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

----

----

| PART      I – FINANCIAL INFORMATION                                                                                | Page      No. |
|--------------------------------------------------------------------------------------------------------------------------|---------------|
|                                                                                                                     |          |
| Item      1.  Financial Statements (Unaudited)                                                                 |          |
|                                                                                                                     |          |
|   Consolidated      Balance Sheets – March 31, 2010 and December 31,    2009                                  | 3             |
|                                                                                                                     |          |
|   Consolidated      Statements of Operations – Three months ended March 31, 2010 and      2009                | 4             |
|                                                                                                                     |          |
|   Consolidated      Statements of Changes in Shareholders’ Equity and Comprehensive                 |          |
|        Income      (Loss) -  Three months ended March 31, 2010 and      2009     | 5             |
|                                                                                                                     |          |
|   Consolidated      Statements of Cash Flows – Three months ended March 31, 2010 and      2009                | 6             |
|                                                                                                                     |          |
|   Notes to      Consolidated Financial Statements                                                                   | 7-12          |
|                                                                                                                     |          |
| Item      2.  Management’s Discussion and Analysis of Financial Condition      and Results of Operations | 13-17         |
|                                                                                                                     |          |
| Item      4T.  Controls and Procedures                                                                         | 18            |
|                                                                                                                     |          |
| PART      II – OTHER INFORMATION                                                                                   |          |
|                                                                                                                     |          |
| Item      6.              Exhibits                 | 18            |

