| North Carolina                    | 26-2588442          |
|-----------------------------------|---------------------|
| (State or other jurisdiction      | (I.R.S. Employer    |
| of incorporation or organization) | Identification No.) |

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| PART I – FINANCIAL INFORMATION                                                                                                                      | Page No. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                                      |     |
| Item 1.   Financial Statements (Unaudited)                                                                                                      |     |
|                                                                                                                                                      |     |
|  Consolidated Balance Sheets – September 30, 2010 and December 31, 2009                                                                        | 3        |
|                                                                                                                                                      |     |
|  Consolidated Statements of Operations – Nine months ended September 30, 2010 and 2009 and three months ended September 30, 2010 and 2009 | 4        |
|                                                                                                                                                      |     |
|  Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income (Loss) -                                                  |     |
|  Nine months ended September 30, 2010 and 2009                                                                                                       | 5        |
|                                                                                                                                                      |     |
|  Consolidated Statements of Cash Flows – Nine months ended September 30, 2010 and 2009                                                         | 6        |
|                                                                                                                                                      |     |
|  Notes to Consolidated Financial Statements                                                                                                          | 7-14     |
|                                                                                                                                                      |     |
| Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations                                          | 14-21    |
|                                                                                                                                                      |     |
| Item 4T.  Controls and Procedures                                                                                                                    | 21       |
|                                                                                                                                                      |     |
| PART II – OTHER INFORMATION                                                                                                                         |     |
|                                                                                                                                                      |     |
| Item 6.   Exhibits                                                                                                                         | 22       |

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|                                                                                                                                                                                             |   | September 30,2010 |        |   | December 31,2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-------------|--------|------------------|--------|
|                                                                                                                                                                                             |   | (Unaudited)       |        |   | (Audited)        |   |
| Assets                                                                                                                                                                                           |   |              |        |   |             |   |
| Cash and cash equivalents                                                                                                                                                                        |   |              |        |   |             |   |
| Cash and due from banks                                                                                                                                                                          |   | $                 | 5,171,415   |   |             | $      | 4,701,944 |   |
| Federal funds sold                                                                                                                                                                               |   |              | 5,177,936   |   |             |   | 16,729,661 |   |
| Time deposits with other banks                                                                                                                                                                   |   |              | 1,053,660   |   |             |   | 1,296,527 |   |
| Total cash and cash equivalents                                                                                                                                                                  |   |              | 11,403,011  |   |             |   | 22,728,132 |   |
| Securities available for sale at fair value                                                                                                                                                      |   |              | 15,969,398  |   |             |   | 5,031,414 |   |
| Nonmarketable equity securities                                                                                                                                                                  |   |              | 1,315,080   |   |             |   | 1,413,180 |   |
| Total investments                                                                                                                                                                                |   |              | 17,284,478  |   |             |   | 6,444,594 |   |
| Loans receivable                                                                                                                                                                                 |   |              | 133,801,358 |   |             |   | 139,974,913 |   |
| Less allowance for loan losses                                                                                                                                                                   |   |              | (2,451,315  | )      |             |   | (2,408,990 | ) |
| Loans, net                                                                                                                                                                                       |   |              | 131,350,043 |   |             |   | 137,565,923 |   |
| Premises, furniture and equipment, net                                                                                                                                                           |   |              | 3,886,835   |   |             |   | 3,952,877 |   |
| Accrued interest receivable                                                                                                                                                                      |   |              | 664,552     |   |             |   | 566,318 |   |
| Deferred tax asset                                                                                                                                                                               |   |              | 2,020,521   |   |             |   | 1,937,482 |   |
| Other real estate owned                                                                                                                                                                          |   |              | 4,675,490   |   |             |   | 2,050,272 |   |
| Other assets                                                                                                                                                                                     |   |              | 1,061,192   |   |             |   | 1,485,400 |   |
| Total assets                                                                                                                                                                                     |   | $                 | 172,346,122 |   |             | $      | 176,730,998 |   |
| Liabilities                                                                                                                                                                                      |   |              |        |   |             |   |   |   |
| Deposits                                                                                                                                                                                         |   |              |        |   |             |   |   |   |
| Noninterest-bearing transaction accounts                                                                                                                                                         |   | $                 | 7,975,242   |   |             | $      | 5,626,494 |   |
| Interest-bearing transaction accounts                                                                                                                                                            |   |              | 6,226,275   |   |             |   | 4,759,708 |   |
| Savings and money market                                                                                                                                                                         |   |              | 31,169,040  |   |             |   | 24,279,357 |   |
| Time deposits $100,000 and over                                                                                                                                                                  |   |              | 9,679,265   |   |             |   | 6,934,915 |   |
| Other time deposits                                                                                                                                                                              |   |              | 81,026,616  |   |             |   | 102,069,318 |   |
| Total deposits                                                                                                                                                                                   |   |              | 136,076,438 |   |             |   | 143,669,792 |   |
| Borrowed funds                                                                                                                                                                                   |   |              | 77,097      |   |             |   | - |   |
| FHLB advances                                                                                                                                                                                    |   |              | 11,000,000  |   |             |   | 8,000,000 |   |
| Accrued interest payable                                                                                                                                                                         |   |              | 59,723      |   |             |   | 55,169 |   |
| Other liabilities                                                                                                                                                                                |   |              | 178,922     |   |             |   | 112,331 |   |
| Total liabilities                                                                                                                                                                                |   |              | 147,392,180 |   |             |   | 151,837,292 |   |
|                                                                                                                                                                                             |   |              |        |   |             |   |   |   |
| Shareholders’ equity                                                                                                                                                                       |   |              |        |   |             |   |   |   |
| Preferred stock, no par value, 1,000,000 shares authorized, issued          and outstanding – 3,500 at September 30, 2010 and at December 31, 2009 |   |              | 3,404,142   |   |             |   | 3,385,908 |   |
| Common stock, $1.00 par value; 11,000,000 shares authorized, 2,668,205 issued          and outstanding at September 30, 2010 and December 31, 2009       |   |              | 2,678,205   |   |             |   | 2,678,205 |   |
| Treasury stock, at cost (10,000 shares at September 30, 2010 and December 31, 2009)                                                                                                         |   |              | (55,600     | )      |             |   | (55,600 | ) |
| Warrants                                                                                                                                                                                         |   |              | 136,850     |   |             |   | 136,850 |   |
| Capital surplus                                                                                                                                                                                  |   |              | 21,774,620  |   |             |   | 21,734,686 |   |
| Retained deficit                                                                                                                                                                                 |   |              | (3,003,217  | )      |             |   | (3,066,700 | ) |
| Accumulated other comprehensive income                                                                                                                                                           |   |              | 18,942      |   |             |   | 80,357 |   |
| Total shareholders’ equity                                                                                                                                                                 |   |              | 24,953,942  |   |             |   | 24,893,706 |   |
|  Total liabilities and shareholders’ equity                                                                                                                                           |   | $                 | 172,346,122 |   |             | $      | 176,730,998 |   |

