |         | 19,983,000  |   |   |   | 8,871,000 |   |
|                                                                    |   |         |        |   |   |   |   |   |
| Securities available for sale                                           |   |         | 138,628,000 |   |   |   | 103,026,000 |   |
| Securities held to maturity; estimated fair value                       |   |         |        |   |   |   |   |   |
| of $47,316,000 (2010) and $68,765,000 (2009)                            |   |         | 45,394,000  |   |   |   | 67,717,000 |   |
| Federal Home Loan Bank of New York stock, at cost                       |   |         | 2,497,000   |   |   |   | 3,227,000 |   |
| Mortgage loans held for sale                                            |   |         | 9,818,000   |   |   |   | 660,000 |   |
| Loans, net of allowance for loan losses of $8,490,000 (2010)            |   |         |        |   |   |   |   |   |
| and $6,920,000 (2009)                                                   |   |         | 443,245,000 |   |   |   | 453,119,000 |   |
| Premises and equipment, net                                             |   |         | 6,395,000   |   |   |   | 6,861,000 |   |
| Accrued interest receivable                                             |   |         | 2,806,000   |   |   |   | 3,167,000 |   |
| Other real estate owned                                                 |   |         | 615,000     |   |   |   | - |   |
| Bank owned life insurance                                               |   |         | 9,819,000   |   |   |   | 9,488,000 |   |
| Other assets                                                            |   |         | 8,918,000   |   |   |   | 7,708,000 |   |
|                                                                    |   |         |        |   |   |   |   |   |
| Total assets                                                            |   | $            | 688,118,000 |   |   | $ | 663,844,000 |   |
|                                                                    |   |         |        |   |   |   |   |   |
| Liabilities and Stockholders' equity                                    |   |         |        |   |   |   |   |   |
|                                                                    |   |         |        |   |   |   |   |   |
| Liabilities                                                             |   |         |        |   |   |   |   |   |
| Deposits:                                                               |   |         |        |   |   |   |   |   |
| Noninterest-bearing                                                     |   | $            | 99,723,000  |   |   | $ | 88,427,000 |   |
| Interest-bearing                                                        |   |         | 475,880,000 |   |   |   | 441,503,000 |   |
| Total deposits                                                          |   |         | 575,603,000 |   |   |   | 529,930,000 |   |
|                                                                    |   |         |        |   |   |   |   |   |
| Federal Home Loan Bank of New York Advances                             |   |         | 36,000,000  |   |   |   | 54,600,000 |   |
| Securities sold under agreements to repurchase                          |   |         | 14,642,000  |   |   |   | 15,396,000 |   |
| Subordinated debentures                                                 |   |         | 7,217,000   |   |   |   | 7,217,000 |   |
| Accrued interest payable                                                |   |         | 977,000     |   |   |   | 1,193,000 |   |
| Accrued expenses and other liabilities                                  |   |         | 1,547,000   |   |   |   | 1,997,000 |   |
|                                                                    |   |         |        |   |   |   |   |   |
| Total liabilities                                                       |   |         | 635,986,000 |   |   |   | 610,333,000 |   |
|                                                                    |   |         |        |   |   |   |   |   |
| Commitments and contingencies                                           |   |         |        |   |   |   |   |   |
|                                                                    |   |         |        |   |   |   |   |   |
| Stockholders' equity                                                    |   |         |        |   |   |   |   |   |
| Preferred stock, no par value; 2,500,000 shares authorized;             |   |         |        |   |   |   |   |   |
| 10,000 shares issued and outstanding at December 31, 2010               |   |         |        |   |   |   |   |   |
| and December 31, 2009.  Liquidation preference of $10,000,000 |   |         | 9,796,000   |   |   |   | 9,736,000 |   |
| Common stock, no par value; 10,000,000 shares authorized;               |   |         |        |   |   |   |   |   |
| 5,847,844 and 5,834,515 shares issued; 5,846,927 and 5,834,515          |   |         |        |   |   |   |   |   |
| shares outstanding at December 31, 2010 and 2009, respectively          |   |         | 40,516,000  |   |   |   | 40,415,000 |   |
| Treasury stock, 917 shares at December 31, 2010                         |   |         | (13,000     | ) |   |   | - |   |
| Retained earnings                                                       |   |         | 1,959,000   |   |   |   | 2,922,000 |   |
| Accumulated other comprehensive income (loss), net                      |   |         | (126,000    | ) |   |   | 438,000 |   |
| Total Stockholders' equity                                              |   |         | 52,132,000  |   |   |   | 53,511,000 |   |
|                                                                    |   |         |        |   |   |   |   |   |
| Total liabilities and Stockholders' equity                              |   | $            | 688,118,000 |   |   | $ | 663,844,000 |   |

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Table of Contents

|                                                         |   | Years Ended December 31, |       |
|--------------------------------------------------------------|--------|--------------------------|------------|
|                                                         |   | 2010                     |       |   | 2009 |   |
| Interest income:                                             |   |                     |       |   |   |   |
| Loans                                                        |   | $                        | 27,290,000 |   |   | $ | 26,934,000 |   |
| Securities held to maturity:                                 |   |                     |       |   |   |   |   |   |
| Taxable                                                      |   |                     | 1,239,000  |   |   |   | 1,946,000 |   |
| Nontaxable                                                   |   |                     | 918,000    |   |   |   | 879,000 |   |
| Securities available for sale:                               |   |                     |       |   |   |   |   |   |
| Taxable                                                      |   |                     | 3,219,000  |   |   |   | 4,060,000 |   |
| Nontaxable                                                   |   |                     | 157,000    |   |   |   | 203,000 |   |
| FHLB dividends                                               |   |                     | 135,000    |   |   |   | 125,000 |   |
| Other interest-earning assets                                |   |                     | 26,000     |   |   |   | 9,000 |   |
| Total interest income                                        |   |                     | 32,984,000 |   |   |   | 34,156,000 |   |
|                                                         |   |                     |       |   |   |   |   |   |
| Interest expense:                                            |   |                     |       |   |   |   |   |   |
| Deposits                                                     |   |                     | 6,624,000  |   |   |   | 8,793,000 |   |
| Borrowed money                                               |   |                     | 2,154,000  |   |   |   | 2,018,000 |   |
| Total interest expense                                       |   |                     | 8,778,000  |   |   |   | 10,811,000 |   |
| Net interest income before provision for loan losses         |   |                     | 24,206,000 |   |   |   | 23,345,000 |   |
| Provision for loan losses                                    |   |                     | 9,575,000  |   |   |   | 3,575,000 |   |
| Net interest income after provision for loan losses          |   |                     | 14,631,000 |   |   |   | 19,770,000 |   |
|                                                         |   |                     |       |   |   |   |   |   |
| Noninterest income:                                          |   |                     |       |   |   |   |   |   |
| Fees and service charges                                     |   |                     | 1,990,000  |   |   |   | 1,847,000 |   |
| Bank owned life insurance                                    |   |                     | 331,000    |   |   |   | 322,000 |   |
| Gain on calls and sales of securities, net                   |   |                     | 1,081,000  |   |   |   | 258,000 |   |
| Gain on sales of mortgage loans                              |   |                     | 671,000    |   |   |   | 294,000 |   |
| Merchant processing                                          |   |                     | -          |   |   |   | 118,000 |   |
| Miscellaneous                                                |   |                     | 314,000    |   |   |   | 294,000 |   |
| Total noninterest income                                     |   |                     | 4,387,000  |   |   |   | 3,133,000 |   |
|                                                         |   |                     |       |   |   |   |   |   |
| Noninterest expense:                                         |   |                     |       |   |   |   |   |   |
| Salaries and employee benefits                               |   |                     | 8,331,000  |   |   |   | 8,264,000 |   |
| Occupancy, net                                               |   |                     | 1,954,000  |   |   |   | 1,858,000 |   |
| Equipment                                                    |   |                     | 1,129,000  |   |   |   | 1,087,000 |   |
| Data processing                                              |   |                     | 1,322,000  |   |   |   | 1,218,000 |   |
| Advertising                                                  |   |                     | 523,000    |   |   |   | 505,000 |   |
| FDIC insurance premium                                       |   |                     | 976,000    |   |   |   | 1,124,000 |   |
| Charitable contributions                                     |   |                     | 360,000    |   |   |   | 619,000 |   |
| Stationery and supplies                                      |   |                     | 258,000    |   |   |   | 253,000 |   |
| Legal                                                        |   |                     | 446,000    |   |   |   | 198,000 |   |
| Merchant processing                                          |   |                     | -          |   |   |   | 108,000 |   |
| Bank-card related services                                   |   |                     | 435,000    |   |   |   | 383,000 |   |
| Other real estate owned                                      |   |                     | 61,000     |   |   |   | - |   |
| Miscellaneous                                                |   |                     | 2,155,000  |   |   |   | 2,173,000 |   |
| Total noninterest expenses                                   |   |                     | 17,950,000 |   |   |   | 17,790,000 |   |
| Income before income tax (benefit) expense                   |   |                     | 1,068,000  |   |   |   | 5,113,000 |   |
| Income tax (benefit) expense                                 |   |                     | (165,000   | ) |   |   | 1,479,000 |   |
| Net income                                                   |   |                     | 1,233,000  |   |   |   | 3,634,000 |   |
| Dividends on preferred stock and accretion                   |   |                     | 550,000    |   |   |   | 504,000 |   |
| Net Income available to common stockholders                  |   | $                        | 683,000    |   |   | $ | 3,130,000 |   |
|                                                         |   |                     |       |   |   |   |   |   |
| Basic earnings per common share                              |   | $                        | 0.12       |   |   | $ | 0.54 |   |
|                                                         |   |                     |       |   |   |   |   |   |
| Diluted earnings per common share                            |   | $                        | 0.12       |   |   | $ | 0.54 |   |
|                                                         |   |                     |       |   |   |   |   |   |
| Weighted average number of common shares outstanding         |   |                     | 5,843,419  |   |   |   | 5,832,186 |   |
|                                                         |   |                     |       |   |   |   |   |   |
| Weighted average number of diluted common shares outstanding |   |                     | 5,843,756  |   |   |   | 5,836,739 |   |