----

|                                                                                                                                                            |   | March      31,2010 |        |   | December      31,2009 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|--------|-----------------------|--------|
|                                                                                                                                                            |   | (Unaudited)        |        |   | (Audited)             |   |
| Assets                                                                                                                                                          |   |               |        |   |                  |   |
| Cash and cash      equivalents                                                                                                                                  |   |               |        |   |                  |   |
| Cash and due from      banks                                                                                                                                    |   | $                  | 3,091,388   |   |                  | $      | 4,701,944 |   |
| Federal funds      sold                                                                                                                                         |   |               | 9,258,877   |   |                  |   | 16,729,661 |   |
| Time deposits with      other banks                                                                                                                             |   |               | 1,037,518   |   |                  |   | 1,296,527 |   |
| Total cash and cash      equivalents                                                                                                                            |   |               | 13,387,783  |   |                  |   | 22,728,132 |   |
| Securities available      for sale at fair value                                                                                                                |   |               | 12,521,238  |   |                  |   | 5,031,414 |   |
| Nonmarketable equity      securities                                                                                                                            |   |               | 1,413,180   |   |                  |   | 1,413,180 |   |
| Total      investments                                                                                                                                          |   |               | 14,971,936  |   |                  |   | 6,444,594 |   |
| Loans      receivable                                                                                                                                           |   |               | 137,640,105 |   |                  |   | 139,974,913 |   |
| Less allowance for      loan losses                                                                                                                             |   |               | (2,521,012  | )      |                  |   | (2,408,990 | ) |
| Loans,      net                                                                                                                                                 |   |               | 135,119,093 |   |                  |   | 137,565,923 |   |
| Premises, furniture      and equipment, net                                                                                                                     |   |               | 3,938,115   |   |                  |   | 3,952,877 |   |
| Accrued interest      receivable                                                                                                                                |   |               | 553,048     |   |                  |   | 566,318 |   |
| Deferred tax      asset                                                                                                                                         |   |               | 2,649,540   |   |                  |   | 1,937,482 |   |
| Other real estate      owned                                                                                                                                    |   |               | 3,135,185   |   |                  |   | 2,050,272 |   |
| Other      assets                                                                                                                                               |   |               | 697,208     |   |                  |   | 1,485,400 |   |
| Total      assets                                                                                                                                               |   | $                  | 173,414,390 |   |                  | $      | 176,730,998 |   |
| Liabilities                                                                                                                                                     |   |               |        |   |                  |   |   |   |
| Deposits                                                                                                                                                        |   |               |        |   |                  |   |   |   |
| Noninterest-bearing      transaction accounts                                                                                                                   |   | $                  | 6,248,528   |   |                  | $      | 5,626,494 |   |
| Interest-bearing      transaction accounts                                                                                                                      |   |               | 5,452,464   |   |                  |   | 4,759,708 |   |
| Savings and money      market                                                                                                                                   |   |               | 28,205,770  |   |                  |   | 24,279,357 |   |
| Time deposits      $100,000 and over                                                                                                                            |   |               | 7,460,145   |   |                  |   | 6,934,915 |   |
| Other time      deposits                                                                                                                                        |   |               | 92,803,092  |   |                  |   | 102,069,318 |   |
| Total      deposits                                                                                                                                             |   |               | 140,169,999 |   |                  |   | 143,669,792 |   |
| Borrowed      funds                                                                                                                                             |   |               | 21,374      |   |                  |   | - |   |
| FHLB      advances                                                                                                                                              |   |               | 8,000,000   |   |                  |   | 8,000,000 |   |
| Accrued interest      payable                                                                                                                                   |   |               | 70,379      |   |                  |   | 55,169 |   |
| Other      liabilities                                                                                                                                          |   |               | 156,245     |   |                  |   | 112,331 |   |
| Total      liabilities                                                                                                                                          |   |               | 148,417,997 |   |                  |   | 151,837,292 |   |
|                                                                                                                                                            |   |               |        |   |                  |   |   |   |
| Shareholders’      equity                                                                                                                                 |   |               |        |   |                  |   |   |   |
| Preferred stock, no      par value, 1,000,000 shares authorized, issued      and outstanding      – 3,500 at March 31, 2010 and at December 31, 2009 |   |               | 3,391,986   |   |                  |   | 3,385,908 |   |
| Common stock, $1.00      par value; 11,000,000 shares authorized, issued and outstanding      – 2,678,205 at March 31, 2010 and December 31, 2009    |   |               | 2,678,205   |   |                  |   | 2,678,205 |   |
| Treasury stock, at      cost (10,000 shares at March 31, 2010 and December 31,      2009)                                                                       |   |               | (55,600     | )      |                  |   | (55,600 | ) |
| Warrants                                                                                                                                                        |   |               | 136,850     |   |                  |   | 136,850 |   |
| Capital      surplus                                                                                                                                            |   |               | 21,757,432  |   |                  |   | 21,734,686 |   |
| Retained      deficit                                                                                                                                           |   |               | (2,991,146  | )      |                  |   | (3,066,700 | ) |
| Accumulated other      comprehensive income                                                                                                                     |   |               | 78,666      |   |                  |   | 80,357 |   |
| Total shareholders’      equity                                                                                                                           |   |               | 24,996,393  |   |                  |   | 24,893,706 |   |
| Total      liabilities and shareholders’ equity                                                                                                           |   | $                  | 173,414,390 |   |                  | $      | 176,730,998 |   |