----

|                                             |   | For the three months ended September 30, |      |   | For the nine months ended September 30, |   |
|--------------------------------------------------|--------|------------------------------------------|-----------|--------|-----------------------------------------|--------|
|                                             |   | 2010                                     |      |   | 2009                                    |   |   | 2010 |   |   | 2009 |   |
| Interest income:                                 |   |                                     |      |   |                                    |   |   |   |   |   |   |   |
| Loans, including fees                            |   | $                                        | 1,582,034 |   |                                    | $      | 1,740,062 |   |   | $ | 4,920,922 |   |   | $ | 5,099,541 |   |
| Investment securities, taxable                   |   |                                     | 104,652   |   |                                    |   | 59,535 |   |   |   | 294,467 |   |   |   | 189,466 |   |
| FHLB, interest and dividends                     |   |                                     | 1,501     |   |                                    |   | 2,865 |   |   |   | 3,309 |   |   |   | 2,865 |   |
| Federal funds sold                               |   |                                     | 4,568     |   |                                    |   | 119 |   |   |   | 20,043 |   |   |   | 4,623 |   |
| Time deposits with other banks                   |   |                                     | 5,132     |   |                                    |   | 19,112 |   |   |   | 13,283 |   |   |   | 56,640 |   |
| Total                                            |   |                                     | 1,697,887 |   |                                    |   | 1,821,693 |   |   |   | 5,252,024 |   |   |   | 5,353,135 |   |
|                                             |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                                |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Time deposits $100,000 and over                  |   |                                     | 147,202   |   |                                    |   | 204,211 |   |   |   | 147,799 |   |   |   | 439,064 |   |
| Other deposits                                   |   |                                     | 274,990   |   |                                    |   | 398,279 |   |   |   | 1,213,868 |   |   |   | 1,601,892 |   |
| Other interest expense                           |   |                                     | 80,006    |   |                                    |   | 153,062 |   |   |   | 237,746 |   |   |   | 560,120 |   |
| Total                                            |   |                                     | 502,198   |   |                                    |   | 755,552 |   |   |   | 1,599,413 |   |   |   | 2,601,076 |   |
|                                             |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                              |   |                                     | 1,195,689 |   |                                    |   | 1,066,141 |   |   |   | 3,652,611 |   |   |   | 2,752,059 |   |
| Provision for loan losses                        |   |                                     | 105,199   |   |                                    |   | 1,711,572 |   |   |   | 541,727 |   |   |   | 2,358,646 |   |
|                                             |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income after provision              |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| for loan losses                                  |   |                                     | 1,090,490 |   |                                    |   | (645,431 | ) |   |   | 3,110,884 |   |   |   | 393,413 |   |
|                                             |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Other operating income:                          |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Service charges on deposit accounts              |   |                                     | 94,773    |   |                                    |   | 106,452 |   |   |   | 282,461 |   |   |   | 288,192 |   |
| Residential mortgage application fees            |   |                                     | -         |   |                                    |   | - |   |   |   | - |   |   |   | 12,405 |   |
| Rental income                                    |   |                                     | 3,000     |   |                                    |   | 1,225 |   |   |   | 6,000 |   |   |   | 3,475 |   |
| Gain on sale of investment securities            |   |                                     | 134,975   |   |                                    |   | - |   |   |   | 410,187 |   |   |   | - |   |
| Other service charges, commissions and fees      |   |                                     | 12,998    |   |                                    |   | 7,848 |   |   |   | 35,955 |   |   |   | 39,198 |   |
| Total                                            |   |                                     | 245,746   |   |                                    |   | 115,525 |   |   |   | 734,603 |   |   |   | 343,270 |   |
|                                             |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Other operating expenses:                        |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                   |   |                                     | 619,290   |   |                                    |   | 529,063 |   |   |   | 1,761,892 |   |   |   | 1,648,935 |   |
| Occupancy expense                                |   |                                     | 51,759    |   |                                    |   | 46,194 |   |   |   | 142,226 |   |   |   | 146,258 |   |
| Furniture and equipment expense                  |   |                                     | 42,883    |   |                                    |   | 51,023 |   |   |   | 133,659 |   |   |   | 147,090 |   |
| Loss on sale of other real estate                |   |                                     | -         |   |                                    |   | - |   |   |   | 9,016 |   |   |   | 51,783 |   |
| Other operating expenses                         |   |                                     | 708,189   |   |                                    |   | 405,668 |   |   |   | 1,675,822 |   |   |   | 1,222,757 |   |
| Total                                            |   |                                     | 1,422,121 |   |                                    |   | 1,031,948 |   |   |   | 3,722,615 |   |   |   | 3,216,823 |   |
|                                             |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes                |   |                                     | (85,885   | )      |                                    |   | (1,561,854 | ) |   |   | 122,872 |   |   |   | (2,480,140 | ) |
| Income tax expense (benefit)                     |   |                                     | (35,962   | )      |                                    |   | (605,599 | ) |   |   | 40,548 |   |   |   | (952,785 | ) |
|                                             |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                |   | $                                        | (49,923   | )      |                                    | $      | (956,255 | ) |   | $ | 82,234 |   |   | $ | (1,527,355 | ) |
|                                             |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Accretion of preferred stock to redemption value |   |                                     | 6,078     |   |                                    |   | 6,078 |   |   |   | 18,234 |   |   |   | 16,680 |   |
| Preferred stock dividends                        |   |                                     | 43,750    |   |                                    |   | 43,750 |   |   |   | 131,250 |   |   |   | 131,250 |   |
| Net loss available to                            |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| common shareholders                              |   | $                                        | (99,751   | )      |                                    | $      | (1,006,083 | ) |   | $ | (67,250 | ) |   | $ | (1,675,285 | ) |
| Loss per common share                            |   |                                     |      |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Basic loss per common share                      |   | $                                        | (0.04     | )      |                                    | $      | (0.38 | ) |   | $ | (0.03 | ) |   | $ | (0.63 | ) |
| Diluted loss per common share                    |   | $                                        | (0.04     | )      |                                    | $      | (0.38 | ) |   | $ | (0.03 | ) |   | $ | (0.63 | ) |