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Table of Contents

|                                                                                                                        |   |  Years Ended December 31, 2010 and 2009 |      |
|-----------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|
|                                                                                                                        |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                                                                                                        |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Other |   |   |   |   |
|                                                                                                                        |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   | Compre-hensive |   |   |   |   |
|                                                                                                                        |   | Preferred                                    |      |   | Common Stock |   |   | Retained |   |   | Treasury Stock |   |   | Income |   |   |   |   |
|                                                                                                                        |   | Stock                                        |      |   | Shares |   |   | Amount |   |   | Earnings |   |   | Shares |   |   | Amount |   |   | (Loss), Net |   |   | Total |   |
|                                                                                                                        |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance -- December 31, 2008                                                                                                |   | $                                            | -         |   |   |   | 5,575,095 |   |   | $ | 37,962,000 |   |   | $ | 4,383,000 |   |   |   | (20,000 | ) |   | $ | (272,000 | ) |   | $ | 723,000 |   |   | $ | 42,796,000 |   |
| Proceeds from issuance of preferredstock and a warrant                                                                      |   |                                         | 9,731,000 |   |   |   | - |   |   |   | 269,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 10,000,000 |   |
| Preferred stock issuance costs                                                                                              |   |                                         | (48,000   | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (48,000 | ) |
| Cash dividends declared ($0.36 pershare)                                                                                    |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | (2,110,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (2,110,000 | ) |
| Payment of discount on dividendreinvestment plan                                                                            |   |                                         | -         |   |   |   | - |   |   |   | (44,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (44,000 | ) |
| 5% Stock dividend                                                                                                           |   |                                         | -         |   |   |   | 249,129 |   |   |   | 2,114,000 |   |   |   | (2,472,000 | ) |   |   | 28,502 |   |   |   | 356,000 |   |   |   | - |   |   |   | (2,000 | ) |
| Cash dividends accrued on preferredstock                                                                                    |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | (460,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (460,000 | ) |
| Common stock issued under stockplans                                                                                        |   |                                         | -         |   |   |   | 2,288 |   |   |   | 22,000 |   |   |   | - |   |   |   | 2,566 |   |   |   | 23,000 |   |   |   | - |   |   |   | 45,000 |   |
| Stock option compensation expense                                                                                           |   |                                         | -         |   |   |   | - |   |   |   | 48,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 48,000 |   |
| Repurchase of treasury stock for stockoptions                                                                               |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (3,568 | ) |   |   | (32,000 | ) |   |   |   |   |   |   | (32,000 | ) |
| Stock options exercised                                                                                                     |   |                                         | -         |   |   |   | 8,003 |   |   |   | 44,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 44,000 |   |
| Repurchase of common stock                                                                                                  |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (7,500 | ) |   |   | (75,000 | ) |   |   | - |   |   |   | (75,000 | ) |
| Accretion of discount on preferredstock                                                                                     |   |                                         | 44,000    |   |   |   | - |   |   |   | - |   |   |   | (44,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Amortization of issuance costs                                                                                              |   |                                         | 9,000     |   |   |   | - |   |   |   | - |   |   |   | (9,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Comprehensive income:                                                                                                       |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                                  |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | 3,634,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,634,000 |   |
| Change in unrealized holding gainson securities available for salearising during the period (net of taxexpense of $21,000)  |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 26,000 |   |   |   | 26,000 |   |
| Reclassification adjustment for gainsin net income (net of taxes of$102,000)                                                |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (156,000 | ) |   |   | (156,000 | ) |
| Change in fair value of interest rateswap (net of tax benefit of$103,000)                                                   |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (155,000 | ) |   |   | (155,000 | ) |
| Total comprehensive income                                                                                                  |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 3,349,000 |   |
| Balance -- December 31, 2009                                                                                                |   |                                         | 9,736,000 |   |   |   | 5,834,515 |   |   |   | 40,415,000 |   |   |   | 2,922,000 |   |   |   | - |   |   |   |   |   |   |   | 438,000 |   |   |   | 53,511,000 |   |
|                                                                                                                        |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividends declared ($0.28 pershare)                                                                                    |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | (1,636,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,636,000 | ) |
| Payment of discount on dividendreinvestment plan                                                                            |   |                                         | -         |   |   |   | - |   |   |   | (29,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (29,000 | ) |
| Cash dividends accrued on preferredstock                                                                                    |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | (500,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (500,000 | ) |
| Common stock issued under stockplans                                                                                        |   |                                         | -         |   |   |   | 3,036 |   |   |   | 24,000 |   |   |   | - |   |   |   | 3,644 |   |   |   | 30,000 |   |   |   | - |   |   |   | 54,000 |   |
| Stock option compensation expense                                                                                           |   |                                         | -         |   |   |   | - |   |   |   | 51,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 51,000 |   |
| Repurchase of treasury stock for stockoptions                                                                               |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (4,561 | ) |   |   | (43,000 | ) |   |   |   |   |   |   | (43,000 | ) |
| Stock options exercised                                                                                                     |   |                                         | -         |   |   |   | 9,376 |   |   |   | 55,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 55,000 |   |
| Accretion of discount on preferredstock                                                                                     |   |                                         | 50,000    |   |   |   | - |   |   |   | - |   |   |   | (50,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Amortization of issuance costs                                                                                              |   |                                         | 10,000    |   |   |   | - |   |   |   | - |   |   |   | (10,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Comprehensive income:                                                                                                       |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                                                  |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | 1,233,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,233,000 |   |
| Change in unrealized holding gainson securities available for salearising during the period (net of taxexpense of $220,000) |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 334,000 |   |   |   | 334,000 |   |
| Reclassification adjustment for gainsin net income (net of tax expense of$426,000)                                          |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (655,000 | ) |   |   | (655,000 | ) |
| Change in fair value of interest rateswap (net of tax benefit of$162,000)                                                   |   |                                         | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (243,000 | ) |   |   | (243,000 | ) |
| Total comprehensive income                                                                                                  |   |                                         |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 669,000 |   |
| Balance -- December 31, 2010                                                                                                |   | $                                            | 9,796,000 |   |   |   | 5,846,927 |   |   | $ | 40,516,000 |   |   | $ | 1,959,000 |   |   |   | (917 | ) |   | $ | (13,000 | ) |   | $ | (126,000 | ) |   | $ | 52,132,000 |   |

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Table of Contents

|                                                                                                        |   | Years Ended December 31, |       |
|-------------------------------------------------------------------------------------------------------------|--------|--------------------------|------------|
|                                                                                                        |   | 2010                     |       |   | 2009 |   |
|                                                                                                        |   |                     |       |   |   |   |
| Net income                                                                                                  |   | $                        | 1,233,000  |   |   | $ | 3,634,000 |   |
|                                                                                                        |   |                     |       |   |   |   |   |   |
| Other comprehensive income (loss):                                                                          |   |                     |       |   |   |   |   |   |
| Change in unrealized holding gains (losses) on securities available for sale arising during the period |   |                     | 554,000    |   |   |   | 47,000 |   |
| Reclassification adjustment for gains in net income                                                         |   |                     | (1,081,000 | ) |   |   | (258,000 | ) |
| Net unrealized losses                                                                                       |   |                     | (527,000   | ) |   |   | (211,000 | ) |
| Tax effect                                                                                                  |   |                     | 206,000    |   |   |   | 81,000 |   |
| Net unrealized losses, net of tax amount                                                                    |   |                     | (321,000   | ) |   |   | (130,000 | ) |
|                                                                                                        |   |                     |       |   |   |   |   |   |
| Change in fair value of interest rate swap                                                                  |   |                     | (405,000   | ) |   |   | (258,000 | ) |
| Tax effect                                                                                                  |   |                     | 162,000    |   |   |   | 103,000 |   |
| Change in fair value of interest rate swap, net of tax amount                                               |   |                     | (243,000   | ) |   |   | (155,000 | ) |
|                                                                                                        |   |                     |       |   |   |   |   |   |
| Total other comprehensive loss                                                                              |   |                     | (564,000   | ) |   |   | (285,000 | ) |
|                                                                                                        |   |                     |       |   |   |   |   |   |
| Total comprehensive income                                                                                  |   | $                        | 669,000    |   |   | $ | 3,349,000 |   |

|                                                |   | At December 31, |     |
|-----------------------------------------------------|--------|-----------------|----------|
|                                                |   | 2010            |     |   | 2009 |   |
|                                                |   |            |     |   |   |   |
| Unrealized gain on securities available for sale    |   | $               | 272,000  |   |   | $ | 593,000 |   |
| Unrealized loss on fair value of interest rate swap |   |            | (398,000 | ) |   |   | (155,000 | ) |
|                                                |   |            |     |   |   |   |   |   |
| Accumulated other comprehensive income (loss), net  |   | $               | (126,000 | ) |   | $ | 438,000 |   |

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Table of Contents

|                                                                               |   | Years Ended December 31, |         |
|------------------------------------------------------------------------------------|--------|--------------------------|--------------|
|                                                                               |   | 2010                     |         |   | 2009 |   |
| Cash flows from operating activities:                                              |   |                     |         |   |   |   |
| Net income                                                                         |   | $                        | 1,233,000    |   |   | $ | 3,634,000 |   |
| Adjustments to reconcile net income to                                             |   |                     |         |   |   |   |   |   |
| net cash provided by operating activities:                                         |   |                     |         |   |   |   |   |   |
| Depreciation and amortization of premises and equipment                            |   |                     | 775,000      |   |   |   | 841,000 |   |
| Amortization of premiums and accretion of discounts, net                           |   |                     | 1,094,000    |   |   |   | 628,000 |   |
| Accretion of deferred loan fees                                                    |   |                     | (112,000     | ) |   |   | (235,000 | ) |
| Provision for loan losses                                                          |   |                     | 9,575,000    |   |   |   | 3,575,000 |   |
| Originations of mortgage loans held for sale                                       |   |                     | (58,713,000  | ) |   |   | (36,076,000 | ) |
| Proceeds from sale of mortgage loans                                               |   |                     | 50,226,000   |   |   |   | 36,104,000 |   |
| Gain on sale of loans                                                              |   |                     | (671,000     | ) |   |   | (294,000 | ) |
| Gains on sales and calls of securities                                             |   |                     | (1,081,000   | ) |   |   | (258,000 | ) |
| Loss on sale of OREO                                                               |   |                     | 40,000       |   |   |   | - |   |
| Deferred income tax benefit                                                        |   |                     | (851,000     | ) |   |   | (1,210,000 | ) |
| Decrease in accrued interest receivable                                            |   |                     | 361,000      |   |   |   | 204,000 |   |
| Decrease in accrued interest payable                                               |   |                     | (216,000     | ) |   |   | (389,000 | ) |
| Earnings on bank owned life insurance                                              |   |                     | (331,000     | ) |   |   | (322,000 | ) |
| Stock option expense                                                               |   |                     | 51,000       |   |   |   | 48,000 |   |
| Increase in other assets                                                           |   |                     | (322,000     | ) |   |   | (3,101,000 | ) |
| (Decrease) increase in other liabilities                                           |   |                     | (523,000     | ) |   |   | 598,000 |   |
| Net cash provided by operating activities                                          |   |                     | 535,000      |   |   |   | 3,747,000 |   |
|                                                                               |   |                     |         |   |   |   |   |   |
| Cash flows from investing activities:                                              |   |                     |         |   |   |   |   |   |
| Purchase of securities available for sale                                          |   |                     | (121,488,000 | ) |   |   | (69,388,000 | ) |
| Proceeds from maturities and principal repayments on securities available for sale |   |                     | 19,990,000   |   |   |   | 15,444,000 |   |
| Proceeds from sales and calls on securities available for sale                     |   |                     | 65,676,000   |   |   |   | 40,654,000 |   |
| Purchase of securities held to maturity                                            |   |                     | (5,566,000   | ) |   |   | (42,913,000 | ) |
| Proceeds from maturities and principal repayments on securities held to maturity   |   |                     | 6,433,000    |   |   |   | 7,093,000 |   |
| Proceeds from calls of securities held to maturity                                 |   |                     | 21,135,000   |   |   |   | 16,666,000 |   |
| Redemption (purchase) of FHLB-NY stock                                             |   |                     | 730,000      |   |   |   | (807,000 | ) |
| Net increase in loans                                                              |   |                     | (1,244,000   | ) |   |   | (22,356,000 | ) |
| Proceeds from sale of OREO                                                         |   |                     | 1,000,000    |   |   |   | - |   |
| Additions to premises and equipment                                                |   |                     | (309,000     | ) |   |   | (232,000 | ) |
| Purchase of BOLI                                                                   |   |                     | -            |   |   |   | (567,000 | ) |
| Net cash used in investing activities                                              |   |                     | (13,643,000  | ) |   |   | (56,406,000 | ) |
|                                                                               |   |                     |         |   |   |   |   |   |
| Cash flows from financing activities:                                              |   |                     |         |   |   |   |   |   |
| Net increase (decrease) in noninterest-bearing deposits                            |   |                     | 11,296,000   |   |   |   | (10,672,000 | ) |
| Net increase in interest-bearing deposits                                          |   |                     | 34,377,000   |   |   |   | 34,071,000 |   |
| Net (decrease) increase in securities sold under agreements to repurchase          |   |                     | (754,000     | ) |   |   | 236,000 |   |
| Net (decrease) increase in short term borrowings                                   |   |                     | (18,600,000  | ) |   |   | 11,700,000 |   |
| Proceeds from long term borrowings                                                 |   |                     | -            |   |   |   | 6,000,000 |   |
| Proceeds from issuance of preferred stock and warrants                             |   |                     | -            |   |   |   | 9,951,000 |   |
| Cash dividends paid on common stock                                                |   |                     | (1,636,000   | ) |   |   | (2,112,000 | ) |
| Cash dividends paid on preferred stock                                             |   |                     | (500,000     | ) |   |   | (396,000 | ) |
| Payment of discount on dividend reinvestment plan                                  |   |                     | (29,000      | ) |   |   | (44,000 | ) |
| Purchase of treasury stock                                                         |   |                     | -            |   |   |   | (75,000 | ) |
| Repurchse of treasury stock for stock options                                      |   |                     | (43,000      | ) |   |   | (32,000 | ) |
| Exercise of stock options                                                          |   |                     | 55,000       |   |   |   | 44,000 |   |
| Issuance of common stock                                                           |   |                     | 54,000       |   |   |   | 45,000 |   |
| Net cash provided by financing activities                                          |   |                     | 24,220,000   |   |   |   | 48,716,000 |   |
|                                                                               |   |                     |         |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                               |   |                     | 11,112,000   |   |   |   | (3,943,000 | ) |
| Cash and cash equivalents - beginning                                              |   |                     | 8,871,000    |   |   |   | 12,814,000 |   |
| Cash and cash equivalents - ending                                                 |   | $                        | 19,983,000   |   |   | $ | 8,871,000 |   |
|                                                                               |   |                     |         |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                 |   |                     |         |   |   |   |   |   |
| Cash paid during the year for interest                                             |   | $                        | 8,994,000    |   |   | $ | 11,200,000 |   |
| Cash paid during the year for income taxes                                         |   | $                        | 2,277,000    |   |   | $ | 1,831,000 |   |
| Transfers from loans to other real estate owned                                    |   | $                        | 1,655,000    |   |   | $ | - |   |