----

|                                                  |   | For      the three months endedMarch      31, |      |
|-------------------------------------------------------|--------|-----------------------------------------------|-----------|
|                                                  |   | 2010                                          |      |   | 2009 |   |
| Interest      income:                                 |   |                                          |      |   |   |   |
| Loans, including      fees                            |   | $                                             | 1,689,925 |   |   | $ | 1,644,474 |   |
| Investment      securities, taxable                   |   |                                          | 63,302    |   |   |   | 61,962 |   |
| FHLB, interest and      dividends                     |   |                                          | 931       |   |   |   | - |   |
| Federal funds      sold                               |   |                                          | 10,941    |   |   |   | 3,663 |   |
| Time deposits with      other banks                   |   |                                          | 3,683     |   |   |   | 19,167 |   |
| Total                                                 |   |                                          | 1,768,782 |   |   |   | 1,729,266 |   |
| Interest      expense:                                |   |                                          |      |   |   |   |   |   |
| Time deposits      $100,000 and over                  |   |                                          | 41,971    |   |   |   | 624,574 |   |
| Other      deposits                                   |   |                                          | 446,634   |   |   |   | 158,449 |   |
| Other interest      expense                           |   |                                          | 76,407    |   |   |   | 200,827 |   |
| Total                                                 |   |                                          | 565,012   |   |   |   | 983,850 |   |
| Net      interest income                              |   |                                          | 1,203,770 |   |   |   | 745,416 |   |
| Provision for loan      losses                        |   |                                          | 36,528    |   |   |   | 341,314 |   |
| Net      interest income after provision              |   |                                          |      |   |   |   |   |   |
| for loan      losses                                  |   |                                          | 1,167,242 |   |   |   | 404,102 |   |
| Other      operating income:                          |   |                                          |      |   |   |   |   |   |
| Service charges on      deposit accounts              |   |                                          | 89,425    |   |   |   | 82,872 |   |
| Residential mortgage      application fees            |   |                                          | -         |   |   |   | 12,405 |   |
| Rental      income                                    |   |                                          | 750       |   |   |   | 900 |   |
| Other service      charges, commission and fees       |   |                                          | 10,449    |   |   |   | 13,003 |   |
| Total                                                 |   |                                          | 100,624   |   |   |   | 109,180 |   |
| Other      operating expenses:                        |   |                                          |      |   |   |   |   |   |
| Salaries and      employee benefits                   |   |                                          | 557,418   |   |   |   | 595,942 |   |
| Occupancy      expense                                |   |                                          | 46,539    |   |   |   | 47,351 |   |
| Furniture and      equipment expense                  |   |                                          | 42,718    |   |   |   | 51,606 |   |
| Loss on sale of      other real estate                |   |                                          | 448       |   |   |   | - |   |
| Other operating      expenses                         |   |                                          | 486,522   |   |   |   | 341,459 |   |
| Total                                                 |   |                                          | 1,133,645 |   |   |   | 1,036,358 |   |
| Income      (loss) before income taxes                |   |                                          | 134,221   |   |   |   | (523,076 | ) |
| Income      tax expense (benefit)                     |   |                                          | 51,982    |   |   |   | (200,598 | ) |
| Net      income (loss)                                |   | $                                             | 82,239    |   |   | $ | (322,478 | ) |
| Accretion      of preferred stock to redemption value |   |                                          | 6,078     |   |   |   | 4,524 |   |
| Preferred      stock dividends                        |   |                                          | 43,750    |   |   |   | 43,750 |   |
| Net      income (loss) available to                   |   |                                          |      |   |   |   |   |   |
| common      shareholders                              |   | $                                             | 32,411    |   |   | $ | (370,752 | ) |
| Income      (loss) per common share                   |   |                                          |      |   |   |   |   |   |
| Basic      income (loss) per common share             |   | $                                             | 0.01      |   |   | $ | (0.14 | ) |
| Diluted      income (loss) per common share           |   | $                                             | 0.01      |   |   | $ | (0.14 | ) |

----

|                                                                                  |  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                                                                   |                    |                                         |              |               |                |                            |                |            |  (322) |  (322) |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| Other      comprehensive  income,      net of tax                           |                    |                                         |              |               |                |                            |                |  24        |   |  24 |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| Comprehensive  loss                                                         |                    |                                         |              |               |                |                            |                |            |   | (298) |
|  Issuance      of  preferred      stock                                |                    |                                         |   3,500 |   3,363  |                |                            |                |            |   |   3,363 |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| Issuance      of common  stock      warrants                                |                    |                                         |              |               |                |  137                       |                |            |   |  137 |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| Accretion      of  preferred      stock to  redemption      value |                    |                                         |              |   5      |                |                            |                |            |   (5) |   - |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| Dividends,      preferred                                                             |                    |                                         |              |               |                |                            | (11)                |            |   | (11) |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| Purchase      of Treasury  stock      (10,000 shares)                       |                    |                                         |              |               |  (56)          |                            |                |            |   |  (56) |
|  Stock-based      employee  compensation                               |                    |                                         |              |               |                |                            |   66      |            |   |   66 |
| Balance                                                                               |                    |                                         |              |               |                |                            |                |            |   |   |
|  March      31, 2009                                                             | 2,678,205               | $      2,678                                 | 3,500             | $      3,368       | $      (56)         | $      137                      | $      21,662       | $      90       | $      (484) | $      27,395 |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| 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                       |                    |                                         |              |               |                |                            |                |  (1)       |   |  (1) |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| Comprehensive      income                                                             |                    |                                         |              |               |                |                            |                |            |   | 81 |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| Accretion      of  preferred      stock to  redemption      value |                    |                                         |              |   6      |                |                            |                |            |   (6) |   - |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| Dividends,      preferred                                                             |                    |                                         |              |               |                |                            | (44)                |            |   | (44) |
|                                                                                  |                    |                                         |              |               |                |                            |                |            |   |   |
| Stock-based employee       compensation expense                             |                    |                                         |              |               |                |                            |  67            |            |   |  67 |
| Balance                                                                               |                    |                                         |              |               |                |                            |                |            |   |   |
|  March      31, 2010                                                             | 2,678,205               | $      2,678                                 | 3,500             | $      3,392       | $  (56)   | $      137                      | $      21,757       | $      79       | $      (2,991) | $24,996 |

----

|                                                                                                                                           |   | For      the three monthsended      March 31, |       |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|
|                                                                                                                                           |   | 2010                                          |       |   | 2009 |   |
| Cash      flows from operating activities:                                                                                                     |   |                                          |       |   |   |   |
| Net income      (loss)                                                                                                                         |   | $                                             | 82,239     |   |   | $ | (322,478 | ) |
| Adjustments to      reconcile net income (loss) to net  cash      provided by operating activities                                   |   |                                          |       |   |   |   |   |   |
| Provision for loan      losses                                                                                                                 |   |                                          | 36,528     |   |   |   | 341,314 |   |
| Loss on sale of      other real estate                                                                                                         |   |                                          | 448        |   |   |   | - |   |
| Depreciation and      amortization expense                                                                                                     |   |                                          | 41,923     |   |   |   | 54,431 |   |
| Discount accretion      and premium amortization                                                                                               |   |                                          | 1,471      |   |   |   | 110,063 |   |
| Deferred income tax      benefit                                                                                                               |   |                                          | (1,079     | ) |   |   | (216,280 | ) |
| Decrease in interest      receivable                                                                                                           |   |                                          | 13,270     |   |   |   | 35,110 |   |
| Increase in interest      payable                                                                                                              |   |                                          | 15,210     |   |   |   | 22,214 |   |
| Decrease in other      assets                                                                                                                  |   |                                          | 78,292     |   |   |   | 10,391 |   |
| Increase in other      liabilities                                                                                                             |   |                                          | 64,681     |   |   |   | 91,150 |   |
|           Stock based compensation expense                                                                                 |   |                                          | 66,496     |   |   |   | 66,371 |   |
| Net cash provided by      operating activities                                                                                                 |   |                                          | 399,479    |   |   |   | 192,286 |   |
|                                                                                                                                           |   |                                          |       |   |   |   |   |   |
| Cash      flows from investing activities:                                                                                                     |   |                                          |       |   |   |   |   |   |
| Purchase of      securities available for sale                                                                                                 |   |                                          | (7,536,998 | ) |   |   | - |   |
| Purchase of      nonmarketable equity securities                                                                                               |   |                                          | -          |   |   |   | (41,900 | ) |
| Redemption      (purchase) of certificates of deposit from other    banks                                                                      |   |                                          | 259,009    |   |   |   | (11,449 | ) |
| Calls and maturities      of securities available for sale                                                                                     |   |                                          | 42,933     |   |   |   | - |   |
| Net decrease      (increase) in loans receivable                                                                                               |   |                                          | 1,269,635  |   |   |   | (161,901 | ) |
| Proceeds from sale      of other real estate                                                                                                   |   |                                          | 55,306     |   |   |   | 370,246 |   |
| Purchases of      premises, furniture, and equipment                                                                                           |   |                                          | (27,161    | ) |   |   | (2,976 | ) |
| Net cash provided      (used) by investing activities                                                                                          |   |                                          | (5,936,276 | ) |   |   | 152,020 |   |
|                                                                                                                                           |   |                                          |       |   |   |   |   |   |
| Cash      flows from financing activities:                                                                                                     |   |                                          |       |   |   |   |   |   |
| Net increase      (decrease) in demand deposits, interest-     bearing      transaction accounts and savings accounts |   |                                          | 5,241,203  |   |   |   | (1,262,834 | ) |
| Net decrease in      certificates of deposit andother time      deposits                                                                       |   |                                          | (8,740,996 | ) |   |   | (1,458,467 | ) |
| Net decrease in      borrowed funds                                                                                                            |   |                                          | -          |   |   |   | (1,066,883 | ) |
| Proceeds from      issuance of preferred stock, net                                                                                            |   |                                          | -          |   |   |   | 3,363,150 |   |
| Dividends      paid                                                                                                                            |   |                                          | (43,750    | ) |   |   | (10,694 | ) |
| Purchase of treasury      stock                                                                                                                |   |                                          | -          |   |   |   | (55,600 | ) |
| Proceeds from      issuance of stock warrants                                                                                                  |   |                                          | -          |   |   |   | 136,850 |   |
| Net cash used by      financing activities                                                                                                     |   |                                          | (3,543,543 | ) |   |   | (354,478 | ) |
|                                                                                                                                           |   |                                          |       |   |   |   |   |   |
| Net      decrease in cash and cash equivalents                                                                                                 |   | $                                             | (9,081,340 | ) |   | $ | (10,172 | ) |
|                                                                                                                                           |   |                                          |       |   |   |   |   |   |
| Cash      and cash equivalents, beginning of period                                                                                            |   | $                                             | 22,728,132 |   |   | $ | 17,168,629 |   |
|                                                                                                                                           |   |                                          |       |   |   |   |   |   |
| Cash      and cash equivalents, end of period                                                                                                  |   | $                                             | 13,387,783 |   |   | $ | 17,158,457 |   |
|                                                                                                                                           |   |                                          |       |   |   |   |   |   |

| Transfer      of loans to real estate acquired in settlement of loans |   | $ | 1,140,667 |   |   | $ | 1,266,727 |   |
|-----------------------------------------------------------------------|--------|---|-----------|--------|--------|---|-----------|--------|
| Interest      paid                                                    |   | $ | 549,802   |   |   | $ | 3,298,739 |   |
| Taxes      paid                                                       |   | $ | -         |   |   | $ | -         |   |

----

----

|                                                             |   | Three      months endedMarch      31, |   |
|------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                             |   | 2010                                  |   |   | 2009 |   |
| Unrealized      gains (losses) on securities available for sale  |   | $                                     | (2,772 | ) |   | $ | 40,198 |   |
| Reclassification      of (gains) losses recognized in net income |   |                                  | -      |   |   |   | - |   |
| Income      tax expense (benefit)                                |   |                                  | 1,078  |   |   |   | (15,657 | ) |
|                                                             |   |                                  |   |   |   |   |   |   |
| Other      comprehensive income (loss)                           |   | $                                     | (1,694 | ) |   | $ | 24,541 |   |

|                                                                      |   | Income(Numerator) |   |   | Shares(Denominator) |   |      | Per      ShareAmount |   |
|---------------------------------------------------------------------------|--------|-------------------|--------|--------|---------------------|--------|-----------|----------------------|--------|
| Basic      loss per share                                                 |   |              |   |   |                |   |      |                 |   |
| Income available to      common shareholders                              |   | $                 | 32,411 |   |                |   | 2,668,205 |                 |   | $ | 0.01 |   |
| Effect      of dilutive securities                                        |   |              |   |   |                |   |      |                 |   |   |   |   |
| Stock      options                                                        |   |              | -      |   |                |   | -         |                 |   |   |   |   |
| Dilutive      income per share                                            |   |              |   |   |                |   |      |                 |   |   |   |   |
| Income available to      common shareholdersplus assumed      conversions |   | $                 | 32,411 |   |                |   | 2,668,205 |                 |   | $ | 0.01 |   |

|                                                                    |   | Income(Numerator) |     |   | Shares(Denominator) |   |      | Per      ShareAmount |   |
|-------------------------------------------------------------------------|--------|-------------------|----------|--------|---------------------|--------|-----------|----------------------|--------|
| Basic      loss per share                                               |   |              |     |   |                |   |      |                 |   |
| Loss available to      common shareholders                              |   | $                 | (370,752 | )      |                |   | 2,668,205 |                 |   | $ | (0.14 | ) |
| Effect      of dilutive securities                                      |   |              |     |   |                |   |      |                 |   |   |   |   |
| Stock      options                                                      |   |              | -        |   |                |   | -         |                 |   |   |   |   |
| Dilutive      loss per share                                            |   |              |     |   |                |   |      |                 |   |   |   |   |
| Loss available to      common shareholdersplus assumed      conversions |   | $                 | (370,752 | )      |                |   | 2,668,205 |                 |   | $ | (0.14 | ) |

----

| 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 |   | $                                                        | -      |   |                                                   | $      | 12,521,238 |                                                     |   | $ | - |   |
|                                |   |                                                     |   |   |                                                   |   |       |                                                     |   |   |   |   |
| Total                               |   | $                                                        | -      |   |                                                   | $      | 12,521,238 |                                                     |   | $ | - |   |

|                                |   | Quoted      market price in active markets(Level      1) |   |   | Significant      other observable inputs(Level      2) |   |      | Significant      unobservable inputs (Level      3) |   |
|-------------------------------------|--------|----------------------------------------------------------|--------|--------|--------------------------------------------------------|--------|-----------|----------------------------------------------------------|--------|
|                                |   |                                                     |   |   |                                                   |   |      |                                                     |   |
| Available      for sale investments |   | $                                                        | -      |   |                                                   | $      | 5,031,414 |                                                     |   | $ | - |   |
|                                |   |                                                     |   |   |                                                   |   |      |                                                     |   |   |   |   |
| 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                           |   | $                                                        | -      |   |                                                   | $      | 6,249,354 |                                                     |   | $ | - |   |
| Real      estate acquired through foreclosure |   |                                                     |   |   |                                                   |   | 3,135,185 |                                                     |   |   |   |   |
|                                          |   |                                                     |   |   |                                                   |   |      |                                                     |   |   |   |   |
| Total                                         |   | $                                                        | -      |   |                                                   | $      | 9,384,539 |                                                     |   | $ | - |   |
|                                          |   |                                                     |   |   |                                                   |   |      |                                                     |   |   |   |   |
|                                          |   |                                                     |   |   |                                                   |   |      |                                                     |   |   |   |   |

|                                          |   | Quoted      market price in active markets(Level      1) |   |   | Significant      other observable inputs(Level      2) |   |      | Significant      unobservable inputs (Level      3) |   |
|-----------------------------------------------|--------|----------------------------------------------------------|--------|--------|--------------------------------------------------------|--------|-----------|----------------------------------------------------------|--------|
|                                          |   |                                                     |   |   |                                                   |   |      |                                                     |   |
| Impaired      loans                           |   | $                                                        | -      |   |                                                   | $      | 6,066,187 |                                                     |   | $ | - |   |
| Real      estate acquired through foreclosure |   |                                                     |   |   |                                                   |   | 2,050,272 |                                                     |   |   |   |   |
|                                          |   |                                                     |   |   |                                                   |   |      |                                                     |   |   |   |   |
| Total                                         |   | $                                                        | -      |   |                                                   | $      | 8,116,459 |                                                     |   | $ | - |   |

----

|                        |   | March      31, 2010 |        |   | December      31, 2009 |   |
|-----------------------------|--------|---------------------|-------------|--------|------------------------|--------|
|                        |   | Carrying            |        |   | Estimated              |   |   | Carrying |   |   | Estimated |   |
|                        |   | Amount              |        |   | Fair      Value        |   |   | Amount |   |   | Fair      Value |   |
|                        |   |                |        |   |                   |   |   |   |   |   |   |   |
| Financial      Assets:      |   |                |        |   |                   |   |   |   |   |   |   |   |
| Loans receivable,      net  |   | $                   | 133,560,000 |   |                   | $      | 137,565,923 |   |   | $ | 137,205,000 |   |   | $ | 135,119,093 |   |
|                        |   |                |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Financial      Liabilities: |   |                |        |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Total      deposits         |   | $                   | 135,462,000 |   |                   | $      | 143,669,792 |   |   | $ | 139,206,000 |   |   | $ | 140,169,999 |   |
| FHLB      advances          |   | $                   | 8,000,000   |   |                   | $      | 8,248,000 |   |   | $ | 8,000,000 |   |   | $ | 8,004,000 |   |

|                            |   |          |       |   | Gross      Unrealized |   |    |   |   |
|---------------------------------|--------|---------------|------------|--------|-----------------------|--------|---------|--------|--------|
|                            |   | AmortizedCost |       |   | Gains                 |   |    | Losses |   |   | EstimatedFair      Value |   |
| March      31, 2010             |   |          |       |   |                  |   |    |   |   |   |   |   |
| Mortgage-backed      securities |   | $             | 10,348,629 |   |                  | $      | 150,052 |   |   | $ | 15,175 |   |   | $ | 10,483,506 |   |
| Agencies                        |   |          | 1,041,282  |   |                  |   | 3,849   |   |   |   | - |   |   |   | 1,045,132 |   |
| Municipals                      |   |          | 1,002,471  |   |                  |   | -       |   |   |   | 9,871 |   |   |   | 992,600 |   |
|  Total                     |   | $             | 12,392,382 |   |                  | $      | 153,901 |   |   | $ | 25,046 |   |   | $ | 12,521,238 |   |
|                            |   |          |       |   |                  |   |    |   |   |   |   |   |   |   |   |   |
| 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                   |   | $                            | 892,666    |   |   | $ | 922,971 |   |
| Due      after one year but within five years  |   |                         | 1,446,288  |   |   |   | 1,520,688 |   |
| Due      after five years but within ten years |   |                         | 7,725,461  |   |   |   | 7,759,465 |   |
| Due      after ten years                       |   |                         | 2,327,969  |   |   |   | 2,318,113 |   |
|                                           |   | $                            | 12,392,384 |   |   | $ | 12,521,238 |   |

|                            |   | Less      thantwelve      months |      |   | Twelve      monthsor      more |   |   | Total           |   |
|---------------------------------|--------|----------------------------------|-----------|--------|--------------------------------|--------|--------|-----------------|--------|
|                            |   | Fair      Value                  |      |   | Unrealized      losses         |   |   | Fair      Value |   |   | Unrealized      losses |   |   | Fair      Value |   |   | Unrealized      losses |   |
| March      31, 2010             |   |                             |      |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed      securities |   | $                                | 2,243,082 |   |                           | $      | 15,175 |            |   | $ | - |   |   | $ | - |   |   | $ | 2,243,082 |   |   | $ | 15,175 |   |
| Agencies                        |   |                             | -         |   |                           |   | -      |            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Municipals                      |   |                             | 992,600   |   |                           |   | 9,871  |            |   |   | - |   |   |   | - |   |   |   | 992,600 |   |   |   | 9,871 |   |
|                            |   |                             |      |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                           |   | $                                | 2,269,387 |   |                           | $      | 25,046 |            |   | $ | - |   |   | $ | - |   |   | $ | 2,269,387 |   |   | $ | 25,046 |   |
|                            |   |                             |      |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                            |   | 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 |   |
|                            |   |                             |      |   |                           |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

|                                  |   | March      31,2010 |        |   | December      31,2009 |   |
|---------------------------------------|--------|--------------------|-------------|--------|-----------------------|--------|
| Real      estate – construction |   | $                  | 25,862,000  |   |                  | $      | 29,444,000 |   |
| Real      estate – mortgage     |   |               | 95,127,000  |   |                  |   | 94,439,000 |   |
| Commercial      and industrial        |   |               | 15,242,000  |   |                  |   | 15,220,000 |   |
| Consumer      and other               |   |               | 1,409,105   |   |                  |   | 871,913 |   |
|  Total      gross loans          |   | $                  | 137,640,105 |   |                  | $      | 139,974,913 |   |

----

|                                                      |   | March      31,2010 |        |   | March      31,2009 |   |
|-----------------------------------------------------------|--------|--------------------|-------------|--------|--------------------|--------|
| Balance,      January 1                                   |   | $                  | 2,408,990   |   |               | $      | 1,935,702 |   |
| Provision      for loan losses for the period             |   |               | 36,528      |   |               |   | 341,314 |   |
| Net      loans (charged-off) recovered during the period  |   |               | 75,494      |   |               |   | (534,651 | ) |
|  Balance,  March      31,                  |   | $                  | 2,521,012   |   |               | $      | 1,742,365 |   |
|  Gross      loans outstanding, March 31,             |   | $                  | 137,640,105 |   |               | $      | 138,240,108 |   |
|  Allowance      for loan losses to loans outstanding |   |               | 1.83        | %      |               |   | 1.26 | % |

|                                          |   | March      31,2010 |        |   | December      31,2009 |   |
|-----------------------------------------------|--------|--------------------|-------------|--------|-----------------------|--------|
| Noninterest-bearing      transaction accounts |   | $                  | 6,248,528   |   |                  | $      | 5,626,494 |   |
| Interest-bearing      transaction accounts    |   |               | 5,452,464   |   |                  |   | 4,759,708 |   |
| Savings      and money market                 |   |               | 28,205,770  |   |                  |   | 24,279,357 |   |
| Time      deposits $100,000 and over          |   |               | 7,460,145   |   |                  |   | 6,934,915 |   |
| Other      time deposits                      |   |               | 92,803,092  |   |                  |   | 102,069,318 |   |
| Total      deposits                           |   | $                  | 140,169,999 |   |                  | $      | 143,669,792 |   |

----

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

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

----

| Shareholders'      equity                                                 |   | $      | 24,996,393  |   |
|---------------------------------------------------------------------------|--------|--------|-------------|--------|
| Plus      – unrealized (gain) loss on available-for-sale securities |   |   | (78,666     | )      |
|  Tier      1 capital                                                 |   | $      | 24,917,727  |   |
|  Plus - allowance for      loan losses(1)                            |   |   | 1,707,000   |   |
|  Total      capital                                                  |   | $      | 26,624,727  |   |
|  Risk-weighted      assets                                           |   | $      | 136,583,000 |   |
| Risk-based      capital ratios:                                           |   |   |        |   |
| Tier 1 capital (to      risk-weighted assets)                             |   |   | 18.24       | %      |
| Total capital (to      risk-weighted assets)                              |   |   | 19.49       | %      |
| Leverage      ratio                                                       |   |   | 14.16       | %      |

|                                           |   | WithinOneMonth |    |   | After      OneThroughThreeMonths |   |    | After      ThreeThroughTwelveMonths |   |   | GreaterThanOne      Year |   |   |   Total |      |
|------------------------------------------------|--------|----------------|---------|--------|----------------------------------|--------|---------|-------------------------------------|--------|--------|--------------------------|--------|--------|-------------------|-----------|
|  Unused      commitments to extend credit |   | $              | 265,006 |   |                             | $      | 682,805 |                                |   | $      | 3,483,722                |   |   | $                 | 5,321,042 |   |   | $ | 9,752,575 |   |
| Standby      letters of credit                 |   |           | 179,695 |   |                             |   | -       |                                |   |   | -                        |   |   |              | -         |   |   |   | 179,695 |   |
|  Totals                                   |   | $              | 444,701 |   |                             | $      | 682,805 |                                |   | $      | 3,483,722                |   |   | $                 | 5,321,042 |   |   | $ | 9,932,270 |   |

----

| (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      March 31, 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 |