----

|                                                                   |   | Common Stock |      |   |    Preferred Stock |   |   |   |   |   |         |   |   |           |         |   | Accumu-latedOtherCompre-hensive |   |   | Retained       |   |   |         |   |
|------------------------------------------------------------------------|--------|--------------|-----------|--------|-----------------------------------|--------|--------|--------|--------|--------|--------------|--------|--------|----------------|--------------|--------|---------------------------------|--------|--------|----------------|--------|--------|--------------|--------|
|                                                                   |   | Shares       |      |   | Amount                            |   |   | Shares |   |   | Amount       |   |   | Treasury Stock |         |   | Warrants                        |   |   | CapitalSurplus |   |   | Income(Loss) |   |   | Earnings(Deficit) |   |   | Total |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |
| Balance, December 31, 2008                                        |   |         | 2,678,205 |   |                              | $      | 2,678  |   |   |   | -            |   |   | $              | -            |   |                            | $      | -      |           |   | $      | -            |   |   | $ | 21,607 |   |   | $ | 66 |   |   | $ | (157 | ) |   | $ | 24,194 |   |
|  Net loss                                                         |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   | (1,527 | ) |   |   | (1,527 | ) |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive  income, net of tax                           |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   | 39 |   |   |   |   |   |   |   | 39 |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive  loss                                          |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,488 | ) |
|  Issuance of  preferred stock                           |   |         |      |   |                              |   |   |   |   |   |   3,500 |   |   |           |   3,363 |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   3,363 |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of common  stock warrants                           |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   | 137          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 137 |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion of  preferred stock to  redemption value |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |   17    |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   | (17 | ) |   |   |   - |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends, preferred                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   | (98 | ) |   |   |   |   |   |   |   |   |   |   | (98 | ) |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase of Treasury  stock (10,000 shares)                  |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   | (56    | )              |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (56 | ) |
|  Stock-based employee  compensation                     |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   201 |   |   |   |   |   |   |   |   |   |   |   |   201 |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                                                                |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  September 30, 2009                                               |   |         | 2,678,205 |   |                              | $      | 2,678  |   |   |   | 3,500        |   |   | $              | 3,380        |   |                            | $      | (56    | )              |   | $      | 137          |   |   | $ | 21,710 |   |   | $ | 105 |   |   | $ | (1,701 | ) |   | $ | 26,253 |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009                                        |   |         | 2,678,205 |   |                              | $      | 2,678  |   |   |   | 3,500        |   |   | $              | 3,386        |   |                            | $      | (56    | )              |   | $      | 137          |   |   | $ | 21,734 |   |   | $ | 80 |   |   | $ | (3,067 | ) |   | $ | 24,893 |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                             |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   | 82 |   |   |   | 82 |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive loss, net of tax                              |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   | (61 | ) |   |   |   |   |   |   | (61 | ) |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 21 |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accretion of preferred stock to  redemption value       |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |   18    |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   | (18 | ) |   |   |   - |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends, preferred                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   | (131 | ) |   |   |   |   |   |   |   |   |   |   | (131 | ) |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based employee compensation                                 |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   | 171 |   |   |   |   |   |   |   |   |   |   |   | 171 |   |
|                                                                   |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Balance                                                          |   |         |      |   |                              |   |   |   |   |   |         |   |   |           |         |   |                            |   |   |           |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  September 30, 2010                                               |   |         | 2,678,205 |   |                              | $      | 2,678  |   |   |   | 3,500        |   |   | $              | 3,404        |   |                            | $      | (56    | )              |   | $      | 137          |   |   | $ | 21,774 |   |   | $ | 19 |   |   | $ | (3,003 | ) |   | $ | 24,954 |   |