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|                                            |   | December 31, 2010 |        |
|-------------------------------------------------|--------|-------------------|-------------|
|                                            |   | AmortizedCost     |        |   | Gross Unrealized |   |   | FairValue |   |
| Gains                                           |   |              | Losses      |
|                                            |   |              |        |   |   |   |   |   |   |   |   |   |
| U.S. Treasury                                   |   | $                 | 9,141,000   |   |   | $ | 109,000 |   |   | $ | 1,000 |   |   | $ | 9,249,000 |   |
| U.S. government-sponsored agencies              |   |              | 13,600,000  |   |   |   | 97,000 |   |   |   | 111,000 |   |   |   | 13,586,000 |   |
| Obligations of state and political subdivisions |   |              | 4,219,000   |   |   |   | 79,000 |   |   |   | 19,000 |   |   |   | 4,279,000 |   |
| Mortgage-backed securities-residential          |   |              | 108,078,000 |   |   |   | 1,169,000 |   |   |   | 920,000 |   |   |   | 108,327,000 |   |
|                                            |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total debt securities                           |   |              | 135,038,000 |   |   |   | 1,454,000 |   |   |   | 1,051,000 |   |   |   | 135,441,000 |   |
| Other equity investments                        |   |              | 3,135,000   |   |   |   | 52,000 |   |   |   | - |   |   |   | 3,187,000 |   |
|                                            |   | $                 | 138,173,000 |   |   | $ | 1,506,000 |   |   | $ | 1,051,000 |   |   | $ | 138,628,000 |   |

|                                            |   | December 31, 2009 |        |
|-------------------------------------------------|--------|-------------------|-------------|
|                                            |   | AmortizedCost     |        |   | Gross Unrealized |   |   | FairValue |   |
| Gains                                           |   |              | Losses      |
|                                            |   |              |        |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies:             |   | $                 | 32,642,000  |   |   | $ | 92,000 |   |   | $ | 448,000 |   |   | $ | 32,286,000 |   |
| Obligations of state and political subdivisions |   |              | 5,284,000   |   |   |   | 122,000 |   |   |   | 9,000 |   |   |   | 5,397,000 |   |
| Mortgage-backed securities-residential          |   |              | 61,060,000  |   |   |   | 1,423,000 |   |   |   | 255,000 |   |   |   | 62,228,000 |   |
|                                            |   |              |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total debt securities                           |   |              | 98,986,000  |   |   |   | 1,637,000 |   |   |   | 712,000 |   |   |   | 99,911,000 |   |
| Other equity investments                        |   |              | 3,058,000   |   |   |   | 66,000 |   |   |   | 9,000 |   |   |   | 3,115,000 |   |
|                                            |   | $                 | 102,044,000 |   |   | $ | 1,703,000 |   |   | $ | 721,000 |   |   | $ | 103,026,000 |   |

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|                                            |   | December 31, 2010 |       |
|-------------------------------------------------|--------|-------------------|------------|
|                                            |   | AmortizedCost     |       |   | Gross Unrecognized |   |   | FairValue |   |
| Gains                                           |   |              | Losses     |
|                                            |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies              |   | $                 | 4,208,000  |   |   | $ | 146,000 |   |   | $ | - |   |   | $ | 4,354,000 |   |
| Obligations of state and political subdivisions |   |              | 26,148,000 |   |   |   | 1,046,000 |   |   |   | 20,000 |   |   |   | 27,174,000 |   |
| Mortgage-backed securities-residential          |   |              | 15,038,000 |   |   |   | 750,000 |   |   |   | - |   |   |   | 15,788,000 |   |
|                                            |   | $                 | 45,394,000 |   |   | $ | 1,942,000 |   |   | $ | 20,000 |   |   | $ | 47,316,000 |   |

|                                            |   | December 31, 2009 |       |
|-------------------------------------------------|--------|-------------------|------------|
|                                            |   | AmortizedCost     |       |   | Gross Unrealized |   |   | FairValue |   |
| Gains                                           |   |              | Losses     |
|                                            |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. government-sponsored agencies              |   | $                 | 19,921,000 |   |   | $ | 90,000 |   |   | $ | 351,000 |   |   | $ | 19,660,000 |   |
| Obligations of state and political subdivisions |   |              | 27,038,000 |   |   |   | 871,000 |   |   |   | 84,000 |   |   |   | 27,825,000 |   |
| Mortgage-backed securities-residential          |   |              | 20,758,000 |   |   |   | 547,000 |   |   |   | 25,000 |   |   |   | 21,280,000 |   |
|                                            |   | $                 | 67,717,000 |   |   | $ | 1,508,000 |   |   | $ | 460,000 |   |   | $ | 68,765,000 |   |

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| 2010                                   |   | Less than 12 Months |       |   | 12 Months or Longer |   |       | Total     |   |
|----------------------------------------|--------|---------------------|------------|--------|---------------------|--------|------------|-----------|--------|
|                                   |   | FairValue           |       |   | UnrealizedLosses    |   |       | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                                   |   |                |       |   |                |   |       |      |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury                          |   | $                   | 1,522,000  |   |                | $      | (1,000     | )         |   | $ | - |   |   | $ | - |   |   | $ | 1,522,000 |   |   | $ | (1,000 | ) |
| U.S. government-                       |   |                |       |   |                |   |       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies                     |   |                | 3,418,000  |   |                |   | (111,000   | )         |   |   | - |   |   |   | - |   |   |   | 3,418,000 |   |   |   | (111,000 | ) |
| Obligations of state and political     |   |                |       |   |                |   |       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                           |   |                | 1,153,000  |   |                |   | (19,000    | )         |   |   | - |   |   |   | - |   |   |   | 1,153,000 |   |   |   | (19,000 | ) |
| Mortgage-backed securities-residential |   |                | 39,179,000 |   |                |   | (920,000   | )         |   |   | - |   |   |   | - |   |   |   | 39,179,000 |   |   |   | (920,000 | ) |
| Other equity investments               |   |                | -          |   |                |   |       |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total temporarily impaired securities  |   | $                   | 45,272,000 |   |                | $      | (1,051,000 | )         |   | $ | - |   |   | $ | - |   |   | $ | 45,272,000 |   |   | $ | (1,051,000 | ) |

| 2009                                   |   | Less than 12 Months |       |   | 12 Months or Longer |   |     | Total     |   |
|----------------------------------------|--------|---------------------|------------|--------|---------------------|--------|----------|-----------|--------|
|                                   |   | FairValue           |       |   | UnrealizedLosses    |   |     | FairValue |   |   | UnrealizedLosses |   |   | FairValue |   |   | UnrealizedLosses |   |
|                                   |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-                       |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies                     |   | $                   | 23,282,000 |   |                | $      | (361,000 | )         |   | $ | 2,913,000 |   |   | $ | (87,000 | ) |   | $ | 26,195,000 |   |   | $ | (448,000 | ) |
| Obligations of state and political     |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                           |   |                | 373,000    |   |                |   | (2,000   | )         |   |   | 443,000 |   |   |   | (7,000 | ) |   |   | 816,000 |   |   |   | (9,000 | ) |
| Mortgage-backed securities-residential |   |                | 15,156,000 |   |                |   | (255,000 | )         |   |   | - |   |   |   | - |   |   |   | 15,156,000 |   |   |   | (255,000 | ) |
| Other equity investments               |   |                | -          |   |                |   | -        |      |   |   | 33,000 |   |   |   | (9,000 | ) |   |   | 33,000 |   |   |   | (9,000 | ) |
| Total temporarily impaired securities  |   | $                   | 38,811,000 |   |                | $      | (618,000 | )         |   | $ | 3,389,000 |   |   | $ | (103,000 | ) |   | $ | 42,200,000 |   |   | $ | (721,000 | ) |

| 2010                                   |   | Less than 12 Months |      |   | 12 Months or Longer |   |    | Total     |   |
|----------------------------------------|--------|---------------------|-----------|--------|---------------------|--------|---------|-----------|--------|
|                                   |   | FairValue           |      |   | UnrecognizedLosses  |   |    | FairValue |   |   | UnrecognizedLosses |   |   | FairValue |   |   | UnrecognizedLosses |   |
|                                   |   |                |      |   |                |   |    |      |   |   |   |   |   |   |   |   |   |   |
| U.S. government-                       |   |                |      |   |                |   |    |      |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies                     |   | $                   | -         |   |                | $      | -       |      |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Obligations of state and political     |   |                |      |   |                |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                           |   |                | 1,403,000 |   |                |   | (20,000 | )         |   |   | - |   |   |   | - |   |   |   | 1,403,000 |   |   |   | (20,000 | ) |
| Mortgage-backed securities-residential |   |                | -         |   |                |   | -       |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total temporarily impaired securities  |   | $                   | 1,403,000 |   |                | $      | (20,000 | )         |   | $ |  - |   |   | $ |  - |   |   | $ | 1,403,000 |   |   | $ | (20,000 | ) |

| 2009                                   |   | Less than 12 Months |       |   | 12 Months or Longer |   |     | Total     |   |
|----------------------------------------|--------|---------------------|------------|--------|---------------------|--------|----------|-----------|--------|
|                                   |   | FairValue           |       |   | UnrecognizedLosses  |   |     | FairValue |   |   | UnrecognizedLosses |   |   | FairValue |   |   | UnrecognizedLosses |   |
|                                   |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. government-                       |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies                     |   | $                   | 12,529,000 |   |                | $      | (351,000 | )         |   | $ | - |   |   | $ | - |   |   | $ | 12,529,000 |   |   | $ | (351,000 | ) |
| Obligations of state and political     |   |                |       |   |                |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| subdivisions                           |   |                | 4,504,000  |   |                |   | (69,000  | )         |   |   | 401,000 |   |   |   | (15,000 | ) |   |   | 4,905,000 |   |   |   | (84,000 | ) |
| Mortgage-backed securities-residential |   |                | 1,949,000  |   |                |   | (25,000  | )         |   |   | - |   |   |   | - |   |   |   | 1,949,000 |   |   |   | (25,000 | ) |
| Total temporarily impaired securities  |   | $                   | 18,982,000 |   |                | $      | (445,000 | )         |   | $ | 401,000 |   |   | $ | (15,000 | ) |   | $ | 19,383,000 |   |   | $ | (460,000 | ) |

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|                                               |   | December 31, |        |
|----------------------------------------------------|--------|--------------|-------------|
|                                               |   | 2010         |        |   | 2009 |   |
|                                               |   |         |        |   |   |   |
| Commercial:                                        |   |         |        |   |   |   |
| Secured by real estate                             |   | $            | 65,200,000  |   |   | $ | 64,240,000 |   |
| Other                                              |   |         | 44,327,000  |   |   |   | 50,650,000 |   |
| Commercial real estate                             |   |         | 219,875,000 |   |   |   | 205,585,000 |   |
| Construction:                                      |   |         |        |   |   |   |   |   |
| Commercial                                         |   |         | 28,652,000  |   |   |   | 40,627,000 |   |
| Residential                                        |   |         | 875,000     |   |   |   | 4,508,000 |   |
| Residential real estate                            |   |         | 42,145,000  |   |   |   | 31,738,000 |   |
| Consumer:                                          |   |         |        |   |   |   |   |   |
| Secured by real estate                             |   |         | 49,360,000  |   |   |   | 61,268,000 |   |
| Other                                              |   |         | 1,280,000   |   |   |   | 1,703,000 |   |
| Other                                              |   |         | 152,000     |   |   |   | 157,000 |   |
| Total gross loans                                  |   |         | 451,866,000 |   |   |   | 460,476,000 |   |
|                                               |   |         |        |   |   |   |   |   |
| Less:   Deferred loan fees, net of costs |   |         | 131,000     |   |   |   | 437,000 |   |
| Allowance for loan losses                          |   |         | 8,490,000   |   |   |   | 6,920,000 |   |
|                                               |   |         | 8,621,000   |   |   |   | 7,357,000 |   |
|                                               |   |         |        |   |   |   |   |   |
| Loans, net                                         |   | $            | 443,245,000 |   |   | $ | 453,119,000 |   |

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|                            |   | December 31, |       |
|---------------------------------|--------|--------------|------------|
|                            |   | 2010         |       |   | 2009 |   |
|                            |   |         |       |   |   |   |
| Balance, beginning              |   | $            | 6,920,000  |   |   | $ | 5,166,000 |   |
| Provision charged to operations |   |         | 9,575,000  |   |   |   | 3,575,000 |   |
| Loans charged off               |   |         | (8,098,000 | ) |   |   | (1,926,000 | ) |
| Recoveries of loans charged off |   |         | 93,000     |   |   |   | 105,000 |   |
|                            |   |         |       |   |   |   |   |   |
| Balance, ending                 |   | $            | 8,490,000  |   |   | $ | 6,920,000 |   |

|                                                                                                |   | Commercial |        |   | Commercial Real Estate |   |        | Construction |   |   | Residential Real Estate |   |   | Consumer |       |   | Other Loans |   |       | Unallocated |   |   | Total   |   |
|-----------------------------------------------------------------------------------------------------|--------|------------|-------------|--------|------------------------|--------|-------------|--------------|--------|--------|-------------------------|--------|--------|----------|------------|--------|-------------|--------|------------|-------------|--------|--------|---------|--------|
|                                                                                                |   |       |        |   |                   |   |        |         |   |   |                    |   |   |     |       |   |        |   |       |        |   |   |    |   |
| Allowance for loan losses:                                                                          |   |       |        |   |                   |   |        |         |   |   |                    |   |   |     |       |   |        |   |       |        |   |   |    |   |
| Ending Allowance balance attributable to loans                                       |   |       |        |   |                   |   |        |         |   |   |                    |   |   |     |       |   |        |   |       |        |   |   |    |   |
|       Individually evaluated for impairment            |   | $          | 1,336,000   |   |                   | $      | 276,000     |         |   | $      | 29,000                  |   |   | $        | 3,000      |   |        | $      | -          |        |   | $      | -       |   |   | $ | - |   |   | $ | 1,644,000 |   |
|       Collectively evaluated for impairment            |   |       | 2,409,000   |   |                   |   | 2,836,000   |         |   |   | 901,000                 |   |   |     | 181,000    |   |        |   | 510,000    |        |   |   | 2,000   |   |   |   | 7,000 |   |   |   | 6,846,000 |   |
| Total ending allowance balance                                                            |   | $          | 3,745,000   |   |                   | $      | 3,112,000   |         |   | $      | 930,000                 |   |   | $        | 184,000    |   |        | $      | 510,000    |        |   | $      | 2,000   |   |   | $ | 7,000 |   |   | $ | 8,490,000 |   |
|                                                                                                |   |       |        |   |                   |   |        |         |   |   |                    |   |   |     |       |   |        |   |       |        |   |   |    |   |   |   |   |   |   |   |   |   |
| Loans                                                                                               |   |       |        |   |                   |   |        |         |   |   |                    |   |   |     |       |   |        |   |       |        |   |   |    |   |   |   |   |   |   |   |   |   |
|       Loans individually evaluated for impairment |   | $          | 7,852,000   |   |                   | $      | 10,540,000  |         |   | $      | 2,303,000               |   |   | $        | 1,106,000  |   |        | $      | 829,000    |        |   | $      | -       |   |   | $ | - |   |   | $ | 22,630,000 |   |
|       Loans collectively evaluated for impairment      |   |       | 101,675,000 |   |                   |   | 209,335,000 |         |   |   | 27,224,000              |   |   |     | 41,039,000 |   |        |   | 49,811,000 |        |   |   | 152,000 |   |   |   | - |   |   |   | 429,236,000 |   |
| Total ending Loan balance                                                                 |   | $          | 109,527,000 |   |                   | $      | 219,875,000 |         |   | $      | 29,527,000              |   |   | $        | 42,145,000 |   |        | $      | 50,640,000 |        |   | $      | 152,000 |   |   | $ | - |   |   | $ | 451,866,000 |   |

----

Table of Contents

|                                         |   | December 31, |       |
|----------------------------------------------|--------|--------------|------------|
|                                         |   | 2010         |       |   | 2009 |   |
|                                         |   |         |       |   |   |   |
| Impaired Loans                               |   |         |       |   |   |   |
| With related allowance for loan losses       |   | $            | 9,060,000  |   |   | $ | 8,668,000 |   |
| Without related allowance for loan losses    |   |         | 13,570,000 |   |   |   | 13,834,000 |   |
| Total impaired loans                         |   | $            | 22,630,000 |   |   | $ | 22,502,000 |   |
|                                         |   |         |       |   |   |   |   |   |
| Related allowance for loan losses            |   | $            | 1,644,000  |   |   | $ | 1,903,000 |   |
|                                         |   |         |       |   |   |   |   |   |
| Average investment in impaired loans         |   | $            | 23,766,000 |   |   | $ | 13,700,000 |   |
|                                         |   |         |       |   |   |   |   |   |
| Interest income recognized on impaired loans |   | $            | 216,000    |   |   | $ | 182,000 |   |

|                                |   | Unpaid Principal Balance |       |   | Recorded Investment |   |       | Allowance for Loan Losses Allocated |   |
|-------------------------------------|--------|--------------------------|------------|--------|---------------------|--------|------------|-------------------------------------|--------|
|                                |   |                     |       |   |                |   |       |                                |   |
| With no related allowance recorded: |   |                     |       |   |                |   |       |                                |   |
| Commercial:                         |   |                     |       |   |                |   |       |                                |   |
| Secured by real estate              |   | $                        | 1,037,000  |   |                | $      | 911,000    |                                |   |   |   |
| Other                               |   |                     | 646,000    |   |                |   | 618,000    |                                |   |   |   |
| Commercial real estate              |   |                     | 4,808,000  |   |                |   | 4,199,000  |                                |   |   |   |
| Construction:                       |   |                     |       |   |                |   |       |                                |   |   |   |
| Commercial                          |   |                     | 1,540,000  |   |                |   | 1,504,000  |                                |   |   |   |
| Residential                         |   |                     | 284,000    |   |                |   | 283,000    |                                |   |   |   |
| Residential real estate             |   |                     | 716,000    |   |                |   | 716,000    |                                |   |   |   |
| Consumer:                           |   |                     |       |   |                |   |       |                                |   |   |   |
| Secured by real estate              |   |                     | 1,037,000  |   |                |   | 829,000    |                                |   |   |   |
| Other                               |   |                     | -          |   |                |   | -          |                                |   |   |   |
| Other                               |   |                     | -          |   |                |   | -          |                                |   |   |   |
|                                |   |                     |       |   |                |   |       |                                |   |   |   |
| With an allowance recorded:         |   |                     |       |   |                |   |       |                                |   |   |   |
| Commercial:                         |   |                     |       |   |                |   |       |                                |   |   |   |
| Secured by real estate              |   |                     | 6,056,000  |   |                |   | 5,013,000  |                                |   | $ | 730,000 |   |
| Other                               |   |                     | 1,311,000  |   |                |   | 1,310,000  |                                |   |   | 606,000 |   |
| Commercial real estate              |   |                     | 6,777,000  |   |                |   | 6,341,000  |                                |   |   | 276,000 |   |
| Construction:                       |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Commercial                          |   |                     | 959,000    |   |                |   | 516,000    |                                |   |   | 29,000 |   |
| Residential                         |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Residential real estate             |   |                     | 415,000    |   |                |   | 390,000    |                                |   |   | 3,000 |   |
| Consumer:                           |   |                     |       |   |                |   |       |                                |   |   |   |   |
| Secured by real estate              |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Other                               |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Other                               |   |                     | -          |   |                |   | -          |                                |   |   | - |   |
| Total                               |   | $                        | 25,586,000 |   |                | $      | 22,630,000 |                                |   | $ | 1,644,000 |   |

----

Table of Contents

|                    |   | Nonaccrual |       |
|-------------------------|--------|------------|------------|
|                    |   |       |       |
| Commercial:             |   |       |       |
| Secured by real estate  |   | $          | 5,924,000  |   |
| Other                   |   |       | 1,798,000  |   |
| Commercial real estate  |   |       | 10,540,000 |   |
| Construction:           |   |       |       |   |
| Commercial              |   |       | 2,020,000  |   |
| Residential             |   |       | 283,000    |   |
| Residential real estate |   |       | 1,106,000  |   |
| Consumer:               |   |       |       |   |
| Secured by real estate  |   |       | 829,000    |   |
| Other                   |   |       | -          |   |
| Other                   |   |       | -          |   |
| Total                   |   | $          | 22,500,000 |   |

|                    |   | 30-59 Days Past Due |      |   | 60-89 Days Past Due |   |      | Greater than 90 Days Past Due |   |   | Total Past Due |   |   | Loans Not Past Due |       |   | Total  |   |
|-------------------------|--------|---------------------|-----------|--------|---------------------|--------|-----------|-------------------------------|--------|--------|----------------|--------|--------|--------------------|------------|--------|--------|--------|
|                    |   |                |      |   |                |   |      |                          |   |   |           |   |   |               |       |   |   |   |
| Commercial:             |   |                |      |   |                |   |      |                          |   |   |           |   |   |               |       |   |   |   |
| Secured by real estate  |   | $                   | 490,000   |   |                | $      | 4,014,000 |                          |   | $      | 2,296,000      |   |   | $                  | 6,800,000  |   |   | $      | 58,400,000 |   |   | $ | 65,200,000 |   |
| Other                   |   |                | -         |   |                |   | -         |                          |   |   | 1,798,000      |   |   |               | 1,798,000  |   |   |   | 42,529,000 |   |   |   | 44,327,000 |   |
| Commercial real estate  |   |                | 1,789,000 |   |                |   | 2,324,000 |                          |   |   | 6,650,000      |   |   |               | 10,763,000 |   |   |   | 209,112,000 |   |   |   | 219,875,000 |   |
| Construction:           |   |                |      |   |                |   |      |                          |   |   |           |   |   |               |       |   |   |   |   |   |   |   |   |   |
| Commercial              |   |                | -         |   |                |   | 2,731,000 |                          |   |   | 916,000        |   |   |               | 3,647,000  |   |   |   | 25,005,000 |   |   |   | 28,652,000 |   |
| Residential             |   |                | -         |   |                |   | -         |                          |   |   | 283,000        |   |   |               | 283,000    |   |   |   | 592,000 |   |   |   | 875,000 |   |
| Residential real estate |   |                | -         |   |                |   | 458,000   |                          |   |   | 1,106,000      |   |   |               | 1,564,000  |   |   |   | 40,581,000 |   |   |   | 42,145,000 |   |
| Consumer:               |   |                |      |   |                |   |      |                          |   |   |           |   |   |               |       |   |   |   |   |   |   |   |   |   |
| Secured by real estate  |   |                | 114,000   |   |                |   | 449,000   |                          |   |   | 829,000        |   |   |               | 1,392,000  |   |   |   | 47,968,000 |   |   |   | 49,360,000 |   |
| Other                   |   |                | 3,000     |   |                |   | -         |                          |   |   | -              |   |   |               | 3,000      |   |   |   | 1,277,000 |   |   |   | 1,280,000 |   |
| Other                   |   |                | -         |   |                |   | -         |                          |   |   | -              |   |   |               | -          |   |   |   | 152,000 |   |   |   | 152,000 |   |
| Total                   |   | $                   | 2,396,000 |   |                | $      | 9,976,000 |                          |   | $      | 13,878,000     |   |   | $                  | 26,250,000 |   |   | $      | 425,616,000 |   |   | $ | 451,866,000 |   |