----

|                                                                                                                                                                                                                                 |   | For the nine months endedSeptember 30, |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-------------|
|                                                                                                                                                                                                                                 |   | 2010                                   |        |   | 2009 |   |
| Cash flows from operating activities:                                                                                                                                                                                                |   |                                   |        |   |   |   |
| Net income (loss)                                                                                                                                                                                                                    |   | $                                      | 82,234      |   |   | $ | (1,527,355 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities                                                                                                                                         |   |                                   |        |   |   |   |   |   |
| Provision for loan losses                                                                                                                                                                                                            |   |                                   | 541,727     |   |   |   | 2,358,646 |   |
| Loss on sale of other real estate                                                                                                                                                                                                    |   |                                   | 9,016       |   |   |   | 51,783 |   |
| Loss on write down of other real estate                                                                                                                                                                                              |   |                                   | 143,236     |   |   |   | - |   |
| Gain on sale of investment securities                                                                                                                                                                                                |   |                                   | (410,187    | ) |   |   | - |   |
| Depreciation and amortization expense                                                                                                                                                                                                |   |                                   | 131,699     |   |   |   | 162,166 |   |
| Discount accretion and premium amortization                                                                                                                                                                                          |   |                                   | 11,398      |   |   |   | 406,871 |   |
| Deferred income tax benefit                                                                                                                                                                                                          |   |                                   | (68,201     | ) |   |   | (977,942 | ) |
| Increase in interest receivable                                                                                                                                                                                                      |   |                                   | (98,234     | ) |   |   | (44,127 | ) |
| Increase (decrease) in interest payable                                                                                                                                                                                              |   |                                   | 4,554       |   |   |   | (33,949 | ) |
| Decrease in other assets                                                                                                                                                                                                             |   |                                   | 424,208     |   |   |   | 23,823 |   |
| Increase in other liabilities                                                                                                                                                                                                        |   |                                   | 66,074      |   |   |   | 102,194 |   |
| Gain on sale of other assets                                                                                                                                                                                                         |   |                                   | -           |   |   |   | (13,656 | ) |
|       Stock based compensation expense                                                                                                                                                                 |   |                                   | 171,184     |   |   |   | 200,587 |   |
| Net cash provided by operating activities                                                                                                                                                                                            |   |                                   | 1,008,708   |   |   |   | 709,041 |   |
|                                                                                                                                                                                                                                 |   |                                   |        |   |   |   |   |   |
| Cash flows from investing activities:                                                                                                                                                                                                |   |                                   |        |   |   |   |   |   |
| Purchase of securities available for sale                                                                                                                                                                                            |   |                                   | (22,758,233 | ) |   |   | (1,045,600 | ) |
| Purchase of nonmarketable equity securities                                                                                                                                                                                          |   |                                   | -           |   |   |   | (41,900 | ) |
| Calls and maturities of securities available for sale                                                                                                                                                                                |   |                                   | 1,091,244   |   |   |   | 72,870 |   |
| Net decrease (increase) in loans receivable                                                                                                                                                                                          |   |                                   | 2,575,842   |   |   |   | (3,107,747 | ) |
| Proceeds from sale of available for sale securities                                                                                                                                                                                  |   |                                   | 11,051,541  |   |   |   | - |   |
| Proceeds from sale of nonmarketable equity securities                                                                                                                                                                                |   |                                   | 98,100      |   |   |   | - |   |
| Proceeds from sale of other real estate                                                                                                                                                                                              |   |                                   | 320,841     |   |   |   | 433,819 |   |
| Proceeds from sale of premises, furniture and equipment                                                                                                                                                                              |   |                                   | -           |   |   |   | 37,656 |   |
| Purchases of premises, furniture, and equipment                                                                                                                                                                                      |   |                                   | (65,657     | ) |   |   | (23,963 | ) |
| Net cash used in investing activities                                                                                                                                                                                                |   |                                   | (7,686,322  | ) |   |   | (3,674,865 | ) |
|                                                                                                                                                                                                                                 |   |                                   |        |   |   |   |   |   |
| Cash flows from financing activities:                                                                                                                                                                                                |   |                                   |        |   |   |   |   |   |
| Net increase (decrease) in demand deposits, interest-bearing transaction                      accounts and savings accounts |   |                                   | 10,704,998  |   |   |   | (835,511 | ) |
| Net decrease in certificates of deposit and other time deposits                                                                                                                                                                      |   |                                   | (18,298,352 | ) |   |   | (1,622,455 | ) |
| Net increase (decrease) in borrowed funds                                                                                                                                                                                            |   |                                   | 77,097      |   |   |   | 13,714,730 |   |
| Proceeds from issuance of preferred stock, net                                                                                                                                                                                       |   |                                   | -           |   |   |   | 3,363,150 |   |
| Net increase (decrease) in advances from FHLB                                                                                                                                                                                        |   |                                   | 3,000,000   |   |   |   | (10,570,000 | ) |
| Dividends paid                                                                                                                                                                                                                       |   |                                   | (131,250    | ) |   |   | (98,195 | ) |
| Purchase of treasury stock                                                                                                                                                                                                           |   |                                   | -           |   |   |   | (55,600 | ) |
| Proceeds from issuance of stock warrants                                                                                                                                                                                             |   |                                   | -           |   |   |   | 136,850 |   |
| Net cash provided by financing activities                                                                                                                                                                                            |   |                                   | (4,647,507  | ) |   |   | 4,032,969 |   |
|                                                                                                                                                                                                                                 |   |                                   |        |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                                                                                                                                                 |   | $                                      | (11,325,121 | ) |   | $ | 1,067,145 |   |
| Cash and cash equivalents, beginning of period                                                                                                                                                                                       |   | $                                      | 22,728,132  |   |   | $ | 18,428,828 |   |
| Cash and cash equivalents, end of period                                                                                                                                                                                             |   | $                                      | 11,403,011  |   |   | $ | 19,495,973 |   |
|                                                                                                                                                                                                                                 |   |                                   |        |   |   |   |   |   |