----

Table of Contents

|                   |   | Pass   |        |   | Special Mention |   |       | Substandard |   |   | Doubtful  |   |   | Loss   |      |   | Total  |   |
|------------------------|--------|--------|-------------|--------|-----------------|--------|------------|-------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|
|                   |   |   |        |   |            |   |       |        |   |   |      |   |   |   |      |   |   |   |
| Commercial:            |   |   |        |   |            |   |       |        |   |   |      |   |   |   |      |   |   |   |
| Secured by real estate |   | $      | 59,206,000  |   |            | $      | 4,173,000  |        |   | $      | 1,801,000 |   |   | $      | -         |   |   | $      | 20,000 |   |   | $ | 65,200,000 |   |
| Other                  |   |   | 42,399,000  |   |            |   | 618,000    |        |   |   | -         |   |   |   | 1,267,000 |   |   |   | 43,000 |   |   |   | 44,327,000 |   |
| Commercial real estate |   |   | 209,512,000 |   |            |   | 4,668,000  |        |   |   | 5,695,000 |   |   |   | -         |   |   |   | - |   |   |   | 219,875,000 |   |
| Construction:          |   |   |        |   |            |   |       |        |   |   |      |   |   |   |      |   |   |   |   |   |   |   |   |   |
| Commercial             |   |   | 26,631,000  |   |            |   | 1,614,000  |        |   |   | 407,000   |   |   |   | -         |   |   |   | - |   |   |   | 28,652,000 |   |
| Residential            |   |   | 592,000     |   |            |   | 283,000    |        |   |   | -         |   |   |   | -         |   |   |   | - |   |   |   | 875,000 |   |
| Total                  |   | $      | 338,340,000 |   |            | $      | 11,356,000 |        |   | $      | 7,903,000 |   |   | $      | 1,267,000 |   |   | $      | 63,000 |   |   | $ | 358,929,000 |   |

|                    |   | Performing |       |   | Nonperforming |   |      | Total  |   |
|-------------------------|--------|------------|------------|--------|---------------|--------|-----------|--------|--------|
|                    |   |       |       |   |          |   |      |   |   |
| Residential real estate |   | $          | 40,581,000 |   |          | $      | 1,564,000 |   |   | $ | 42,145,000 |   |
| Consumer:               |   |       |       |   |          |   |      |   |   |   |   |   |
| Secured by real estate  |   |       | 47,968,000 |   |          |   | 1,392,000 |   |   |   | 49,360,000 |   |
| Other                   |   |       | 1,277,000  |   |          |   | 3,000     |   |   |   | 1,280,000 |   |
| Total                   |   | $          | 89,826,000 |   |          | $      | 2,959,000 |   |   | $ | 92,785,000 |   |

----

Table of Contents

|                                            |   | December 31, |       |
|-------------------------------------------------|--------|--------------|------------|
|                                            |   | 2010         |       |   | 2009 |   |
|                                            |   |         |       |   |   |   |
| Land                                            |   | $            | 2,999,000  |   |   | $ | 2,999,000 |   |
| Buildings and improvements                      |   |         | 2,932,000  |   |   |   | 2,928,000 |   |
| Leasehold improvements                          |   |         | 2,244,000  |   |   |   | 2,178,000 |   |
| Furniture, fixtures and equipment               |   |         | 3,566,000  |   |   |   | 3,627,000 |   |
|                                            |   |         | 11,741,000 |   |   |   | 11,732,000 |   |
| Less: accumulated depreciation and amortization |   |         | 5,346,000  |   |   |   | 4,871,000 |   |
| Total premises & equipment, net             |   | $            | 6,395,000  |   |   | $ | 6,861,000 |   |

|                                     |   | December 31, |        |
|------------------------------------------|--------|--------------|-------------|
|                                     |   | 2010         |        |   | 2009 |   |
|                                     |   |         |        |   |   |   |
| Noninterest-bearing demand               |   | $            | 99,723,000  |   |   | $ | 88,427,000 |   |
|                                     |   |         |        |   |   |   |   |   |
| NOW accounts                             |   |         | 175,566,000 |   |   |   | 133,270,000 |   |
| Money market accounts                    |   |         | 72,674,000  |   |   |   | 85,014,000 |   |
| Total interest-bearing demand            |   |         | 248,240,000 |   |   |   | 218,284,000 |   |
|                                     |   |         |        |   |   |   |   |   |
| Statement savings and clubs              |   |         | 44,418,000  |   |   |   | 41,366,000 |   |
| Business savings                         |   |         | 3,274,000   |   |   |   | 4,417,000 |   |
| Total savings                            |   |         | 47,692,000  |   |   |   | 45,783,000 |   |
|                                     |   |         |        |   |   |   |   |   |
| IRA investment and variable rate savings |   |         | 37,659,000  |   |   |   | 33,905,000 |   |
| Money market certificates                |   |         | 142,289,000 |   |   |   | 143,531,000 |   |
| Total certificates of deposit            |   |         | 179,948,000 |   |   |   | 177,436,000 |   |
|                                     |   |         |        |   |   |   |   |   |
| Total interest-bearing deposits          |   |         | 475,880,000 |   |   |   | 441,503,000 |   |
|                                     |   |         |        |   |   |   |   |   |
| Total deposits                           |   | $            | 575,603,000 |   |   | $ | 529,930,000 |   |

|   |   | December 31, |        |
|--------|--------|--------------|-------------|
|   |   |         |        |
| 2011   |   | $            | 94,290,000  |   |
| 2012   |   |         | 43,667,000  |   |
| 2013   |   |         | 24,216,000  |   |
| 2014   |   |         | 16,183,000  |   |
| 2015   |   |         | 1,592,000   |   |
|   |   | $            | 179,948,000 |   |

----

Table of Contents

|                                     |   | December 31, 2010 |       |   | December 31, 2009    |   |
|------------------------------------------|--------|-------------------|------------|--------|----------------------|--------|
| Advances maturing                        |   | Amount            |       |   | Weighted AverageRate |   |   | Amount |   |   | Weighted AverageRate |   |
|                                     |   |
| Within one year                          |   | $                 | 3,000,000  |   |                 |   | 2.28 | % |   | $ | 18,600,000 |   |   |   | 0.32 | % |
| After one year, but within two years     |   |              | 3,000,000  |   |                 |   | 2.86 | % |   |   | 3,000,000 |   |   |   | 2.28 | % |
| After two years, but within three years  |   |              | 15,000,000 |   |                 |   | 3.30 | % |   |   | 3,000,000 |   |   |   | 2.86 | % |
| After three years, but within four years |   |              | -          |   |                 |   | - | % |   |   | 15,000,000 |   |   |   | 3.30 | % |
| After four years, but within five years  |   |              | 5,000,000  |   |                 |   | 2.25 | % |   |   | - |   |   |   | - | % |
| After five years                         |   |              | 10,000,000 |   |                 |   | 1.85 | % |   |   | 15,000,000 |   |   |   | 1.98 | % |
|                                     |   | $                 | 36,000,000 |   |                 |   | 2.63 | % |   | $ | 54,600,000 |   |   |   | 1.84 | % |

----

Table of Contents

|                                        |   | December 31, |       |
|---------------------------------------------|--------|--------------|------------|
|                                        |   | 2010         |       |   | 2009 |   |
|                                        |   |         |       |   |   |   |
| Balance                                     |   | $            | 14,642,000 |   |   | $ | 15,396,000 |   |
| Weighted average interest rate at year end  |   |         | 4.94       | % |   |   | 4.72 | % |
| Maximum amount outstanding at any month end |   |         |       |   |   |   |   |   |
| during the year                             |   | $            | 15,400,000 |   |   | $ | 16,019,000 |   |
| Average amount outstanding during the year  |   | $            | 15,221,000 |   |   | $ | 15,316,000 |   |
| Average interest rate during the year       |   |         | 4.84       | % |   |   | 4.92 | % |

----

Table of Contents

|                      |   | Actual |       |   | Required for Capital Adequacy Purposes |   |   | To Be Well Capitalized Under Prompt Corrective Action Regulations |   |
|---------------------------|--------|--------|------------|--------|----------------------------------------|--------|--------|-------------------------------------------------------------------|--------|
|                      |   | Amount |       |   | Ratio                                  |   |   | Amount                                                            |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                      |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010         |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |
| Leverage (Tier 1) capital |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |
| Consolidated              |   | $      | 59,258,000 |   |                                   |   | 8.58   | %                                                                 |   | $ | 27,631,000 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                      |   |   | 55,023,000 |   |                                   |   | 8.01   | %                                                                 |   |   | 27,487,000 |   |   |   | 4.00 | % |   | $ | 34,359,000 |   |   |   | 5.00 | % |
|                      |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk-based capital:       |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1                    |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated              |   |   | 59,258,000 |   |                                   |   | 12.20  | %                                                                 |   |   | 19,435,000 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                      |   |   | 55,023,000 |   |                                   |   | 11.34  | %                                                                 |   |   | 19,401,000 |   |   |   | 4.00 | % |   |   | 29,101,000 |   |   |   | 6.00 | % |
|                      |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                     |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated              |   |   | 65,361,000 |   |                                   |   | 13.45  | %                                                                 |   |   | 38,869,000 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                      |   |   | 61,116,000 |   |                                   |   | 12.60  | %                                                                 |   |   | 38,802,000 |   |   |   | 8.00 | % |   |   | 48,502,000 |   |   |   | 10.00 | % |
|                      |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009         |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage (Tier 1) capital |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated              |   | $      | 60,067,000 |   |                                   |   | 9.22   | %                                                                 |   | $ | 26,065,000 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                      |   |   | 55,049,000 |   |                                   |   | 8.51   | %                                                                 |   |   | 25,881,000 |   |   |   | 4.00 | % |   | $ | 32,352,000 |   |   |   | 5.00 | % |
|                      |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk-based capital:       |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tier 1                    |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated              |   |   | 60,067,000 |   |                                   |   | 11.99  | %                                                                 |   |   | 20,041,000 |   |   |   | 4.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                      |   |   | 55,049,000 |   |                                   |   | 11.02  | %                                                                 |   |   | 19,986,000 |   |   |   | 4.00 | % |   |   | 29,979,000 |   |   |   | 6.00 | % |
|                      |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                     |   |   |       |   |                                   |   |   |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated              |   |   | 66,338,000 |   |                                   |   | 13.24  | %                                                                 |   |   | 40,081,000 |   |   |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |
| Bank                      |   |   | 61,303,000 |   |                                   |   | 12.27  | %                                                                 |   |   | 39,972,000 |   |   |   | 8.00 | % |   |   | 49,965,000 |   |   |   | 10.00 | % |

----

Table of Contents

|                                                |   | 2010   |   |
|-----------------------------------------------------|--------|--------|--------|
|                                                |   | Shares |   |   | WeightedAverageExercisePrice |   |
| Outstanding at beginning of year                    |   |   | 19,713 |   |   | $ | 8.33 |   |
| Exercised                                           |   |   | (9,376 | ) |   |   | 5.83 |   |
| Forfeited                                           |   |   | (2,739 | ) |   |   | 8.95 |   |
| Outstanding at end of year                          |   |   | 7,598  |   |   | $ | 11.19 |   |
|                                                |   |   |   |   |   |   |   |   |
| Intrinsic value at year end                         |   | $      | -      |   |   |   |   |   |
| Options exercisable at year end                     |   |   | 7,598  |   |   |   |   |   |
| Intrinsic value of options exercisable              |   | $      | -      |   |   |   |   |   |
| Weighted-average remaining contractual term (years) |   |   | 2.54   |   |   |   |   |   |

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| ExercisePrice |   | NumberOutstandingat 12/31/10 |   | Weighted-AverageRemainingLife |
|---------------|--------|------------------------------|--------|-------------------------------|
| $ 1.19        |   | 7,598                        |   | 2.54 years                    |

|                                                |   | 2010   |   |
|-----------------------------------------------------|--------|--------|--------|
|                                                |   | Shares |   |   | WeightedAverageExercisePrice |   |
| Outstanding at beginning of year                    |   |   | 63,335 |   |   | $ | 11.12 |   |
| Forfeited                                           |   |   | (6,205 | ) |   |   | 12.07 |   |
| Outstanding at end of year                          |   |   | 57,130 |   |   | $ | 11.02 |   |
|                                                |   |   |   |   |   |   |   |   |
| Intrinsic value at year end                         |   | $      | -      |   |   |   |   |   |
| Options exercisable at year end                     |   |   | 42,544 |   |   |   |   |   |
| Intrinsic value of options exercisable              |   | $      | -      |   |   |   |   |   |
| Weighted-average remaining contractual term (years) |   |   | 1.37   |   |   |   |   |   |

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| Risk-free interest rate         |   |       | 0.88  | % |
|---------------------------------|--------|------------|-------|---|
| Expected term                   |   | 2.42 years |
| Expected stock price volatility |   |       | 42.13 | % |
| Dividend yield                  |   |       | 3.88  | % |

| ExercisePrice |   |   | NumberOutstandingat 12/31/10 |   |   | Weighted-AverageRemainingLife |   |       | NumberExercisableat 12/31/10 |   |
|---------------|--------|--------|------------------------------|--------|--------|-------------------------------|--------|------------|------------------------------|--------|
| $             | 11.11  |   |                         |   | 54,699 |                          |   | 1.37 years |                         |   |   | 41,329 |   |
|          | 9.00   |   |                         |   | 2,431  |                          |   |       | 1.37                         |   |   |   | 1,215 |   |
| $             | 11.02  |   |                         |   | 57,130 |                          |   | 1.37 years |                         |   |   | 42,544 |   |

|                                                 |   | 2010   |      |   | 2009   |   |
|------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                 |   |   |      |   |   |   |
| Net income                                           |   | $      | 1,233,000 |   |   | $      | 3,634,000 |   |
| Dividends on preferred stock and accretion           |   |   | 550,000   |   |   |   | 504,000 |   |
| Net income available to common stockholders          |   | $      | 683,000   |   |   | $      | 3,130,000 |   |
|                                                 |   |   |      |   |   |   |   |   |
| Weighted average common shares outstanding - basic   |   |   | 5,843,419 |   |   |   | 5,832,186 |   |
| Effect of dilutive securities - stock options        |   |   | 337       |   |   |   | 4,553 |   |
|                                                 |   |   |      |   |   |   |   |   |
| Weighted average common shares outstanding - diluted |   |   | 5,843,756 |   |   |   | 5,836,739 |   |
|                                                 |   |   |      |   |   |   |   |   |
|                                                 |   |   |      |   |   |   |   |   |
| Earnings per common share:                           |   |   |      |   |   |   |   |   |
| Basic                                                |   | $      | 0.12      |   |   | $      | 0.54 |   |
| Diluted                                              |   | $      | 0.12      |   |   | $      | 0.54 |   |

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|                            |   | Years ended December 31, |     |
|---------------------------------|--------|--------------------------|----------|
|                            |   | 2010                     |     |   | 2009 |   |
| Current tax expense:            |   |                     |     |   |   |   |
| Federal                         |   | $                        | 461,000  |   |   | $ | 2,045,000 |   |
| State                           |   |                     | 225,000  |   |   |   | 644,000 |   |
|                            |   |                     | 686,000  |   |   |   | 2,689,000 |   |
| Deferred tax (benefit) expense: |   |                     |     |   |   |   |   |   |
| Federal                         |   |                     | (661,000 | ) |   |   | (938,000 | ) |
| State                           |   |                     | (200,000 | ) |   |   | (278,000 | ) |
| Valuation allowance             |   |                     | 10,000   |   |   |   | 6,000 |   |
|                            |   |                     | (851,000 | ) |   |   | (1,210,000 | ) |
|                            |   |                     |     |   |   |   |   |   |
|                            |   | $                        | (165,000 | ) |   | $ | 1,479,000 |   |

|                                                 |   | Years Ended December 31, |     |
|------------------------------------------------------|--------|--------------------------|----------|
|                                                 |   | 2010                     |     |   | 2009 |   |
|                                                 |   |                     |     |   |   |   |
| Federal income tax                                   |   | $                        | 363,000  |   |   | $ | 1,738,000 |   |
| Add (deduct) effect of:                              |   |                     |     |   |   |   |   |   |
| State income taxes, net of federal income tax effect |   |                     | 23,000   |   |   |   | 246,000 |   |
| Nontaxable interest income                           |   |                     | (395,000 | ) |   |   | (398,000 | ) |
| Life insurance                                       |   |                     | (115,000 | ) |   |   | (113,000 | ) |
| Nondeductible expenses                               |   |                     | 24,000   |   |   |   | 24,000 |   |
| Other items, net                                     |   |                     | (65,000  | ) |   |   | (18,000 | ) |
|                                                 |   |                     |     |   |   |   |   |   |
| Effective federal income taxes                       |   | $                        | (165,000 | ) |   | $ | 1,479,000 |   |

|                                              |   | December 31, |      |
|---------------------------------------------------|--------|--------------|-----------|
|                                              |   | 2010         |      |   | 2009 |   |
| Deferred tax assets:                              |   |         |      |   |   |   |
| Allowance for loan losses                         |   | $            | 3,391,000 |   |   | $ | 2,764,000 |   |
| Accrued reserves                                  |   |         | 8,000     |   |   |   | 17,000 |   |
| Stock compensation                                |   |         | 99,000    |   |   |   | 79,000 |   |
| Nonaccrual loan interest                          |   |         | 594,000   |   |   |   | 489,000 |   |
| Depreciation                                      |   |         | 374,000   |   |   |   | 268,000 |   |
| Contribution carry forward                        |   |         | 260,000   |   |   |   | 183,000 |   |
| State capital loss carry forward                  |   |         | 2,000     |   |   |   | 83,000 |   |
| Unrealized loss on securities available for sale  |   |         | 59,000    |   |   |   | - |   |
|                                              |   |         | 4,787,000 |   |   |   | 3,883,000 |   |
| Valuation reserve                                 |   |         | (115,000  | ) |   |   | (105,000 | ) |
|                                              |   |         | 4,672,000 |   |   |   | 3,778,000 |   |
| Deferred tax liabilities:                         |   |         |      |   |   |   |   |   |
| Unrealized gains on securities available for sale |   |         | -         |   |   |   | 294,000 |   |
| Other                                             |   |         | 19,000    |   |   |   | 34,000 |   |
|                                              |   |         | 19,000    |   |   |   | 328,000 |   |
|                                              |   |         |      |   |   |   |   |   |
| Net deferred tax assets                           |   | $            | 4,653,000 |   |   | $ | 3,450,000 |   |

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| Year Ending December 31 |   | Minimum Rent |      |
|-------------------------|--------|--------------|-----------|
|                    |   |         |      |
| 2011                    |   | $            | 939,000   |   |
| 2012                    |   |         | 923,000   |   |
| 2013                    |   |         | 894,000   |   |
| 2014                    |   |         | 643,000   |   |
| 2015                    |   |         | 284,000   |   |
| Thereafter              |   |         | 2,392,000 |   |
|                    |   | $            | 6,075,000 |   |

| Notional amount |   | $7,000,000               |   |
|-----------------|--------|--------------------------|--------|
| Pay rate        |   |  7.00%              |   |
| Receive rate    |   | 3 month LIBOR plus 2.95% |   |
| Maturity        |   | March 17, 2016           |   |
| Fair value      |   | $(664,000)               |   |

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| Cash Flow Hedging Relationship |   | Amount of Loss,Net of Taxes, Recognized inOther Comprehensive Incomeon Derivative(Effective Portion) |    |
|--------------------------------|--------|------------------------------------------------------------------------------------------------------|---------|
|                           |   | For the year ended December 31,                                                                      |    |
|                           |   | 2010                                                                                                 |    |   | 2009 |   |
|                           |   |                                                                                                 |    |   |   |   |
| Cash flow hedge                |   | $                                                                                                    | 243,000 |   |   | $ | 155,000 |   |

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Table of Contents

|                          |   |              |        |   | Fair Value Measurements Using                                 |   |
|-------------------------------|--------|-------------------|-------------|--------|---------------------------------------------------------------|--------|
|                          |   | Carrying Value    |        |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
|                          |   | December 31, 2010 |        |
| Assets:                       |   |              |        |   |                                                          |   |   |   |   |   |   |   |
| Available for sale securities |   |              |        |   |                                                          |   |   |   |   |   |   |   |
| U.S. Treasuries               |   | $                 | 9,249,000   |   |                                                          | $      | - |   |   | $ | 9,249,000 |   |   | $ | - |   |
| U.S. government -             |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies            |   |              | 13,586,000  |   |                                                          |   | - |   |   |   | 13,586,000 |   |   |   | - |   |
| Obligations of state and      |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions        |   |              | 4,279,000   |   |                                                          |   | - |   |   |   | 4,279,000 |   |   |   | - |   |
| Mortgage-backed securities-   |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| residential                   |   |              | 108,327,000 |   |                                                          |   | - |   |   |   | 108,327,000 |   |   |   | - |   |
| Other equity investments      |   |              | 3,187,000   |   |                                                          |   | - |   |   |   | 3,187,000 |   |   |   | - |   |
| Total available for           |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| sale securities               |   | $                 | 138,628,000 |   |                                                          | $      | - |   |   | $ | 138,628,000 |   |   | $ | - |   |
| Liabilities:                  |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap            |   | $                 | 664,000     |   |                                                          | $      | - |   |   | $ | 664,000 |   |   | $ | - |   |
|                          |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
|                          |   | December 31, 2009 |        |
| Assets:                       |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale securities |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasuries               |   | $                 | -           |   |                                                          | $      | - |   |   | $ | - |   |   | $ | - |   |
| U.S. government -             |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| sponsored agencies            |   |              | 32,286,000  |   |                                                          |   | - |   |   |   | 32,286,000 |   |   |   | - |   |
| Obligations of state and      |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| political subdivisions        |   |              | 5,397,000   |   |                                                          |   | - |   |   |   | 5,397,000 |   |   |   | - |   |
| Mortgage-backed securities-   |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| residential                   |   |              | 62,228,000  |   |                                                          |   | - |   |   |   | 62,228,000 |   |   |   | - |   |
| Other equity investments      |   |              | 3,115,000   |   |                                                          |   | - |   |   |   | 3,115,000 |   |   |   | - |   |
| Total available for           |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| sale securities               |   | $                 | 103,026,000 |   |                                                          | $      | - |   |   | $ | 103,026,000 |   |   | $ | - |   |
| Liabilities:                  |   |              |        |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap            |   | $                 | 258,000     |   |                                                          | $      | - |   |   | $ | 258,000 |   |   | $ | - |   |

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|           |   |              |      |   | Fair Value Measurements Using                                 |   |
|----------------|--------|-------------------|-----------|--------|---------------------------------------------------------------|--------|
|           |   | Carrying Value    |      |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
|           |   | December 31, 2010 |      |
| Assets:        |   |              |      |   |                                                          |   |   |   |   |   |   |   |
| Impaired loans |   | $                 | 7,416,000 |   |                                                          | $      | - |   |   | $ | - |   |   | $ | 7,416,000 |   |
|           |   |              |      |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
|           |   | December 31, 2009 |      |
| Assets:        |   |              |      |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans |   | $                 | 6,765,000 |   |                                                          | $      | - |   |   | $ | - |   |   | $ | 6,765,000 |   |

|                                          |   | December 31,   |        |
|-----------------------------------------------|--------|----------------|-------------|
|                                          |   | 2010           |        |   | 2009 |   |
|                                          |   | CarryingAmount |        |   | EstimatedFair Value |   |   | CarryingAmount |   |   | EstimatedFair Value |   |
|                                          |   |           |        |
| Financial Assets:                             |   |           |        |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                     |   | $              | 19,983,000  |   |   | $ | 19,983,000 |   |   | $ | 8,871,000 |   |   | $ | 8,871,000 |   |
| Securities available for sale                 |   |           | 138,628,000 |   |   |   | 138,628,000 |   |   |   | 103,026,000 |   |   |   | 103,026,000 |   |
| Securities held to maturity                   |   |           | 45,394,000  |   |   |   | 47,316,000 |   |   |   | 67,717,000 |   |   |   | 68,765,000 |   |
| FHLB-NY stock                                 |   |           | 2,497,000   |   |   |   | N/A |   |   |   | 3,227,000 |   |   |   | N/A |   |
| Net loans, including impaired loans           |   |           | 443,245,000 |   |   |   | 445,671,000 |   |   |   | 453,119,000 |   |   |   | 453,813,000 |   |
| Accrued interest receivable                   |   |           | 2,806,000   |   |   |   | 2,806,000 |   |   |   | 3,167,000 |   |   |   | 3,167,000 |   |
|                                          |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                        |   |           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                      |   |           | 575,603,000 |   |   |   | 577,485,000 |   |   |   | 529,930,000 |   |   |   | 531,230,000 |   |
| FHLB-NY Advances                              |   |           | 36,000,000  |   |   |   | 33,892,000 |   |   |   | 54,600,000 |   |   |   | 51,949,000 |   |
| Securities sold under agreementsto repurchase |   |           | 14,642,000  |   |   |   | 14,642,000 |   |   |   | 15,396,000 |   |   |   | 15,396,000 |   |
| Subordinated debenture                        |   |           | 7,217,000   |   |   |   | 6,803,000 |   |   |   | 7,217,000 |   |   |   | 5,943,000 |   |
| Accrued interest payable                      |   |           | 977,000     |   |   |   | 977,000 |   |   |   | 1,193,000 |   |   |   | 1,193,000 |   |
| Interest rate swap                            |   |           | 664,000     |   |   |   | 664,000 |   |   |   | 258,000 |   |   |   | 258,000 |   |

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|                                       |   | December 31, |       |
|--------------------------------------------|--------|--------------|------------|
|                                       |   | 2010         |       |   | 2009 |   |
| Assets                                     |   |         |       |   |   |   |
|                                       |   |         |       |   |   |   |
| Cash and due from banks                    |   | $            | 1,793,000  |   |   | $ | 294,000 |   |
| Securities available for sale              |   |         | 1,216,000  |   |   |   | 3,436,000 |   |
| Securities held to maturity                |   |         | 993,000    |   |   |   | 992,000 |   |
| Investment in subsidiary                   |   |         | 55,288,000 |   |   |   | 55,689,000 |   |
| Accrued interest receivable                |   |         | 16,000     |   |   |   | 30,000 |   |
| Other assets                               |   |         | 541,000    |   |   |   | 528,000 |   |
| Total assets                               |   | $            | 59,847,000 |   |   | $ | 60,969,000 |   |
|                                       |   |         |       |   |   |   |   |   |
| Liabilities and Stockholders’ Equity |   |         |       |   |   |   |   |   |
|                                       |   |         |       |   |   |   |   |   |
| Subordinated debentures                    |   | $            | 7,217,000  |   |   | $ | 7,217,000 |   |
| Other liabilities                          |   |         | 498,000    |   |   |   | 241,000 |   |
| Stockholders' equity                       |   |         | 52,132,000 |   |   |   | 53,511,000 |   |
| Total liabilities and Stockholders' equity |   | $            | 59,847,000 |   |   | $ | 60,969,000 |   |

|                                                         |   | Years ended December 31, |      |
|--------------------------------------------------------------|--------|--------------------------|-----------|
|                                                         |   | 2010                     |      |   | 2009 |   |
|                                                         |   |                     |      |   |   |   |
| Interest income - securities available for sale              |   | $                        | 85,000    |   |   | $ | 103,000 |   |
| Interest income - securities held to maturity                |   |                     | 54,000    |   |   |   | 104,000 |   |
| Dividend income                                              |   |                     | 1,750,000 |   |   |   | 3,000,000 |   |
| Other income                                                 |   |                     | (11,000   | ) |   |   | 24,000 |   |
| Total income                                                 |   |                     | 1,878,000 |   |   |   | 3,231,000 |   |
|                                                         |   |                     |      |   |   |   |   |   |
| Interest expense                                             |   |                     | 448,000   |   |   |   | 285,000 |   |
| Other expenses                                               |   |                     | 337,000   |   |   |   | 319,000 |   |
| Total expenses                                               |   |                     | 785,000   |   |   |   | 604,000 |   |
|                                                         |   |                     |      |   |   |   |   |   |
| Income before income tax benefit                             |   |                     | 1,093,000 |   |   |   | 2,627,000 |   |
| Tax benefit                                                  |   |                     | (222,000  | ) |   |   | (125,000 | ) |
| Income before equity in undistributed earnings of subsidiary |   |                     | 1,315,000 |   |   |   | 2,752,000 |   |
| Equity in undistributed earnings of subsidiary               |   |                     | (82,000   | ) |   |   | 882,000 |   |
| Net income                                                   |   |                     | 1,233,000 |   |   |   | 3,634,000 |   |
| Dividends on preferred stock and accretion                   |   |                     | 550,000   |   |   |   | 504,000 |   |
| Net income available to common stockholders                  |   | $                        | 683,000   |   |   | $ | 3,130,000 |   |

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|                                                                |   | Years ended December 31, |       |
|---------------------------------------------------------------------|--------|--------------------------|------------|
|                                                                |   | 2010                     |       |   | 2009 |   |
|                                                                |   |                     |       |   |   |   |
| Cash flows from operating activities:                               |   |                     |       |   |   |   |
| Net income                                                          |   | $                        | 1,233,000  |   |   | $ | 3,634,000 |   |
| Adjustments to reconcile net income to                              |   |                     |       |   |   |   |   |   |
| net cash provided by operating activities:                          |   |                     |       |   |   |   |   |   |
| Equity in undistributed earnings of subsidiary                      |   |                     | 82,000     |   |   |   | (882,000 | ) |
| Amortization of premiums and accretion of discounts, net            |   |                     | 7,000      |   |   |   | 4,000 |   |
| Loss (gain) on calls and sales of securities                        |   |                     | 21,000     |   |   |   | (13,000 | ) |
| Decrease in accrued interest receivable                             |   |                     | 14,000     |   |   |   | 15,000 |   |
| Increase in other assets                                            |   |                     | (39,000    | ) |   |   | (33,000 | ) |
| Increase (decrease) in other liabilities                            |   |                     | 14,000     |   |   |   | (13,000 | ) |
| Net cash provided by operating activities                           |   |                     | 1,332,000  |   |   |   | 2,712,000 |   |
|                                                                |   |                     |       |   |   |   |   |   |
| Cash flows from investing activities:                               |   |                     |       |   |   |   |   |   |
| Purchase of securities available for sale                           |   |                     | (1,000,000 | ) |   |   | (3,028,000 | ) |
| Proceeds from principal repayments on securities available for sale |   |                     | 212,000    |   |   |   | 98,000 |   |
| Proceeds from calls on securities available for sale                |   |                     | 3,054,000  |   |   |   | 2,000,000 |   |
| Proceeds from calls on securities held to maturity                  |   |                     | -          |   |   |   | 1,000,000 |   |
| Investment in subsidiary bank                                       |   |                     | -          |   |   |   | (10,000,000 | ) |
| Net cash provided by (used in) investing activities                 |   |                     | 2,266,000  |   |   |   | (9,930,000 | ) |
|                                                                |   |                     |       |   |   |   |   |   |
| Cash flows from financing activities:                               |   |                     |       |   |   |   |   |   |
| Proceeds from issuance of preferred stock and warrants              |   |                     | -          |   |   |   | 9,951,000 |   |
| Cash dividends paid on common stock                                 |   |                     | (1,636,000 | ) |   |   | (2,112,000 | ) |
| Cash dividends paid on preferred stock                              |   |                     | (500,000   | ) |   |   | (396,000 | ) |
| Payment of discount on dividend reinvestment plan                   |   |                     | (29,000    | ) |   |   | (44,000 | ) |
| Purchase of treasury stock                                          |   |                     | -          |   |   |   | (75,000 | ) |
| Exercise of stock options                                           |   |                     | 12,000     |   |   |   | 12,000 |   |
| Tax benefit of stock plans                                          |   |                     | -          |   |   |   | - |   |
| Issuance of common stock                                            |   |                     | 54,000     |   |   |   | 45,000 |   |
| Net cash (used in) provided by financing activities                 |   |                     | (2,099,000 | ) |   |   | 7,381,000 |   |
|                                                                |   |                     |       |   |   |   |   |   |
| Net increase in cash and cash equivalents                           |   |                     | 1,499,000  |   |   |   | 163,000 |   |
| Cash and cash equivalents - beginning                               |   |                     | 294,000    |   |   |   | 131,000 |   |
| Cash and cash equivalents - ending                                  |   | $                        | 1,793,000  |   |   | $ | 294,000 |   |

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|                                                 |   | First Quarter |   |   | Second Quarter |   |   | Third Quarter |   |   | Fourth Quarter |   |   | Total  |   |
|------------------------------------------------------|--------|---------------|--------|--------|----------------|--------|--------|---------------|--------|--------|----------------|--------|--------|--------|--------|
|                                                 |   |          |   |   |           |   |   |          |   |   |           |   |   |   |   |
| Year ended December 31, 2010:                        |   |          |   |   |           |   |   |          |   |   |           |   |   |   |   |
|                                                 |   |          |   |   |           |   |   |          |   |   |           |   |   |   |   |
| Interest income                                      |   | $             | 8,495  |   |           | $      | 8,201  |          |   | $      | 8,095          |   |   | $      | 8,193  |   |   | $ | 32,984 |   |
| Interest expense                                     |   |          | 2,316  |   |           |   | 2,278  |          |   |   | 2,145          |   |   |   | 2,039  |   |   |   | 8,778 |   |
| Net interest income before provision for loan losses |   |          | 6,179  |   |           |   | 5,923  |          |   |   | 5,950          |   |   |   | 6,154  |   |   |   | 24,206 |   |
| Provision for loan losses                            |   |          | 1,550  |   |           |   | 4,705  |          |   |   | 1,500          |   |   |   | 1,820  |   |   |   | 9,575 |   |
| Net interest income after provision for loan losses  |   |          | 4,629  |   |           |   | 1,218  |          |   |   | 4,450          |   |   |   | 4,334  |   |   |   | 14,631 |   |
| Noninterest income                                   |   |          | 1,011  |   |           |   | 1,247  |          |   |   | 759            |   |   |   | 1,370  |   |   |   | 4,387 |   |
| Noninterest expenses                                 |   |          | 4,424  |   |           |   | 4,171  |          |   |   | 4,608          |   |   |   | 4,747  |   |   |   | 17,950 |   |
| Income before income tax expense (benefit)           |   |          | 1,216  |   |           |   | (1,706 | )             |   |   | 601            |   |   |   | 957    |   |   |   | 1,068 |   |
| Income tax expense (benefit)                         |   |          | 345    |   |           |   | (641   | )             |   |   | 261            |   |   |   | (130   | ) |   |   | (165 | ) |
| Net income (loss)                                    |   |          | 871    |   |           |   | (1,065 | )             |   |   | 340            |   |   |   | 1,087  |   |   |   | 1,233 |   |
| Dividends on preferred stock and accretion           |   |          | 137    |   |           |   | 138    |          |   |   | 137            |   |   |   | 138    |   |   |   | 550 |   |
| Net income (loss) available to common stockholders   |   | $             | 734    |   |           | $      | (1,203 | )             |   | $      | 203            |   |   | $      | 949    |   |   | $ | 683 |   |
| Basic earnings (loss) per share                      |   | $             | 0.13   |   |           | $      | (0.21  | )             |   | $      | 0.03           |   |   | $      | 0.16   |   |   | $ | 0.12 |   |
| Diluted earnings (loss) per share                    |   | $             | 0.13   |   |           | $      | (0.21  | )             |   | $      | 0.03           |   |   | $      | 0.16   |   |   | $ | 0.12 |   |
|                                                 |   |          |   |   |           |   |   |          |   |   |           |   |   |   |   |   |   |   |   |   |
| Year ended December 31, 2009:                        |   |          |   |   |           |   |   |          |   |   |           |   |   |   |   |   |   |   |   |   |
|                                                 |   |          |   |   |           |   |   |          |   |   |           |   |   |   |   |   |   |   |   |   |
| Interest income                                      |   | $             | 8,473  |   |           | $      | 8,542  |          |   | $      | 8,610          |   |   | $      | 8,531  |   |   | $ | 34,156 |   |
| Interest expense                                     |   |          | 2,875  |   |           |   | 2,722  |          |   |   | 2,634          |   |   |   | 2,580  |   |   |   | 10,811 |   |
| Net interest income before provision for loan losses |   |          | 5,598  |   |           |   | 5,820  |          |   |   | 5,976          |   |   |   | 5,951  |   |   |   | 23,345 |   |
| Provision for loan losses                            |   |          | 150    |   |           |   | 1,025  |          |   |   | 1,200          |   |   |   | 1,200  |   |   |   | 3,575 |   |
| Net interest income after provision for loan losses  |   |          | 5,448  |   |           |   | 4,795  |          |   |   | 4,776          |   |   |   | 4,751  |   |   |   | 19,770 |   |
| Noninterest income                                   |   |          | 707    |   |           |   | 949    |          |   |   | 821            |   |   |   | 656    |   |   |   | 3,133 |   |
| Noninterest expenses (a)                             |   |          | 4,408  |   |           |   | 4,684  |          |   |   | 4,346          |   |   |   | 4,352  |   |   |   | 17,790 |   |
| Income before income tax expense                     |   |          | 1,747  |   |           |   | 1,060  |          |   |   | 1,251          |   |   |   | 1,055  |   |   |   | 5,113 |   |
| Income tax expense                                   |   |          | 560    |   |           |   | 280    |          |   |   | 358            |   |   |   | 281    |   |   |   | 1,479 |   |
| Net income                                           |   |          | 1,187  |   |           |   | 780    |          |   |   | 893            |   |   |   | 774    |   |   |   | 3,634 |   |
| Dividends on preferred stock and accretion           |   |          | 92     |   |           |   | 137    |          |   |   | 138            |   |   |   | 137    |   |   |   | 504 |   |
| Net income available to common stockholders          |   | $             | 1,095  |   |           | $      | 643    |          |   | $      | 755            |   |   | $      | 637    |   |   | $ | 3,130 |   |
| Basic earnings per share                             |   | $             | 0.19   |   |           | $      | 0.11   |          |   | $      | 0.13           |   |   | $      | 0.11   |   |   | $ | 0.54 |   |
| Diluted earnings per share                           |   | $             | 0.19   |   |           | $      | 0.11   |          |   | $      | 0.13           |   |   | $      | 0.11   |   |   | $ | 0.54 |   |

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Item 

Item 

|   | (a)  | Evaluation of internal controls and procedures |
|--------|-----------|------------------------------------------------|

|   | (b)  | Management's Report on Internal Control over Financial Reporting |
|--------|-----------|------------------------------------------------------------------|

|   | (c)  | Changes in Internal Controls over Financial Reporting |
|--------|-----------|-------------------------------------------------------|

Item 

Item 

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Item 

Item 

| Equity Compensation Plan Information                      |
|-----------------------------------------------------------|
|                                                      |   |   |   |   |   |   |   |   |   |
|                                                      |   | Number of securities to be issued upon exercise of outstanding options, warrants and rights |   |   | Weighted-average exercise price of outstanding options, warrants and rights |   |   | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |   |
|                                                      |   | (a) |   |   | (b) |   |   | (c) |   |
| Equity compensation plans approved bysecurity holders     |   |   | 64,728 |   |   | $ | 11.04 |   |   |   | 468,727 |   |
| Equity compensation plans not approved bysecurity holders |   |   | - |   |   |   | - |   |   |   | 549,622 |   |
| Total                                                     |   |   | 64,728 |   |   | $ | 11.04 |   |   |   | 1,018,349 |   |

Item 

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Item 

Item 

|   | (a)  Exhibits |
|--------|-------------------------|
|   |                    |   |
|   | Exhibit                 |   |
|   | Number                  | Description of Exhibits |
|   | 3(i)                    | Restated Certificate of Incorporation of Stewardship Financial Corporation (1) |
|   | 3(ii).1                 | By-Laws of Stewardship Financial Corporation (2) |
|   | 3(ii).2                 | Amendment to By-Laws of Stewardship Financial Corporation (3) |
|   | 4(i)                    | Form of Certificate for the Series A Preferred Shares (4) |
|   | 4(ii)                   | Warrant to Purchase up to 127,119 Shares of Common Stock (5) |
|   | 10(i)                   | 1995 Incentive Stock Option Plan (6) |
|   | 10(ii)                  | 1995 Employee Stock Purchase Plan (7) |
|   | 10 (iii)                | Stewardship Financial Corporation Dividend Reinvestment Plan (8) |
|   | 10 (iv)                 | Stewardship Financial Corporation Director Stock Plan (9) |
|   | 10(v)                   | Amended and Restated 1995 Stock Option Plan (9) |
|   | 10(vi)                  | Amended and Restated Director Stock Plan (10) |
|   | 10(vii)                 | Dividend Reinvestment Plan (11) |
|   | 10(viii)                | 2001 Stock Option Plan For Non-Employee Directors (12) |
|   | 10(ix)                  | Dividend Reinvestment Plan (13) |
|   | 10(x)                   | 2006 Stock Option Plan for Non-Employee Directors (14) |
|   | 10(xi)                  | Letter Agreement, dated January 30, 2009, including Securities Purchase Agreement – Standard Terms incorporated by reference therein, between Stewardship Financial Corporation and the Treasury (15) |
|   | 10(xii)                 | Form of Waiver, executed by each of Paul Van Ostenbridge, Claire M. |
|   |                    | Chadwick, Julie E. Holland and Robert C. Vliet (16) |
|   | 10(xiii)                | Dividend Reinvestment Plan (17) |
|   | 10(xiv)                 | 2010 Stock Incentive Plan (18) |
|   | 13                      | Annual Report to Shareholders for the year ended December 31, 2010 |
|   | 21                      | Subsidiaries of the Registrant |
|   | 23                      | Consent of Crowe Horwath LLP |
|   | 31.1                    | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   | 31.2                    | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   | 32.1                    | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|   | 99.1                    | Certification of Chief Executive Officer pursuant to the Emergency Economic Stability Act of 2008 |
|   | 99.2                    | Certification of Chief Financial Officer pursuant to the Emergency Economic Stability Act of 2008 |

| (1) | Incorporated by reference from Exhibit 3(i).1 to the Corporation’s Quarterly Report on Form 10-Q, filed May 15, 2009. |
|-----|-----------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated by reference from Exhibit 3(ii) to the Corporation’s Registration Statement on Form 8-B, Registration No. 0-21855, filed on December 10, 1996. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Incorporate by reference from Exhibit 3.1 to the Corporation’s Current Report on Form 8-K, filed on December 27, 2007. |
|-----|------------------------------------------------------------------------------------------------------------------------------|

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| (4) | Incorporated by reference from Exhibit 4.1 to the Corporation’s Current Report on Form 8-K, filed February 4, 2009. |
|-----|---------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated by reference from Exhibit 4.2 to the Corporation’s Current Report on Form 8-K, filed February 4, 2009. |
|-----|---------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated by reference from Exhibit 5(B)(10)(a) to the Corporation’s Registration Statement on Form 8-B, Registration No. 0-21855, filed December 10, 1996. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Incorporated by reference from Exhibits 4(c) to 23(d) from the Corporation’s Registration Statement on Form S-8, Registration No. 333-20793, filed January 31, 1997. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Incorporated by reference from Exhibit 4(a) from the Corporation’s Registration Statement on Form S-3, Registration No. 333-20699, filed January 30, 1997. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Incorporated by reference from Exhibit 4(a) from the Corporation’s Registration Statement on Form S-8, Registration No. 333-31245, filed July 11, 1997. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Incorporated by reference from Exhibits 10(vii) and 10(viii) from the Corporation’s Annual Report on Form 10-KSB, filed March 31, 1999. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Incorporated by reference from Exhibit 4(a) from the Corporation’s Registration Statement on Form S-3, Registration No. 333-54738, filed January 31, 2001. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Incorporated by reference from Exhibit 4(b) from the Corporation’s Registration Statement on Form S-8, Registration No. 333-87842, filed May 8, 2002. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | Incorporated by reference from Exhibit 4(a) from the Corporation’s Registration Statement on Form S-3, Registration No. 333-133632, filed April 28, 2006. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (14) | Incorporated by reference from Exhibit 5(a) from the Corporation’s Registration Statement on Form S-8, Registration No. 333-135462, filed June 29, 2006. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15) | Incorporated by reference from Exhibit 10.1 to the Corporation’s Current Report on Form 8-K, filed February 4, 2009. |
|------|----------------------------------------------------------------------------------------------------------------------------|

| (16) | Incorporated by reference from Exhibit 10.2 to the Corporation’s Current Report on Form 8-K, filed February 4, 2009. |
|------|----------------------------------------------------------------------------------------------------------------------------|

| (17) | Incorporated by reference from Exhibit 4.2 to the Corporation’s Registration Statement on Form S-3, Registration No. 333-167374, filed June 8, 2010. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (18) | Incorporated by reference from Exhibit 10.1 to the Corporation’s Current Report on Form 8-K, filed May 19, 2010. |
|------|------------------------------------------------------------------------------------------------------------------------|

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Table of Contents

SIGNATURES

|   | STEWARDSHIP FINANCIAL CORPORATION |                                 |
|--------|-----------------------------------|--------------------------------------|
|   |                              |                                 |   |
|   | By:                               | /s/ Paul Van Ostenbridge        |   |
|   |                              | Paul Van Ostenbridge                 |   |
|   |                              | Chief Executive Officer and Director |   |

| Name                                 |   | Title                            |   | Date           |
|--------------------------------------|--------|----------------------------------|--------|----------------|
|                                 |   |                             |   |           |
| /s/  Paul Van Ostenbridge  |   | Chief Executive Officer          |   | March 30, 2011 |
| Paul Van Ostenbridge                 |   | and Director                     |   |           |
|                                 |   | (Principal Executive Officer)    |   |           |
|                                 |   |                             |   |           |
| /s/  Claire M. Chadwick    |   | Chief Financial Officer          |   | March 30, 2011 |
| Claire M. Chadwick                   |   | (Principal Financial Officer and |   |           |
|                                 |   | Principal Accounting Officer)    |   |           |
|                                 |   |                             |   |           |
| /s/  Richard W. Culp       |   | Director                         |   | March 30, 2011 |
| Richard W. Culp                      |   |                             |   |           |
|                                 |   |                             |   |           |
| /s/  Harold Dyer           |   | Director                         |   | March 30, 2011 |
| Harold Dyer                          |   |                             |   |           |
|                                 |   |                             |   |           |
| /s/  William Hanse         |   | Chairman of the Board            |   | March 30, 2011 |
| William Hanse                        |   |                             |   |           |
|                                 |   |                             |   |           |
| /s/  Margo Lane            |   | Director                         |   | March 30, 2011 |
| Margo Lane                           |   |                             |   |           |
|                                 |   |                             |   |           |
| /s/  Arie Leegwater        |   | Director                         |   | March 30, 2011 |
| Arie Leegwater                       |   |                             |   |           |
|                                 |   |                             |   |           |
| /s/  John L. Steen         |   | Director                         |   | March 30, 2011 |
| John L. Steen                        |   |                             |   |           |
|                                 |   |                             |   |           |
| /s/  Robert Turner         |   | Secretary and Director           |   | March 30, 2011 |
| Robert Turner                        |   |                             |   |           |
|                                 |   |                             |   |           |
| /s/  William J. VanderEems |   | Director                         |   | March 30, 2011 |
| William J. VanderEems                |   |                             |   |           |
|                                 |   |                             |   |           |
| /s/  Michael Westra        |   | Vice Chairman of the Board       |   | March 30, 2011 |
| Michael Westra                       |   |                             |   |           |
|                                 |   |                             |   |           |
| /s/  Howard Yeaton         |   | Director                         |   | March 30, 2011 |
| Howard Yeaton                        |   |                             |   |           |

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Table of Contents

| Exhibit Number |   | Description of Exhibits                                                                                                        |
|----------------|--------|--------------------------------------------------------------------------------------------------------------------------------|
|           |   |                                                                                                                           |
| 13             |   | Annual Report to Shareholders for the year ended December 31, 2010                                                             |
| 21             |   | Subsidiaries of the Registrant                                                                                                 |
| 23             |   | Consent of Crowe Horwath LLP                                                                                                   |
| 31.1           |   | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                             |
| 31.2           |   | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                             |
| 32.1           |   | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 99.1           |   | Certification of Chief Executive Officer pursuant to the Emergency Economic Stability Act of 2008                              |
| 99.2           |   | Certification of Chief Financial Officer pursuant to the Emergency Economic Stability Act of 2008                              |

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