| Transfer of loans to real estate acquired in settlement of loans |   | $ | 3,098,311 |   |   |  $ | 66,309    |   |
|------------------------------------------------------------------|--------|---|-----------|--------|--------|---------|-----------|--------|
| Interest paid                                                    |   | $ | 1,594,859 |   |   |  $ | 2,635,025 |   |
| Taxes paid                                                       |   | $ | -         |   |   |    | -         |   |

----

----

|                                                        |   | Three months endedSeptember 30, |     |   | Nine months endedSeptember 30, |   |
|-------------------------------------------------------------|--------|---------------------------------|----------|--------|--------------------------------|--------|
|                                                        |   | 2010                            |     |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Unrealized gains (losses) on securities available for sale  |   | $                               | 115,051  |   |                           | $      | 96,429 |   |   | $ | 309,590 |   |   | $ | 64,526 |   |
| Reclassification of (gains) losses recognized in net income |   |                            | (134,975 | )      |                           |   | - |   |   |   | (410,187 | ) |   |   | - |   |
| Income tax expense (benefit)                                |   |                            | (16,394  | )      |                           |   | (37,559 | ) |   |   | 39,182 |   |   |   | (25,133 | ) |
|                                                        |   |                            |     |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss)                           |   | $                               | 3,530    |   |                           | $      | 58,870 |   |   | $ | (61,415 | ) |   | $ | 39,393 |   |

----

|                                                          |   | Income(Numerator) |    |   | Shares(Denominator) |   |      | Per ShareAmount |   |
|---------------------------------------------------------------|--------|-------------------|---------|--------|---------------------|--------|-----------|-----------------|--------|
| Basic loss per share                                          |   |              |    |   |                |   |      |            |   |
| Loss available to common shareholders                         |   | $                 | (99,751 | )      |                |   | 2,668,205 |            |   | $ | (0.04 | ) |
| Effect of dilutive securities                                 |   |              |    |   |                |   |      |            |   |   |   |   |
| Stock options                                                 |   |              | -       |   |                |   | -         |            |   |   |   |   |
| Dilutive income per share                                     |   |              |    |   |                |   |      |            |   |   |   |   |
| Loss available to common shareholdersplus assumed conversions |   | $                 | (99,751 | )      |                |   | 2,668,205 |            |   | $ | (0.04 | ) |

|                                                          |   | Income(Numerator) |       |   | Shares(Denominator) |   |      | Per ShareAmount |   |
|---------------------------------------------------------------|--------|-------------------|------------|--------|---------------------|--------|-----------|-----------------|--------|
| Basic loss per share                                          |   |              |       |   |                |   |      |            |   |
| Loss available to common shareholders                         |   | $                 | (1,006,083 | )      |                |   | 2,668,205 |            |   | $ | (0.38 | ) |
| Effect of dilutive securities                                 |   |              |       |   |                |   |      |            |   |   |   |   |
| Stock options                                                 |   |              | -          |   |                |   | -         |            |   |   |   |   |
| Dilutive loss per share                                       |   |              |       |   |                |   |      |            |   |   |   |   |
| Loss available to common shareholdersplus assumed conversions |   | $                 | (1,006,083 | )      |                |   | 2,668,205 |            |   | $ | (0.38 | ) |

|                                                          |   | Income(Numerator) |    |   | Shares(Denominator) |   |      | Per ShareAmount |   |
|---------------------------------------------------------------|--------|-------------------|---------|--------|---------------------|--------|-----------|-----------------|--------|
| Basic loss per share                                          |   |              |    |   |                |   |      |            |   |
| Loss available to common shareholders                         |   | $                 | (67,250 | )      |                |   | 2,668,205 |            |   | $ | (0.03 | ) |
| Effect of dilutive securities                                 |   |              |    |   |                |   |      |            |   |   |   |   |
| Stock options                                                 |   |              | -       |   |                |   | -         |            |   |   |   |   |
| Dilutive income per share                                     |   |              |    |   |                |   |      |            |   |   |   |   |
| Loss available to common shareholdersplus assumed conversions |   | $                 | (67,250 | )      |                |   | 2,668,205 |            |   | $ | (0.03 | ) |

|                                                          |   | Income(Numerator) |       |   | Shares(Denominator) |   |      | Per ShareAmount |   |
|---------------------------------------------------------------|--------|-------------------|------------|--------|---------------------|--------|-----------|-----------------|--------|
| Basic loss per share                                          |   |              |       |   |                |   |      |            |   |
| Loss available to common shareholders                         |   | $                 | (1,675,285 | )      |                |   | 2,668,205 |            |   | $ | (0.63 | ) |
| Effect of dilutive securities                                 |   |              |       |   |                |   |      |            |   |   |   |   |
| Stock options                                                 |   |              | -          |   |                |   | -         |            |   |   |   |   |
| Dilutive loss per share                                       |   |              |       |   |                |   |      |            |   |   |   |   |
| Loss available to common shareholdersplus assumed conversions |   | $                 | (1,675,285 | )      |                |   | 2,668,205 |            |   | $ | (0.63 | ) |

----

| Level 1 | Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasuries, other securities that are highly liquid and are actively traded in over-the-counter markets and money market funds.                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level 2 | Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, mortgage-backed securities, municipal bond, corporate debt securities, and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts and impaired loans.  |
| Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. For example, this category generally includes certain private equity investments, retained residual interests in securitizations, residential mortgage servicing rights, and highly-structured or long-term derivative contracts.                                                                                                                                    |

|                            |   | Quoted market price in active markets(Level 1) |   |   | Significant other observable inputs(Level 2) |   |       | Significant unobservable inputs (Level 3) |   |
|---------------------------------|--------|------------------------------------------------|--------|--------|----------------------------------------------|--------|------------|------------------------------------------------|--------|
| Available for sale investments: |   |                                           |   |   |                                         |   |       |                                           |   |
| Mortgage-backed securities      |   | $                                              | -      |   |                                         | $      | 15,969,398 |                                           |   | $ | - |   |
|                            |   |                                           |   |   |                                         |   |       |                                           |   |   |   |   |
| Total                           |   | $                                              | -      |   |                                         | $      | 15,969,398 |                                           |   | $ | - |   |

----

|                            |   | Quoted market price in active markets(Level 1) |   |   | Significant other observable inputs(Level 2) |      |      | Significant unobservable inputs (Level 3) |   |
|---------------------------------|--------|------------------------------------------------|--------|--------|----------------------------------------------|-----------|-----------|------------------------------------------------|--------|
| Available for sale investments: |   |                                           |   |   |                                         |      |      |                                           |   |
| Mortgage-backed securities      |   |                                           |   |   | $                                            | 3,991,823 |      |                                           |   |   |
| Agencies                        |   | $                                              | -      |   |                                         |      | 1,039,591 |                                           |   | $ | - |   |
|                            |   |                                           |   |   |                                         |      |      |                                           |   |   |   |   |
| Total                           |   | $                                              | -      |   |                                         | $         | 5,031,414 |                                           |   | $ | - |   |

|                                     |   | Quoted market price in active markets(Level 1) |   |   | Significant other observable inputs(Level 2) |   |       | Significant unobservable inputs (Level 3) |   |
|------------------------------------------|--------|------------------------------------------------|--------|--------|----------------------------------------------|--------|------------|------------------------------------------------|--------|
|                                     |   |                                           |   |   |                                         |   |       |                                           |   |
| Impaired loans                           |   | $                                              | -      |   |                                         | $      | 9,486,920  |                                           |   | $ | - |   |
| Real estate acquired through foreclosure |   |                                           | -      |   |                                         |   | 4,675,490  |                                           |   |   | - |   |
|                                     |   |                                           |   |   |                                         |   |       |                                           |   |   |   |   |
| Total                                    |   | $                                              | -      |   |                                         | $      | 14,162,410 |                                           |   | $ | - |   |

|                                     |   | Quoted market price in active markets(Level 1) |   |   | Significant other observable inputs(Level 2) |   |      | Significant unobservable inputs (Level 3) |   |
|------------------------------------------|--------|------------------------------------------------|--------|--------|----------------------------------------------|--------|-----------|------------------------------------------------|--------|
|                                     |   |                                           |   |   |                                         |   |      |                                           |   |
| Impaired loans                           |   | $                                              | -      |   |                                         | $      | 5,202,336 |                                           |   | $ | - |   |
| Real estate acquired through foreclosure |   |                                           | -      |   |                                         |   | 2,050,272 |                                           |   |   | - |   |
|                                     |   |                                           |   |   |                                         |   |      |                                           |   |   |   |   |
| Total                                    |   | $                                              | -      |   |                                         | $      | 7,252,608 |                                           |   | $ | - |   |

----

|                   |   | September 30, 2010 |    |   | December 31, 2009 |   |
|------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                   |   | Carrying           |    |   | Estimated         |   |   | Carrying |   |   | Estimated |   |
| Dollars in thousands   |   | Amount             |    |   | Fair Value        |   |   | Amount |   |   | Fair Value |   |
| Financial Assets:      |   |               |    |   |              |   |   |   |   |   |   |   |
| Loans receivable, net  |   | $                  | 133,801 |   |              | $      | 131,908 |   |   | $ | 139,975 |   |   | $ | 135,119 |   |
|                   |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities: |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits         |   | $                  | 136,076 |   |              | $      | 133,706 |   |   | $ | 143,670 |   |   | $ | 140,169 |   |
| FHLB advances          |   | $                  | 11,000  |   |              | $      | 11,445 |   |   | $ | 8,000 |   |   | $ | 8,004 |   |

----

|                       |   |          |       |   | Gross Unrealized |   |    |   |   |
|----------------------------|--------|---------------|------------|--------|------------------|--------|---------|--------|--------|
|                       |   | AmortizedCost |       |   | Gains            |   |    | Losses |   |   | EstimatedFair Value |   |
| September 30, 2010         |   |          |       |   |             |   |    |   |   |   |   |   |
| Mortgage-backed securities |   | $             | 15,938,371 |   |             | $      | 53,201  |   |   | $ | 22,174 |   |   | $ | 15,969,398 |   |
|  Total                |   | $             | 15,938,371 |   |             | $      | 53,201  |   |   | $ | 22,174 |   |   | $ | 15,969,398 |   |
|                       |   |          |       |   |             |   |    |   |   |   |   |   |   |   |   |   |
| December 31, 2009          |   |          |       |   |             |   |    |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities |   | $             | 3,857,417  |   |             | $      | 155,987 |   |   | $ | 21,581 |   |   | $ | 3,991,823 |   |
| Agencies                   |   |          | 1,042,373  |   |             |   | -       |   |   |   | 2,782 |   |   |   | 1,039,591 |   |
|  Total                |   | $             | 4,899,790  |   |             | $      | 155,987 |   |   | $ | 24,363 |   |   | $ | 5,031,414 |   |

|                                      |   | SecuritiesAvailable-for-Sale |       |
|-------------------------------------------|--------|------------------------------|------------|
|                                      |   | AmortizedCost                |       |   | EstimatedFair Value |   |
| Due in one year or less                   |   | $                            | 144,113    |   |   | $ | 143,133 |   |
| Due after one year but within five years  |   |                         | 6,967,632  |   |   |   | 6,992,241 |   |
| Due after five years but within ten years |   |                         | 4,615,182  |   |   |   | 4,625,404 |   |
| Due after ten years                       |   |                         | 4,211,444  |   |   |   | 4,208,620 |   |
|                                      |   | $                            | 15,938,371 |   |   | $ | 15,969,398 |   |

|                       |   | Less thantwelve months |      |   | Twelve monthsor more |   |   | Total      |   |
|----------------------------|--------|------------------------|-----------|--------|----------------------|--------|--------|------------|--------|
|                       |   | Fair Value             |      |   | Unrealized losses    |   |   | Fair Value |   |   | Unrealized losses |   |   | Fair Value |   |   | Unrealized losses |   |
| September 30, 2010         |   |                   |      |   |                 |   |   |       |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities |   | $                      | 1,820,362 |   |                 | $      | 22,174 |       |   | $ | - |   |   | $ | - |   |   | $ | 1,820,362 |   |   | $ | 22,174 |   |
|                       |   |                   |      |   |                 |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                      |   | $                      | 1,820,362 |   |                 | $      | 22,174 |       |   | $ | - |   |   | $ | - |   |   | $ | 1,820,362 |   |   | $ | 22,174 |   |
|                       |   |                   |      |   |                 |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                       |   | Less thantwelve months |      |   | Twelve monthsor more |   |   | Total      |   |
|----------------------------|--------|------------------------|-----------|--------|----------------------|--------|--------|------------|--------|
|                       |   | Fair Value             |      |   | Unrealized losses    |   |   | Fair Value |   |   | Unrealized losses |   |   | Fair Value |   |   | Unrealized losses |   |
| December 31, 2009          |   |                   |      |   |                 |   |   |       |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities |   | $                      | 1,229,796 |   |                 | $      | 21,581 |       |   | $ | - |   |   | $ | - |   |   | $ | 1,229,796 |   |   | $ | 21,581 |   |
| Agencies                   |   |                   | 1,039,591 |   |                 |   | 2,782  |       |   |   | - |   |   |   | - |   |   |   | 1,039,591 |   |   |   | 2,782 |   |
|                       |   |                   |      |   |                 |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                      |   | $                      | 2,269,387 |   |                 | $      | 24,363 |       |   | $ | - |   |   | $ | - |   |   | $ | 2,269,387 |   |   | $ | 24,363 |   |
|                       |   |                   |      |   |                 |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| ·   | the creation of a Financial Stability Oversight Council to identify emerging systemic risks posed by financial firms, activities and practices, and to improve cooperation between federal agencies; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | the creation of a Bureau of Consumer Financial Protection authorized to promulgate and enforce consumer protection regulations relating to financial products, which would affect both banks and non-bank financial companies; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the establishment of strengthened capital and prudential standards for banks and bank holding companies; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | enhanced regulation of financial markets, including derivatives and securitization markets; |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | the elimination of certain trading activities by banks; |
|--------------------|---------------------------------------------------------|

| ·   | a permanent increase of the previously implemented temporary increase of FDIC deposit insurance to $250,000 per account, an extension of unlimited deposit insurance on qualifying noninterest-bearing transaction accounts, and an increase in the minimum deposit insurance fund reserve requirement from 1.15% to 1.35%, with assessments to be based on assets as opposed to deposits; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | amendments to the Truth in Lending Act aimed at improving consumer protections with respect to mortgage originations, including originator compensation, minimum repayment standards, and prepayment considerations; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | new disclosure and other requirements relating to executive compensation and corporate governance. |
|--------------------|----------------------------------------------------------------------------------------------------|

----

----

|                             |   | September 30,2010 |        |   | December 31,2009 |   |
|----------------------------------|--------|-------------------|-------------|--------|------------------|--------|
| Real estate – construction |   | $                 | 24,073,000  |   |             | $      | 29,444,000 |   |
| Real estate – mortgage     |   |              | 92,657,000  |   |             |   | 94,439,000 |   |
| Commercial and industrial        |   |              | 15,608,000  |   |             |   | 15,220,000 |   |
| Consumer and other               |   |              | 1,463,358   |   |             |   | 871,913 |   |
|  Total gross loans          |   | $                 | 133,801,358 |   |             | $      | 139,974,913 |   |

----

|                                                 |   | September 30,2010 |        |   | September 30,2009 |   |
|------------------------------------------------------|--------|-------------------|-------------|--------|-------------------|--------|
| Balance, January 1                                   |   | $                 | 2,408,990   |   |              | $      | 1,935,702 |   |
| Provision for loan losses for the period             |   |              | 541,727     |   |              |   | 2,358,646 |   |
| Net loans (charged-off) recovered during the period  |   |              | (499,402    | )      |              |   | (654,509 | ) |
|  Balance,  September 30,              |   | $                 | 2,451,315   |   |              | $      | 3,639,839 |   |
|  Gross loans outstanding, September 30,         |   | $                 | 133,801,358 |   |              | $      | 140,881,088 |   |
|  Allowance for loan losses to loans outstanding |   |              | 1.83        | %      |              |   | 2.58 | % |

|                                     |   | September 302010 |        |   | December 31,2009 |   |
|------------------------------------------|--------|------------------|-------------|--------|------------------|--------|
| Noninterest-bearing transaction accounts |   | $                | 7,975,242   |   |             | $      | 5,626,494 |   |
| Interest-bearing transaction accounts    |   |             | 6,226,275   |   |             |   | 4,759,708 |   |
| Savings and money market                 |   |             | 31,169,040  |   |             |   | 24,279,357 |   |
| Time deposits $100,000 and over          |   |             | 9,679,265   |   |             |   | 6,934,915 |   |
| Other time deposits                      |   |             | 81,026,616  |   |             |   | 102,069,318 |   |
| Total deposits                           |   | $                | 136,076,438 |   |             | $      | 143,669,792 |   |

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| Description                         |   | Interest Rate |   |   | Amount |      |
|-------------------------------------|--------|---------------|--------|--------|--------|-----------|
| Daily Rate Credit                   |   | variable      |   |   | $      | 3,000,000 |   |
| Convertible rate advances maturing: |   |          |   |   |   |      |   |
| September 20, 2012                  |   |          | 3.86   | %      |   |      | 8,000,000 |   |
|                                |   |          |   |   |   | $         | 11,000,000 |   |

| 2010   |   |   | -          |   |
|--------|--------|--------|------------|--------|
| 2011   |   | $      | 3,000,000  |   |
| 2012   |   |   | 8,000,000  |   |
|   |   | $      | 11,000,000 |   |

----

| Shareholders' equity                                                 |   | $      | 24,954  |   |
|----------------------------------------------------------------------|--------|--------|---------|--------|
| Plus – unrealized (gain) loss on available-for-sale securities |   |   | (19     | )      |
| Less – disallowed deferred tax assets                          |   |   | (2      | )      |
|  Tier 1 capital                                                 |   | $      | 24,933  |   |
|  Plus - allowance for loan losses(1)                            |   |   | 1,669   |   |
|  Total capital                                                  |   | $      | 26,602  |   |
|  Risk-weighted assets                                           |   | $      | 132,776 |   |
| Risk-based capital ratios:                                      |   |   |    |   |
| Tier 1 capital (to risk-weighted assets)                             |   |   | 17.56   | %      |
| Total capital (to risk-weighted assets)                              |   |   | 18.82   | %      |
| Leverage ratio                                                       |   |   | 13.78   | %      |

|                                      |   | WithinOneMonth |          |   | After OneThroughThreeMonths |   |            | After ThreeThroughTwelveMonths |   |   | GreaterThanOne Year |   |   |   Total |            |
|-------------------------------------------|--------|----------------|---------------|--------|-----------------------------|--------|-----------------|--------------------------------|--------|--------|---------------------|--------|--------|-------------------|-----------------|
|  Unused commitments to extend credit |   | $              |  655,027 |   |                        | $      |  1,236,361 |                           |   | $      |  3,081,511     |   |   | $                 |  5,402,637 |   |   | $ |  10,375,536 |   |
| Standby letters of credit                 |   |           | 179,695       |   |                        |   | -               |                           |   |   | -                   |   |   |              | -               |   |   |   | 179,695 |   |
|  Totals                              |   | $              | 834,722       |   |                        | $      | 1,236,361       |                           |   | $      | 3,081,511           |   |   | $                 | 5,402,637       |   |   | $ | 10,555,231 |   |

----

| (a) | Based on their evaluation of the Company’s disclosure controls and procedures (as defined in 17 C.F.R. Sections 240.13a-15(e) and 240.15d-15(e)) as of September 30, 2010, our chief executive officer and chief financial officer concluded that  such controls and procedures were effective. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | There was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting subsequent to the date of its evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ExhibitNumber |  Description of Exhibit                                                                                                                                              |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1          | Certification of Principal Executive Officer pursuant to Rule 13a-14(a)                                                                                                   |
| 31.2          | Certification of Principal Financial Officer pursuant to Rule 13a-14(a)                                                                                                   |
| 32            | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 USC 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

----

| 31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14(a)                                                                                                   |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14(a)                                                                                                   |
| 32   | Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 USC 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |