----

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| þ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|-----------------------------------------------------------------------------------|

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

| Delaware                                                       |   | 02-0774841                        |
|----------------------------------------------------------------|--------|-----------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (IRS Employer Identification No.) |

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

----

----

----

|                                                                                                      |                                                                                                               |   |   | PAGE   |   |
|-----------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                                                      |                                                                                                               |   |   |   |   |
| INTRODUCTORY NOTE.  CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND RISK FACTORS |                                                                                                               |   | 3      |   |
|                                                                                                      |                                                                                                               |   |   |   |
| PART I - FINANCIAL INFORMATION                                                                            |                                                                                                               |   | 4      |   |
|                                                                                                      |                                                                                                               |   |   |   |
| ITEM 1.                                                                                                   | FINANCIAL STATEMENTS (unaudited)                                                                                   |   |   | 4      |   |
|                                                                                                      | Balance Sheets as of June 30, 2012 and December 31, 2011                                                           |   |   | 4      |   |
|                                                                                                      | Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2012 and 2011 |   |   | 5      |   |
|                                                                                                      | Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2012 and 2011                |   |   | 6      |   |
|                                                                                                      | Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011                                           |   |   | 7      |   |
|                                                                                                      | Unaudited Condensed Notes to Consolidated Financial Statements                                                     |   |   | 9      |   |
| ITEM 2.                                                                                                   | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |   |   | 34     |   |
| ITEM 3.                                                                                                   | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                         |   |   | 50     |   |
| ITEM 4.                                                                                                   | CONTROLS AND PROCEDURES                                                                                            |   |   | 50     |   |
|                                                                                                      |                                                                                                               |   |   |   |
| PART II - OTHER INFORMATION                                                                               |                                                                                                               |   | 51     |   |
|                                                                                                      |                                                                                                               |   |   |   |
| ITEM 1.                                                                                                   | LEGAL PROCEEDINGS                                                                                                  |   |   | 51     |   |
| ITEM 1A.                                                                                                  | RISK FACTORS                                                                                                       |   |   | 51     |   |
| ITEM 2.                                                                                                   | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                        |   |   | 51     |   |
| ITEM 3.                                                                                                   | DEFAULTS UPON SENIOR SECURITIES                                                                                    |   |   | 51     |   |
| ITEM 4.                                                                                                   | MINE SAFETY DISCLOSURE                                                                                             |   |   | 51     |   |
| ITEM 5.                                                                                                   | OTHER INFORMATION                                                                                                  |   |   | 51     |   |
| ITEM 6.                                                                                                   | EXHIBITS                                                                                                           |   |   | 51     |   |
| SIGNATURES                                                                                                |                                                                                                               |   | 52     |   |
| EXHIBIT INDEX                                                                                             |                                                                                                               |   | 53     |   |

----

| ● | management of Solera National Bank may be unable to limit credit risk associated with our loan portfolio, which would affect the Company’s profitability; |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● | general economic conditions in the U.S. and within our market area may be less favorable than expected, causing an adverse impact on our financial performance; |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● | the Company is subject to extensive regulatory oversight, which could restrain our growth and profitability; |
|---------|--------------------------------------------------------------------------------------------------------------|

| ● | interest rate volatility could adversely impact our business; |
|---------|---------------------------------------------------------------|

| ● | the Company may not be able to raise additional capital on terms favorable to us; |
|---------|-----------------------------------------------------------------------------------|

| ● | the Company continues to hold other real estate owned which may be vulnerable to declines in real estate values; |
|---------|------------------------------------------------------------------------------------------------------------------|

| ● | the recently proposed Basel capital standards may negatively impact our capital ratios, profitability and ability to lend; |
|---------|----------------------------------------------------------------------------------------------------------------------------|

| ● | the liquidity of our common stock is affected by its limited trading market; and |
|---------|----------------------------------------------------------------------------------|

| ● | the Company faces competition from a variety of competitors. |
|---------|--------------------------------------------------------------|

----

| ($ in thousands, except share data)                                                                 |   | June 30, |    |   | December 31, |   |
|-----------------------------------------------------------------------------------------------------|--------|----------|---------|--------|-------------------|--------|
|                                                                                                |   | 2012     |    |   | 2011              |   |
| ASSETS                                                                                              |
|                                                                                                |   |     |    |   |              |   |
| Cash and cash equivalents                                                                           |   | $        | 849     |   |              | $      | 1,800 |   |
| Interest-bearing deposits with banks                                                                |   |     | 357     |   |              |   | 1,357 |   |
| Investment securities, available-for-sale                                                           |   |     | 89,141  |   |              |   | 83,195 |   |
| Gross loans                                                                                         |   |     | 58,537  |   |              |   | 55,645 |   |
| Net deferred expenses/(fees)                                                                        |   |     | 94      |   |              |   | (77 | ) |
| Allowance for loan and lease losses                                                                 |   |     | (1,009  | )      |              |   | (1,067 | ) |
| Net loans                                                                                           |   |     | 57,622  |   |              |   | 54,501 |   |
| Federal Home Loan Bank (FHLB) and Federal Reserve Bank stocks                                       |   |     | 1,164   |   |              |   | 1,134 |   |
| Bank-owned life insurance                                                                           |   |     | 2,027   |   |              |   | - |   |
| Other real estate owned                                                                             |   |     | 1,776   |   |              |   | 1,776 |   |
| Premises and equipment, net                                                                         |   |     | 550     |   |              |   | 599 |   |
| Accrued interest receivable                                                                         |   |     | 718     |   |              |   | 584 |   |
| Other assets                                                                                        |   |     | 348     |   |              |   | 420 |   |
| Total assets                                                                                        |   | $        | 154,552 |   |              | $      | 145,366 |   |
|                                                                                                |   |     |    |   |              |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                          |
|                                                                                                |   |     |    |   |              |   |   |   |
| Deposits                                                                                            |   |     |    |   |              |   |   |   |
| Noninterest-bearing demand                                                                          |   | $        | 3,312   |   |              | $      | 3,550 |   |
| Interest-bearing demand                                                                             |   |     | 8,950   |   |              |   | 9,355 |   |
| Savings and money market                                                                            |   |     | 56,740  |   |              |   | 58,854 |   |
| Time deposits                                                                                       |   |     | 56,199  |   |              |   | 47,225 |   |
| Total deposits                                                                                      |   |     | 125,201 |   |              |   | 118,984 |   |
|                                                                                                |   |     |    |   |              |   |   |   |
| Securities sold under agreements to repurchase and federal funds purchased                          |   |     | 814     |   |              |   | 253 |   |
| Accrued interest payable                                                                            |   |     | 63      |   |              |   | 56 |   |
| Accounts payable and other liabilities                                                              |   |     | 336     |   |              |   | 534 |   |
| FHLB advances                                                                                       |   |     | 8,500   |   |              |   | 6,500 |   |
| Total liabilities                                                                                   |   | $        | 134,914 |   |              | $      | 126,327 |   |
|                                                                                                |   |     |    |   |              |   |   |   |
| COMMITMENTS AND CONTINGENCIES (see Notes 10 and 12)                                                 |   |     |    |   |              |   |   |   |
|                                                                                                |   |     |    |   |              |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                          |   |     |    |   |              |   |   |   |
| Common stock, $0.01 par value; 5,000,000 shares authorized; 2,553,671 shares issued and outstanding |   | $        | 26      |   |              | $      | 26 |   |
| Additional paid-in capital                                                                          |   |     | 26,172  |   |              |   | 26,146 |   |
| Accumulated deficit                                                                                 |   |     | (7,546  | )      |              |   | (7,640 | ) |
| Accumulated other comprehensive income                                                              |   |     | 986     |   |              |   | 507 |   |
| Total stockholders’ equity                                                                    |   | $        | 19,638  |   |              | $      | 19,039 |   |
| Total liabilities and stockholders’ equity                                                    |   | $        | 154,552 |   |              | $      | 145,366 |   |

----

| ($ in thousands, except share data)                                           |   | For the Three MonthsEnded June 30, |      |   | For the Six MonthsEnded June 30, |   |
|-------------------------------------------------------------------------------|--------|------------------------------------|-----------|--------|-------------------------------------------------|--------|
|                                                                          |   | 2012                               |      |   | 2011                                            |   |   | 2012 |   |   | 2011 |   |
| INTEREST INCOME:                                                              |   |                               |      |   |                                            |   |   |   |   |   |   |   |
| Interest and fees on loans                                                    |   | $                                  | 787       |   |                                            | $      | 847 |   |   | $ | 1,575 |   |   | $ | 1,671 |   |
| Interest on investment securities                                             |   |                               | 540       |   |                                            |   | 646 |   |   |   | 1,043 |   |   |   | 1,319 |   |
| Dividends on FHLB and FRB stocks                                              |   |                               | 10        |   |                                            |   | 8 |   |   |   | 18 |   |   |   | 17 |   |
| Other interest income                                                         |   |                               | 3         |   |                                            |   | 2 |   |   |   | 5 |   |   |   | 3 |   |
| Total interest income                                                         |   |                               | 1,340     |   |                                            |   | 1,503 |   |   |   | 2,641 |   |   |   | 3,010 |   |
| INTEREST EXPENSE:                                                             |   |                               |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                      |   |                               | 279       |   |                                            |   | 354 |   |   |   | 579 |   |   |   | 723 |   |
| FHLB advances                                                                 |   |                               | 33        |   |                                            |   | 49 |   |   |   | 64 |   |   |   | 106 |   |
| Other borrowings                                                              |   |                               | 2         |   |                                            |   | 3 |   |   |   | 3 |   |   |   | 7 |   |
| Total interest expense                                                        |   |                               | 314       |   |                                            |   | 406 |   |   |   | 646 |   |   |   | 836 |   |
| NET INTEREST INCOME BEFORE PROVISION                                          |   |                               | 1,026     |   |                                            |   | 1,097 |   |   |   | 1,995 |   |   |   | 2,174 |   |
| Provision for loan and lease losses                                           |   |                               | -         |   |                                            |   | 120 |   |   |   | - |   |   |   | 120 |   |
| NET INTEREST INCOME AFTER PROVISION                                           |   |                               | 1,026     |   |                                            |   | 977 |   |   |   | 1,995 |   |   |   | 2,054 |   |
| NONINTEREST INCOME:                                                           |   |                               |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Service charges and fees                                                      |   |                               | 19        |   |                                            |   | 18 |   |   |   | 34 |   |   |   | 35 |   |
| Other income                                                                  |   |                               | 20        |   |                                            |   | 1 |   |   |   | 29 |   |   |   | 2 |   |
| Gain on loans sold                                                            |   |                               | 25        |   |                                            |   | - |   |   |   | 25 |   |   |   | - |   |
| Gain on sale of available-for-sale securities                                 |   |                               | 166       |   |                                            |   | 225 |   |   |   | 280 |   |   |   | 223 |   |
| Total noninterest income                                                      |   |                               | 230       |   |                                            |   | 244 |   |   |   | 368 |   |   |   | 260 |   |
| NONINTEREST EXPENSE:                                                          |   |                               |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
|   Salaries and employee benefits                                    |   |                               | 587       |   |                                            |   | 612 |   |   |   | 1,154 |   |   |   | 1,317 |   |
|   Occupancy                                                         |   |                               | 120       |   |                                            |   | 127 |   |   |   | 247 |   |   |   | 260 |   |
|   Professional fees                                                 |   |                               | 78        |   |                                            |   | 99 |   |   |   | 222 |   |   |   | 225 |   |
|   Other general and administrative                                  |   |                               | 338       |   |                                            |   | 283 |   |   |   | 646 |   |   |   | 595 |   |
| Total noninterest expense                                                     |   |                               | 1,123     |   |                                            |   | 1,121 |   |   |   | 2,269 |   |   |   | 2,397 |   |
| INCOME (LOSS) BEFORE INCOME TAXES                                             |   |                               | 133       |   |                                            |   | 100 |   |   |   | 94 |   |   |   | (83 | ) |
| Provision for income taxes                                                    |   |                               | -         |   |                                            |   | - |   |   |   | - |   |   |   | - |   |
| NET INCOME (LOSS)                                                             |   | $                                  | 133       |   |                                            | $      | 100 |   |   | $ | 94 |   |   | $ | (83 | ) |
|                                                                          |   |                               |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| OTHER COMPREHENSIVE INCOME, NET OF TAX:                                       |   |                               |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Change in net unrealized gains on securities                                  |   |                               | 209       |   |                                            |   | 1,023 |   |   |   | 759 |   |   |   | 1,096 |   |
| Less: Reclassification adjustment for net gains included in net income (loss) |   |                               | (166      | )      |                                            |   | (225 | )  |   |   | (280 | )  |   |   | (223 | )  |
| OTHER COMPREHENSIVE INCOME                                                    |   | $                                  | 43        |   |                                            | $      | 798 |   |   | $ | 479 |   |   | $ | 873 |   |
|                                                                          |   |                               |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE INCOME                                                          |   | $                                  | 176       |   |                                            | $      | 898 |   |   | $ | 573 |   |   | $ | 790 |   |
|                                                                          |   |                               |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS                            |   | $                                  | 133       |   |                                            | $      | 100 |   |   | $ | 94 |   |   | $ | (83 | ) |
|                                                                          |   |                               |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| INCOME (LOSS) PER COMMON SHARE                                                |   |                               |      |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                         |   | $                                  | 0.05      |   |                                            | $      | 0.04 |   |   | $ | 0.04 |   |   | $ | (0.03 | ) |
| Weighted-average common shares outstanding - basic                            |   |                               | 2,553,671 |   |                                            |   | 2,553,671 |   |   |   | 2,553,671 |   |   |   | 2,553,671 |   |
| Diluted                                                                       |   | $                                  | 0.05      |   |                                            | $      | 0.04 |   |   | $ | 0.04 |   |   | $ | (0.03 | ) |
| Weighted-average common shares outstanding - diluted                          |   |                               | 2,558,283 |   |                                            |   | 2,553,671 |   |   |   | 2,558,283 |   |   |   | 2,553,671 |   |

----

| ($ in thousands, except share data)          |   | SharesOutstanding |      |   | Common Stock |   |   | AdditionalPaid-in Capital |   |   | Accumulated Deficit |   |   | Accumulated OtherComprehensiveIncome |   |   | Total  |   |
|----------------------------------------------|--------|-------------------|-----------|--------|--------------|--------|--------|--------------------------------|--------|--------|---------------------|--------|--------|--------------------------------------|--------|--------|--------|--------|
|                                         |   |              |      |   |         |   |   |                           |   |   |                |   |   |                                 |   |   |   |   |
| Balance at December 31, 2010                 |   |              | 2,553,671 |   |         | $      | 26     |                           |   | $      | 25,980              |   |   | $                                    | (7,882 | )      |   | $      | 201 |   |   | $ | 18,325 |   |
| Stock-based compensation                     |   |              | -         |   |         |   | -      |                           |   |   | 115                 |   |   |                                 | -      |   |   |   | - |   |   |   | 115 |   |
| Comprehensive income:                        |   |              |      |   |         |   |   |                           |   |   |                |   |   |                                 |   |   |   |   |   |   |   |   |   |   |
|    Net loss                   |   |              | -         |   |         |   | -      |                           |   |   | -                   |   |   |                                 | (83    | )      |   |   | - |   |   |   | (83 | ) |
|    Other comprehensive income |   |              | -         |   |         |   | -      |                           |   |   | -                   |   |   |                                 | -      |   |   |   | 873 |   |   |   | 873 |   |
| Total comprehensive income                   |   |              |      |   |         |   |   |                           |   |   |                |   |   |                                 |   |   |   |   |   |   |   |   | 790 |   |
| Balance at June 30, 2011                     |   |              | 2,553,671 |   |         | $      | 26     |                           |   | $      | 26,095              |   |   | $                                    | (7,965 | )      |   | $      | 1,074 |   |   | $ | 19,230 |   |

| Balance at December 31, 2011                 |   |   | 2,553,671 |   |   | $      | 26     |   |   | $      | 26,146 |   |   | $      | (7,640 | )      |   | $      | 507    |   |   | $      | 19,039 |   |
|----------------------------------------------|--------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Stock-based compensation                     |   |   | -         |   |   |   | -      |   |   |   | 26     |   |   |   | -      |   |   |   | -      |   |   |   | 26     |   |
| Comprehensive income:                        |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Net income                 |   |   | -         |   |   |   | -      |   |   |   | -      |   |   |   | 94     |   |   |   | -      |   |   |   | 94     |   |
|    Other comprehensive income |   |   | -         |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | 479    |   |   |   | 479    |   |
| Total comprehensive income                   |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 573    |   |
| Balance at June 30, 2012                     |   |   | 2,553,671 |   |   | $      | 26     |   |   | $      | 26,172 |   |   | $      | (7,546 | )      |   | $      | 986    |   |   | $      | 19,638 |   |

----

|                                                                                       |   | For the Six Months |    |
|--------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|
|                                                                                       |   | Ended June 30,               |    |
| ($ in thousands)                                                                           |   | 2012                              |    |   | 2011 |   |
|                                                                                       |   |                              |    |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                       |   |                              |    |   |   |   |
| Net income (loss)                                                                          |   | $                                 | 94      |   |   | $ | (83 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities:   |   |                              |    |   |   |   |   |   |
|    Depreciation and amortization                                            |   |                              | 61      |   |   |   | 76 |   |
|    Provision for loan and lease losses                                      |   |                              | -       |   |   |   | 120 |   |
|    Net accretion of deferred loan fees/expenses                             |   |                              | (6      | ) |   |   | (12 | ) |
|    Net amortization of premiums on investment securities                    |   |                              | 728     |   |   |   | 308 |   |
|    Gain on sale of available-for-sale investment securities                 |   |                              | (280    | ) |   |   | (223 | ) |
|    Federal Home Loan Bank stock dividend                                    |   |                              | (2      | ) |   |   | (2 | ) |
|    Recognition of stock-based compensation on stock options                 |   |                              | 26      |   |   |   | 115 |   |
|    Increase in bank-owned life insurance cash surrender value               |   |                              | (27     | ) |   |   | - |   |
| Changes in operating assets and liabilities:                                               |   |                              |    |   |   |   |   |   |
|    Accrued interest receivable                                              |   |                              | (134    | ) |   |   | 116 |   |
|    Other assets                                                             |   |                              | 72      |   |   |   | 41 |   |
|    Prepaid FDIC premiums                                                    |   |                              | -       |   |   |   | 111 |   |
|    Accrued interest payable                                                 |   |                              | 7       |   |   |   | (27 | ) |
|    Accounts payable and other liabilities                                   |   |                              | (174    | ) |   |   | - |   |
|    Deferred loan fees/expenses, net                                         |   |                              | (165    | ) |   |   | (8 | ) |
| Net cash provided by operating activities                                                  |   | $                                 | 200     |   |   | $ | 532 |   |
|                                                                                       |   |                              |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                       |   |                              |    |   |   |   |   |   |
| Purchase of investment securities, available-for-sale                                      |   | $                                 | (32,369 | ) |   | $ | (27,307 | ) |
| Proceeds from sales of investment securities, available-for-sale                           |   |                              | 19,444  |   |   |   | 25,058 |   |
| Proceeds from maturities/calls/pay downs of investment securities, available-for-sale      |   |                              | 7,010   |   |   |   | 5,060 |   |
| Loan originations funded, net                                                              |   |                              | (2,950  | ) |   |   | (58 | ) |
| (Purchase) / redemption of Federal Reserve Bank stock                                      |   |                              | (28     | ) |   |   | 53 |   |
| Purchase of bank-owned life insurance                                                      |   |                              | (2,000  | ) |   |   | - |   |
| Purchase of premises and equipment                                                         |   |                              | (12     | ) |   |   | (2 | ) |
| Proceeds from sale of foreclosed properties                                                |   |                              | -       |   |   |   | 1,838 |   |
| Purchase of interest-bearing deposits with banks                                           |   |                              | -       |   |   |   | (1,000 | ) |
| Maturity of interest-bearing deposits with banks                                           |   |                              | 1,000   |   |   |   | 160 |   |
| Net cash (used in) / provided by investing activities                                      |   | $                                 | (9,905  | ) |   | $ | 3,802 |   |
|                                                                                       |   |                              |    |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                       |   |                              |    |   |   |   |   |   |
| Net increase in deposits                                                                   |   | $                                 | 6,217   |   |   | $ | 2,538 |   |
| Net increase in securities sold under agreements to repurchase and federal funds purchased |   |                              | 561     |   |   |   | 137 |   |
| Increase / (decrease) in FHLB advances                                                     |   |                              | 2,000   |   |   |   | (3,500 | ) |
| Principal payments on capital lease                                                        |   |                              | (24     | ) |   |   | (22 | ) |
| Net cash provided by / (used in) financing activities                                      |   | $                                 | 8,754   |   |   | $ | (847 | ) |
|                                                                                       |   |                              |    |   |   |   |   |   |
| Net (decrease) / increase in cash and cash equivalents                                     |   | $                                 | (951    | ) |   | $ | 3,487 |   |
|                                                                                       |   |                              |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS                                                                  |   |                              |    |   |   |   |   |   |
| Beginning of period                                                                        |   |                              | 1,800   |   |   |   | 936 |   |
| End of period                                                                              |   | $                                 | 849     |   |   | $ | 4,423 |   |
| (continued)                                                                                |   |                              |    |   |   |   |   |   |

----

|                                                         |   | For the Six Months Ended June 30, |   |
|--------------------------------------------------------------|--------|-----------------------------------|--------|
| ($ in thousands)                                             |   | 2012                              |   |   | 2011 |   |
|                                                         |   |                              |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION             |   |                              |   |   |   |   |
| Cash paid during the period for:                             |   |                              |   |   |   |   |
| Interest                                                     |   | $                                 | 639    |   |   | $ | 863 |   |
| Income taxes paid                                            |   | $                                 | -      |   |   | $ | - |   |
| Non-cash investing transactions:                             |   |                              |   |   |   |   |   |   |
| Unrealized gain on investment securities, available-for-sale |   | $                                 | 479    |   |   | $ | 873 |   |

----

----

----

----

| Level 1 – | inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Level 2 – | inputs are other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or model-based valuation techniques for which all significant assumptions are observable in the market. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Level 3 – | valuation is generated from model-based techniques that use at least one significant assumption not observable in the market.  These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ($ in thousands)                                                  | June 30, 2012 |   |
|-------------------------------------------------------------------|---------------|--------|
|                                                              |          |   | Gross |   | Gross |   |   |   |
|                                                              | Amortized     |   | Unrealized |   | Unrealized |   | Estimated |   |
|                                                              | Cost          |   | Gains |   | Losses |   | Fair Value |   |
| Securities available-for-sale:                                    |          |   |   |   |   |   |   |   |   |   |   |   |
| Corporate                                                         |          | $      | 16,207 |   |   | $ | 327 |   |   | $ | (255 | ) |   | $ | 16,279 |   |
| State and municipal                                               |          |   | 16,143 |   |   |   | 296 |   |   |   | (32 | ) |   |   | 16,407 |   |
| Residential agency mortgage-backed securities (“MBS”) |          |   | 55,805 |   |   |   | 701 |   |   |   | (51 | ) |   |   | 56,455 |   |
| Total securities available-for-sale                               |          | $      | 88,155 |   |   | $ | 1,324 |   |   | $ | (338 | ) |   | $ | 89,141 |   |

| ($ in thousands)                    | December 31, 2011 |   |
|-------------------------------------|-------------------|--------|
|                                |              |   | Gross |   | Gross |   |   |   |
|                                | Amortized         |   | Unrealized |   | Unrealized |   | Estimated |   |
|                                | Cost              |   | Gains |   | Losses |   | Fair Value |   |
| Securities available-for-sale:      |              |   |   |   |   |   |   |   |   |   |   |   |
| Corporate                           |              | $      | 15,117 |   |   | $ | 161 |   |   | $ | (460 | ) |   | $ | 14,818 |   |
| State and municipal                 |              |   | 3,691 |   |   |   | 198 |   |   |   | (4 | ) |   |   | 3,885 |   |
| Residential agency MBS              |              |   | 63,880 |   |   |   | 747 |   |   |   | (135 | ) |   |   | 64,492 |   |
| Total securities available-for-sale |              | $      | 82,688 |   |   | $ | 1,106 |   |   | $ | (599 | ) |   | $ | 83,195 |   |

----

| ($ in thousands)                       |   | June 30, 2012 |   |   | December 31, 2011   |   |
|----------------------------------------|--------|---------------|--------|--------|---------------------|--------|
|                                   |   |          |   |   |                |   |   |   |   |
| Securities available-for-sale:         |   | AmortizedCost |   |   | Estimated FairValue |   |   | AmortizedCost |   |   | Estimated FairValue |   |
| Due within one year                    |   | $             | 499    |   |                | $      | 519 |   |   | $ | - |   |   | $ | - |   |
| Due after one year through five years  |   |          | 6,887  |   |                |   | 7,017 |   |   |   | 8,540 |   |   |   | 8,583 |   |
| Due after five years through ten years |   |          | 23,661 |   |                |   | 23,889 |   |   |   | 13,799 |   |   |   | 13,720 |   |
| Due after ten years                    |   |          | 57,108 |   |                |   | 57,716 |   |   |   | 60,349 |   |   |   | 60,892 |   |
| Total securities available-for-sale    |   | $             | 88,155 |   |                | $      | 89,141 |   |   | $ | 82,688 |   |   | $ | 83,195 |   |

|                       | June 30, 2012        |   |
|----------------------------|----------------------|--------|
| ($ in thousands)           | Less than 12 months  |   |   | 12 months or more |   |   | Total |   |
| Description of securities: | Estimated Fair Value |   | Unrealized Losses |   |   | # of Securities |   |   | Estimated Fair Value |   | Unrealized Losses |   |   | # of Securities |   |   | Estimated Fair Value |   | Unrealized Losses |   |   | # of Securities |   |
| Corporate                  |                 | $      | 2,547 |   |   | $ | (96 | ) |   |   | 5 |   |   | $ | 4,341 |   |   | $ | (159 | ) |   |   | 7 |   |   | $ | 6,888 |   |   | $ | (255 | ) |   |   | 12 |   |
| State and municipal        |                 |   | 3,951 |   |   |   | (32 | ) |   |   | 8 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,951 |   |   |   | (32 | ) |   |   | 8 |   |
| Residential agency MBS     |                 |   | 9,488 |   |   |   | (45 | ) |   |   | 11 |   |   |   | 931 |   |   |   | (6 | ) |   |   | 1 |   |   |   | 10,419 |   |   |   | (51 | ) |   |   | 12 |   |
| Total temporarily-impaired |                 | $      | 15,986 |   |   | $ | (173 | ) |   |   | 24 |   |   | $ | 5,272 |   |   | $ | (165 | ) |   |   | 8 |   |   | $ | 21,258 |   |   | $ | (338 | ) |   |   | 32 |   |

|                       | December 31, 2011    |   |
|----------------------------|----------------------|--------|
| ($ in thousands)           | Less than 12 months  |   |   | 12 months or more |   |   | Total |   |
| Description of securities: | Estimated Fair Value |   | Unrealized Losses |   |   | # of Securities |   |   | Estimated Fair Value |   | Unrealized Losses |   |   | # of Securities |   |   | Estimated Fair Value |   | Unrealized Losses |   |   | # of Securities |   |
| Corporate                  |                 | $      | 4,033 |   |   | $ | (180 | ) |   |   | 8 |   |   | $ | 4,220 |   |   | $ | (280 | ) |   |   | 7 |   |   | $ | 8,253 |   |   | $ | (460 | ) |   |   | 15 |   |
| State and municipal        |                 |   | 502 |   |   |   | (4 | ) |   |   | 1 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 502 |   |   |   | (4 | ) |   |   | 1 |   |
| Residential agency MBS     |                 |   | 18,266 |   |   |   | (135 | ) |   |   | 20 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 18,266 |   |   |   | (135 | ) |   |   | 20 |   |
| Total temporarily-impaired |                 | $      | 22,801 |   |   | $ | (319 | ) |   |   | 29 |   |   | $ | 4,220 |   |   | $ | (280 | ) |   |   | 7 |   |   | $ | 27,021 |   |   | $ | (599 | ) |   |   | 36 |   |

----

| ($ in thousands) |   | Three Months Ended June 30, |   |   | Six Months Ended June 30, |   |
|------------------|--------|-----------------------------|--------|--------|---------------------------|--------|
|             |   | 2012                        |   |   | 2011                      |   |   | 2012 |   |   | 2011 |   |
|             |   |                        |   |   |                      |   |   |   |   |   |   |   |
| Proceeds         |   | $                           | 11,961 |   |                      | $      | 13,708 |   |   | $ | 19,444 |   |   | $ | 25,058 |   |
| Gross gains      |   | $                           | 166    |   |                      | $      | 206 |   |   | $ | 280 |   |   | $ | 352 |   |
| Gross losses     |   | $                           | -      |   |                      | $      | (48 | ) |   | $ | - |   |   | $ | (129 | ) |

----

| ($ in thousands)                           |   | June 30,2012 |   |   | December 31,2011 |   |
|--------------------------------------------|--------|--------------|--------|--------|------------------|--------|
| Commercial real estate (“CRE”) |   | $            | 38,163 |   |             | $      | 37,862 |   |
| Commercial and industrial                  |   |         | 7,832  |   |             |   | 5,971 |   |
| Residential real estate                    |   |         | 11,083 |   |             |   | 10,460 |   |
| Construction and land development          |   |         | 1,405  |   |             |   | 1,307 |   |
| Consumer                                   |   |         | 54     |   |             |   | 45 |   |
| GROSS LOANS                                |   |         | 58,537 |   |             |   | 55,645 |   |
| Net deferred loan expenses / (fees)        |   |         | 94     |   |             |   | (77 | ) |
| Allowance for loan and lease losses        |   |         | (1,009 | )      |             |   | (1,067 | ) |
| LOANS, NET                                 |   | $            | 57,622 |   |             | $      | 54,501 |   |

----

| ($ in thousands)                    |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|-------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                                |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
|                                |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Balance, beginning of period        |   | $                          | 1,077  |   |                     | $      | 1,175 |   |   | $ | 1,067 |   |   | $ | 1,175 |   |
| Charge-offs                         |   |                       | (85    | )      |                     |   | (11 | ) |   |   | (88 | )  |   |   | (11 | )     |
| Recoveries                          |   |                       | 17     |   |                     |   | - |   |   |   | 30 |   |   |   | - |   |
| Provision for loan and lease losses |   |                       | -      |   |                     |   | 120 |   |   |   | - |   |   |   | 120 |   |
| Balance, end of period              |   | $                          | 1,009  |   |                     | $      | 1,284 |   |   | $ | 1,009 |   |   | $ | 1,284 |   |

| Rollforward of Allowance for Loan and Lease Losses by Portfolio Segment |                                |
|-------------------------------------------------------------------------|-------------------------------------|
| Three Months Ended June 30, 2012                                        |                                |
| ($ in thousands)                                                        | Commercial Real Estate Secured |   | Residential Real Estate Secured |   | Commercial and Industrial |   | Consumer |   | Total |   |
|                                                                    |                                |   |   |   |   |   |   |   |   |   |
| Balance at March 31, 2012                                               |                                | $ | 699 |   |   | $ | 247 |   |   | $ | 130 |   |   | $ | 1 |   |   | $ | 1,077 |   |
| Charge-offs                                                             |                                |   | - |   |   |   | - |   |   |   | (85 | ) |   |   | - |   |   |   | (85 | ) |
| Recoveries                                                              |                                |   | - |   |   |   | 17 |   |   |   | - |   |   |   | - |   |   |   | 17 |   |
| Provision for loan and lease losses                                     |                                |   | (34 | ) |   |   | (17 | ) |   |   | 51 |   |   |   | - |   |   |   | - |   |
| Balance at June 30, 2012                                                |                                | $ | 665 |   |   | $ | 247 |   |   | $ | 96 |   |   | $ | 1 |   |   | $ | 1,009 |   |

----

| Rollforward of Allowance for Loan and Lease Losses by Portfolio Segment |
|-------------------------------------------------------------------------|
| Six Months Ended June 30, 2012                                          |
| ($ in thousands)                                                        | Commercial Real Estate Secured |   | Residential Real Estate Secured |   | Commercial and Industrial |   | Consumer |   | Total |
|                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2011                                            |   | $ | 726 |   |   | $ | 244 |   |   | $ | 97 |   |   | $ | - |   |   | $ | 1,067 |   |
| Charge-offs                                                             |   |   | - |   |   |   |   |   |   |   | (85 | ) |   |   | (3 | ) |   |   | (88 | ) |
| Recoveries                                                              |   |   | - |   |   |   | 30 |   |   |   | - |   |   |   | - |   |   |   | 30 |   |
| Provision for loan and lease losses                                     |   |   | (61 | ) |   |   | (27 | ) |   |   | 84 |   |   |   | 4 |   |   |   | - |   |
| Balance at June 30, 2012                                                |   | $ | 665 |   |   | $ | 247 |   |   | $ | 96 |   |   | $ | 1 |   |   | $ | 1,009 |   |

| Rollforward of Allowance for Loan and Lease Losses by Portfolio Segment |                                |
|-------------------------------------------------------------------------|-------------------------------------|
| Three Months Ended June 30, 2011                                        |                                |
| ($ in thousands)                                                        | Commercial Real Estate Secured |   | Residential Real Estate Secured |   | Commercial and Industrial |   | Consumer |   | Total |   |
|                                                                    |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at March 31, 2011                                               |                                | $ | 581 |   |   | $ | 338 |   |   | $ | 255 |   |   | $ | 1 |   |   | $ | 1,175 |   |
| Charge-offs                                                             |                                |   | (11 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (11 | ) |
| Recoveries                                                              |                                |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Provision for loan and lease losses                                     |                                |   | 153 |   |   |   | 94 |   |   |   | (127 | ) |   |   | - |   |   |   | 120 |   |
| Balance at June 30, 2011                                                |                                | $ | 723 |   |   | $ | 432 |   |   | $ | 128 |   |   | $ | 1 |   |   | $ | 1,284 |   |

| Rollforward of Allowance for Loan and Lease Losses by Portfolio Segment |                                |
|-------------------------------------------------------------------------|-------------------------------------|
| Six Months Ended June 30, 2011                                          |                                |
| ($ in thousands)                                                        | Commercial Real Estate Secured |   | Residential Real Estate Secured |   | Commercial and Industrial |   | Consumer |   | Total |   |
|                                                                    |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2010                                            |                                | $ | 524 |   |   | $ | 314 |   |   | $ | 336 |   |   | $ | 1 |   |   | $ | 1,175 |   |
| Charge-offs                                                             |                                |   | (11 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (11 | ) |
| Recoveries                                                              |                                |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Provision for loan and lease losses                                     |                                |   | 210 |   |   |   | 118 |   |   |   | (208 | ) |   |   | - |   |   |   | 120 |   |
| Balance at June 30, 2011                                                |                                | $ | 723 |   |   | $ | 432 |   |   | $ | 128 |   |   | $ | 1 |   |   | $ | 1,284 |   |

----

| Ending Balances in Loans and Allowance for Loan and Lease Losses by Portfolio Segment |   |
|---------------------------------------------------------------------------------------|--------|
| June 30, 2012                                                                         |   |
| ($ in thousands)                                                                      |   | Commercial Real Estate Secured |   |   | Residential Real Estate Secured |   |   | Commercial and Industrial |   |   | Consumer |   |   | Total |   |
| Loans                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment                                                 |   | $ | 214 |   |   | $ | - |   |   | $ | 93 |   |   | $ | - |   |   | $ | 307 |   |
| Collectively evaluated for impairment                                                 |   |   | 34,501 |   |   |   | 16,313 |   |   |   | 7,362 |   |   |   | 54 |   |   |   | 58,230 |   |
| Total                                                                                 |   | $ | 34,715 |   |   | $ | 16,313 |   |   | $ | 7,455 |   |   | $ | 54 |   |   | $ | 58,537 |   |
| Allowance for loan losses                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment                                                 |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Collectively evaluated for impairment                                                 |   |   | 665 |   |   |   | 247 |   |   |   | 96 |   |   |   | 1 |   |   |   | 1,009 |   |
| Total                                                                                 |   | $ | 665 |   |   | $ | 247 |   |   | $ | 96 |   |   | $ | 1 |   |   | $ | 1,009 |   |

| Ending Balances in Loans and Allowance for Loan and Lease Losses by Portfolio Segment |   |
|---------------------------------------------------------------------------------------|--------|
| December 31, 2011                                                                     |   |
| ($ in thousands)                                                                      |   | Commercial Real Estate Secured |   |   | Residential Real Estate Secured |   |   | Commercial and Industrial |   |   | Consumer |   |   | Total |   |
| Loans                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment                                                 |   | $ | 274 |   |   | $ | - |   |   | $ | 336 |   |   | $ | - |   |   | $ | 610 |   |
| Collectively evaluated for impairment                                                 |   |   | 35,159 |   |   |   | 14,586 |   |   |   | 5,245 |   |   |   | 45 |   |   |   | 55,035 |   |
| Total                                                                                 |   | $ | 35,433 |   |   | $ | 14,586 |   |   | $ | 5,581 |   |   | $ | 45 |   |   | $ | 55,645 |   |
| Allowance for loan losses                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment                                                 |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Collectively evaluated for impairment                                                 |   |   | 726 |   |   |   | 244 |   |   |   | 97 |   |   |   | - |   |   |   | 1,067 |   |
| Total                                                                                 |   | $ | 726 |   |   | $ | 244 |   |   | $ | 97 |   |   | $ | - |   |   | $ | 1,067 |   |

----

| Reconciliation between Portfolio Segment and Class |   |
|----------------------------------------------------|--------|
| June 30, 2012 (Principal Balance)                  |   |
| ($ in thousands)                                   |   | Portfolio Segment |   |
| Class                                              |   | Commercial Real Estate Secured |   |   | Residential Real Estate Secured |   |   | Commercial andIndustrial |   |   | Consumer |   |   | Total |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CRE – owner occupied                         |   | $ | 18,104 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 18,104 |   |
| CRE – non-owner occupied                     |   |   | 15,883 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 15,883 |   |
| Commercial and industrial                          |   |   | - |   |   |   | - |   |   |   | 7,455 |   |   |   | - |   |   |   | 7,455 |   |
| Residential real estate                            |   |   | - |   |   |   | 15,636 |   |   |   | - |   |   |   | - |   |   |   | 15,636 |   |
| Construction and land development                  |   |   | 728 |   |   |   | 677 |   |   |   | - |   |   |   | - |   |   |   | 1,405 |   |
| Consumer                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 54 |   |   |   | 54 |   |
| Total                                              |   | $ | 34,715 |   |   | $ | 16,313 |   |   | $ | 7,455 |   |   | $ | 54 |   |   | $ | 58,537 |   |

| Reconciliation between Portfolio Segment and Class |   |
|----------------------------------------------------|--------|
| December 31, 2011 (Principal Balance)              |   |
| ($ in thousands)                                   |   | Portfolio Segment |   |
| Class                                              |   | Commercial Real Estate Secured |   |   | Residential Real Estate Secured |   |   | Commercial andIndustrial |   |   | Consumer |   |   | Total |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CRE – owner occupied                         |   | $ | 16,337 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 16,337 |   |
| CRE – non-owner occupied                     |   |   | 18,367 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 18,367 |   |
| Commercial and industrial                          |   |   | - |   |   |   | - |   |   |   | 5,581 |   |   |   | - |   |   |   | 5,581 |   |
| Residential real estate                            |   |   | - |   |   |   | 14,008 |   |   |   | - |   |   |   | - |   |   |   | 14,008 |   |
| Construction and land development                  |   |   | 729 |   |   |   | 578 |   |   |   | - |   |   |   | - |   |   |   | 1,307 |   |
| Consumer                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 45 |   |   |   | 45 |   |
| Total                                              |   | $ | 35,433 |   |   | $ | 14,586 |   |   | $ | 5,581 |   |   | $ | 45 |   |   | $ | 55,645 |   |

----

|                                     | Impaired Loans by Class as of June 30, 2012 |                     |
|------------------------------------------|---------------------------------------------|--------------------------|
| ($ in thousands)                         |                                        | Recorded Investment |   |   | Unpaid Principal Balance |   |   | Related Allowance |   |   | Average Recorded Investment YTD |   |   | Interest Income Recognized YTD |   |
| Impaired loans with no related allowance |                                        |                     |   |   |   |   |   |   |   |   |   |   |   |
| CRE – owner occupied               |                                        | $                        | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| CRE – non-owner occupied           |                                        |                     | 214 |   |   |   | 434 |   |   |   | - |   |   |   | 243 |   |   |   | - |   |
| Commercial and industrial                |                                        |                     | 93 |   |   |   | 93 |   |   |   | - |   |   |   | 309 |   |   |   | 2 |   |
| Residential real estate                  |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Construction and land development        |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                 |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                    |                                        | $                        | 307 |   |   | $ | 527 |   |   | $ | - |   |   | $ | 552 |   |   | $ | 2 |   |
|                                     |                                        |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans with a related allowance  |                                        |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CRE – owner occupied               |                                        | $                        | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| CRE – non-owner occupied           |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial and industrial                |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential real estate                  |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Construction and land development        |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                 |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                    |                                        | $                        | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                     |                                        |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans                     |                                        |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CRE – owner occupied               |                                        | $                        | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| CRE – non-owner occupied           |                                        |                     | 214 |   |   |   | 434 |   |   |   | - |   |   |   | 243 |   |   |   | - |   |
| Commercial and industrial                |                                        |                     | 93 |   |   |   | 93 |   |   |   | - |   |   |   | 309 |   |   |   | 2 |   |
| Residential real estate                  |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Construction and land development        |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                 |                                        |                     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                    |                                        | $                        | 307 |   |   | $ | 527 |   |   | $ | - |   |   | $ | 552 |   |   | $ | 2 |   |

----

|                                     | Impaired Loans by Class as of December 31, 2011 |                |
|------------------------------------------|-------------------------------------------------|---------------------|
| ($ in thousands)                         |                                            | Recorded Investment |   |   | Unpaid Principal Balance |   |   | Related Allowance |   |   | Average Recorded Investment YTD |   |   | Interest Income Recognized YTD |   |
| Impaired loans with no related allowance |                                            |                |   |   |   |   |   |   |   |   |   |   |   |
| CRE – owner occupied               |                                            | $                   | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| CRE – non-owner occupied           |                                            |                | 274 |   |   |   | 494 |   |   |   | - |   |   |   | 345 |   |   |   | - |   |
| Commercial and industrial                |                                            |                | 336 |   |   |   | 336 |   |   |   | - |   |   |   | 517 |   |   |   | 15 |   |
| Residential real estate                  |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Construction and land development        |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                 |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                    |                                            | $                   | 610 |   |   | $ | 830 |   |   | $ | - |   |   | $ | 862 |   |   | $ | 15 |   |
|                                     |                                            |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans with a related allowance  |                                            |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CRE – owner occupied               |                                            | $                   | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| CRE – non-owner occupied           |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial and industrial                |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Residential real estate                  |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Construction and land development        |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                 |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                    |                                            | $                   | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                     |                                            |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans                     |                                            |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CRE – owner occupied               |                                            | $                   | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| CRE – non-owner occupied           |                                            |                | 274 |   |   |   | 494 |   |   |   | - |   |   |   | 345 |   |   |   | - |   |
| Commercial and industrial                |                                            |                | 336 |   |   |   | 336 |   |   |   | - |   |   |   | 517 |   |   |   | 15 |   |
| Residential real estate                  |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Construction and land development        |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                 |                                            |                | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                    |                                            | $                   | 610 |   |   | $ | 830 |   |   | $ | - |   |   | $ | 862 |   |   | $ | 15 |   |

----

|                              |   | Age Analysis of Loans by Class as of June 30, 2012 |   |
|-----------------------------------|--------|----------------------------------------------------|--------|
| ($ in thousands)                  |   | 30-59 Days Past Due                                |   |   | 60-89 Days Past Due |   |   | Past Due 90 Days or More and Still Accruing |   |   | Nonaccrual |   |   | Total Past Due and Nonaccrual |   |   | Current |   |   | Total |   |
| CRE – owner occupied        |   | $                                                  | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 18,104 |   |   | $ | 18,104 |   |
| CRE – non-owner occupied    |   |                                               | -      |   |   |   | - |   |   |   | - |   |   |   | 214 |   |   |   | 214 |   |   |   | 15,669 |   |   |   | 15,883 |   |
| Commercial and industrial         |   |                                               | -      |   |   |   | 170 |   |   |   | - |   |   |   | 93 |   |   |   | 263 |   |   |   | 7,192 |   |   |   | 7,455 |   |
| Residential real estate           |   |                                               | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 15,636 |   |   |   | 15,636 |   |
| Construction and land development |   |                                               | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,405 |   |   |   | 1,405 |   |
| Consumer                          |   |                                               | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 54 |   |   |   | 54 |   |
| Total                             |   | $                                                  | -      |   |   | $ | 170 |   |   | $ | - |   |   | $ | 307 |   |   | $ | 477 |   |   | $ | 58,060 |   |   | $ | 58,537 |   |

|                              |   | Age Analysis of Loans by Class as of December 31, 2011 |   |
|-----------------------------------|--------|--------------------------------------------------------|--------|
| ($ in thousands)                  |   | 30-59 Days Past Due                                    |   |   | 60-89 Days Past Due |   |   | Past Due 90 Days or More and Still Accruing |   |   | Nonaccrual |   |   | Total Past Due and Nonaccrual |   |   | Current |   |   | Total |   |
| CRE – owner occupied        |   | $                                                      | -      |   |   | $ | 1,040 |   |   | $ | - |   |   | $ | - |   |   | $ | 1,040 |   |   | $ | 15,297 |   |   | $ | 16,337 |   |
| CRE – non-owner occupied    |   |                                                   | -      |   |   |   | - |   |   |   | - |   |   |   | 274 |   |   |   | 274 |   |   |   | 18,093 |   |   |   | 18,367 |   |
| Commercial and industrial         |   |                                                   | -      |   |   |   | - |   |   |   | - |   |   |   | 336 |   |   |   | 336 |   |   |   | 5,245 |   |   |   | 5,581 |   |
| Residential real estate           |   |                                                   | 139    |   |   |   | 170 |   |   |   | - |   |   |   | - |   |   |   | 309 |   |   |   | 13,699 |   |   |   | 14,008 |   |
| Construction and land development |   |                                                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,307 |   |   |   | 1,307 |   |
| Consumer                          |   |                                                   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 45 |   |   |   | 45 |   |
| Total                             |   | $                                                      | 139    |   |   | $ | 1,210 |   |   | $ | - |   |   | $ | 610 |   |   | $ | 1,959 |   |   | $ | 53,686 |   |   | $ | 55,645 |   |

----

|   | Special Mention: | Loans in this category have potential weaknesses that deserve management’s close attention.  If left uncorrected, these potential weaknesses may result in deterioration of the repayment at some future date. |
|--------|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Substandard: | Loans in this category are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any.  These loans have well-defined weaknesses that jeopardize the liquidation of the debt and have the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. |
|--------|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Doubtful: | Loans in this category have all the weaknesses inherent in those classified as substandard, above, with the added characteristic that the weaknesses make the collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. |
|--------|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Loss: | Loans in this category are deemed not collectible and are charged-off. |
|--------|-------|------------------------------------------------------------------------|

|                              |   | Credit Quality of Loans by Class as of June 30, 2012 |   |
|-----------------------------------|--------|------------------------------------------------------|--------|
| ($ in thousands)                  |   | Pass                                                 |   |   | Special Mention |   |   | Substandard |   |   | Doubtful |   |   | Total |   |
| CRE – owner occupied        |   | $                                                    | 15,144 |   |   | $ | 1,448 |   |   | $ | 1,512 |   |   | $ | - |   |   | $ | 18,104 |   |
| CRE – non-owner occupied    |   |                                                 | 14,568 |   |   |   | 1,101 |   |   |   | 214 |   |   |   | - |   |   |   | 15,883 |   |
| Commercial and industrial         |   |                                                 | 7,106  |   |   |   | 170 |   |   |   | 179 |   |   |   | - |   |   |   | 7,455 |   |
| Residential real estate           |   |                                                 | 14,988 |   |   |   | - |   |   |   | 648 |   |   |   | - |   |   |   | 15,636 |   |
| Construction and land development |   |                                                 | 531    |   |   |   | - |   |   |   | 874 |   |   |   | - |   |   |   | 1,405 |   |
| Consumer                          |   |                                                 | 39     |   |   |   | 15 |   |   |   | - |   |   |   |   |   |   |   | 54 |   |
| Total                             |   | $                                                    | 52,376 |   |   | $ | 2,734 |   |   | $ | 3,427 |   |   | $ | - |   |   | $ | 58,537 |   |

----

|                              |   | Credit Quality of Loans by Class as of December 31, 2011 |   |
|-----------------------------------|--------|----------------------------------------------------------|--------|
| ($ in thousands)                  |   | Pass                                                     |   |   | Special Mention |   |   | Substandard |   |   | Doubtful |   |   | Total |   |
| CRE – owner occupied        |   | $                                                        | 14,068 |   |   | $ | 1,135 |   |   | $ | 1,134 |   |   | $ | - |   |   | $ | 16,337 |   |
| CRE – non-owner occupied    |   |                                                     | 15,395 |   |   |   | 1,796 |   |   |   | 1,176 |   |   |   | - |   |   |   | 18,367 |   |
| Commercial and industrial         |   |                                                     | 5,021  |   |   |   | - |   |   |   | 560 |   |   |   | - |   |   |   | 5,581 |   |
| Residential real estate           |   |                                                     | 13,344 |   |   |   | - |   |   |   | 664 |   |   |   | - |   |   |   | 14,008 |   |
| Construction and land development |   |                                                     | 232    |   |   |   | - |   |   |   | 1,075 |   |   |   | - |   |   |   | 1,307 |   |
| Consumer                          |   |                                                     | 45     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 45 |   |
| Total                             |   | $                                                        | 48,105 |   |   | $ | 2,931 |   |   | $ | 4,609 |   |   | $ | - |   |   | $ | 55,645 |   |

| ($ in thousands)                  |   | June 30, 2012 |    |   | December 31, 2011 |   |
|-----------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                              |   | Amount        |    |   | % of Total        |   |   | Amount |   |   | % of Total |   |
| Noninterest-bearing demand        |   | $             | 3,312   |   |              |   | 3 | % |   | $ | 3,550 |   |   |   | 3 | % |
| Interest-bearing demand           |   |          | 8,950   |   |              |   | 7 |   |   |   | 9,355 |   |   |   | 8 |   |
| Money market accounts             |   |          | 10,295  |   |              |   | 8 |   |   |   | 9,781 |   |   |   | 8 |   |
| Savings accounts                  |   |          | 46,445  |   |              |   | 37 |   |   |   | 49,073 |   |   |   | 41 |   |
| Time deposits, less than $100,000 |   |          | 4,496   |   |              |   | 4 |   |   |   | 5,193 |   |   |   | 4 |   |
| Time deposits, $100,000 or more   |   |          | 51,703  |   |              |   | 41 |   |   |   | 42,032 |   |   |   | 36 |   |
| Total deposits                    |   | $             | 125,201 |   |              |   | 100 | % |   | $ | 118,984 |   |   |   | 100 | % |

----

|                             |   | Options |    |                            | Weighted-Average Grant Date Fair Value |   |   | Weighted-Average Exercise Price |   |
|----------------------------------|--------|---------|---------|---------------------------------|----------------------------------------|--------|--------|---------------------------------|--------|
| Outstanding at December 31, 2011 |   |    | 400,312 |                            |                                   | $      | 1.93   |                            |   | $ | 7.62 |   |
| Granted                          |   |    | 93,250  |                            |                                   |   | 0.63   |                            |   |   | 3.38 |   |
| Exercised                        |   |    | -       |                            |                                   |   | -      |                            |   |   | - |   |
| Forfeited                        |   |    | (4,948  | )           |                                   |   | 0.60   |                            |   |   | 3.15 |   |
| Expired                          |   |    | (6,042  | )      |                                   |   | 1.83   |                            |   |   | 8.14 |   |
| Outstanding at June 30, 2012     |   |    | 482,572 |                            |                                   | $      | 1.69   |                            |   | $ | 6.84 |   |

|                             |   | Options |    |                                  | Weighted-Average Grant Date Fair Value |   |   | Weighted-Average Exercise Price |   |
|----------------------------------|--------|---------|---------|---------------------------------------|----------------------------------------|--------|--------|---------------------------------|--------|
| Outstanding at December 31, 2010 |   |    | 367,790 |                                  |                                   | $      | 2.43   |                            |   | $ | 8.31 |   |
| Granted                          |   |    | 44,000  |                                  |                                   |   | 0.64   |                            |   |   | 3.00 |   |
| Exercised                        |   |    | -       |                                  |                                   |   | -      |                            |   |   | - |   |
| Forfeited                        |   |    | (14,020 | )       |                                   |   | 2.29   |                            |   |   | 8.90 |   |
| Expired                          |   |    | (1,000  | )       |                                   |   | 1.32   |                            |   |   | 5.90 |   |
| Outstanding at June 30, 2011     |   |    | 396,770 |                                  |                                   | $      | 2.24   |                            |   | $ | 8.66 |   |

----

| ($ in thousands)                           |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|--------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
| Other general and administrative expenses: |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
| Data processing                            |   | $                          | 84     |   |                     | $      | 77 |   |   | $ | 159 |   |   | $ | 155 |   |
| FDIC assessment                            |   |                       | 50     |   |                     |   | 38 |   |   |   | 96 |   |   |   | 117 |   |
| Regulatory and reporting fees              |   |                       | 41     |   |                     |   | 48 |   |   |   | 73 |   |   |   | 82 |   |
| Marketing and promotions                   |   |                       | 29     |   |                     |   | 25 |   |   |   | 48 |   |   |   | 41 |   |
| Directors’ fees                      |   |                       | 23     |   |                     |   | 22 |   |   |   | 42 |   |   |   | 45 |   |
| Loan and collection expenses               |   |                       | 21     |   |                     |   | 16 |   |   |   | 52 |   |   |   | 35 |   |
| OREO expense                               |   |                       | 11     |   |                     |   | - |   |   |   | 33 |   |   |   | - |   |
| Insurance                                  |   |                       | 12     |   |                     |   | 6 |   |   |   | 24 |   |   |   | 12 |   |
| Telephone/communication                    |   |                       | 12     |   |                     |   | 12 |   |   |   | 24 |   |   |   | 23 |   |
| Travel and entertainment                   |   |                       | 11     |   |                     |   | 5 |   |   |   | 23 |   |   |   | 15 |   |
| Dues and memberships                       |   |                       | 10     |   |                     |   | 7 |   |   |   | 15 |   |   |   | 13 |   |
| Printing, stationery and supplies          |   |                       | 8      |   |                     |   | 7 |   |   |   | 13 |   |   |   | 14 |   |
| ATM and debit card fees                    |   |                       | 4      |   |                     |   | 3 |   |   |   | 8 |   |   |   | 7 |   |
| Postage and shipping                       |   |                       | 4      |   |                     |   | 3 |   |   |   | 7 |   |   |   | 7 |   |
| Training and education                     |   |                       | 2      |   |                     |   | 3 |   |   |   | 5 |   |   |   | 7 |   |
| Franchise taxes                            |   |                       | 3      |   |                     |   | 3 |   |   |   | 5 |   |   |   | 7 |   |
| Miscellaneous                              |   |                       | 13     |   |                     |   | 8 |   |   |   | 19 |   |   |   | 15 |   |
| Total                                      |   | $                          | 338    |   |                     | $      | 283 |   |   | $ | 646 |   |   | $ | 595 |   |

----

----

| ($ in thousands)                           |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |   | Total  |   |
|--------------------------------------------|--------|---------------------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|------------------------------------------|--------|--------|--------|--------|
| Assets at June 30, 2012                    |   |                                                          |   |   |                                         |   |   |                                     |   |   |   |   |
| Investment securities, available-for-sale: |   |                                                          |   |   |                                         |   |   |                                     |   |   |   |   |
| Corporate                                  |   | $                                                             | -      |   |                                         | $      | 16,279 |                                     |   | $      | -      |   |   | $ | 16,279 |   |
| State and municipal                        |   |                                                          | -      |   |                                         |   | 16,407 |                                     |   |   | -      |   |   |   | 16,407 |   |
| Residential agency MBS                     |   |                                                          | -      |   |                                         |   | 56,455 |                                     |   |   | -      |   |   |   | 56,455 |   |
| Total                                      |   | $                                                             | -      |   |                                         | $      | 89,141 |                                     |   | $      | -      |   |   | $ | 89,141 |   |
| Assets at December 31, 2011                |   |                                                          |   |   |                                         |   |   |                                     |   |   |   |   |   |   |   |   |
| Investment securities, available-for-sale: |   |                                                          |   |   |                                         |   |   |                                     |   |   |   |   |   |   |   |   |
| Corporate                                  |   | $                                                             | -      |   |                                         | $      | 14,818 |                                     |   | $      | -      |   |   | $ | 14,818 |   |
| State and municipal                        |   |                                                          | -      |   |                                         |   | 3,885  |                                     |   |   | -      |   |   |   | 3,885 |   |
| Residential agency MBS                     |   |                                                          | -      |   |                                         |   | 64,492 |                                     |   |   | -      |   |   |   | 64,492 |   |
| Total                                      |   | $                                                             | -      |   |                                         | $      | 83,195 |                                     |   | $      | -      |   |   | $ | 83,195 |   |

----

| ($ in thousands)                        |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |   | Total  |   |
|-----------------------------------------|--------|---------------------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|------------------------------------------|--------|--------|--------|--------|
| Assets at June 30, 2012                 |   |                                                          |   |   |                                         |   |   |                                     |   |   |   |   |
| Impaired loans (Financial)              |   | $                                                             | -      |   |                                         | $      | -      |                                     |   | $      | 251    |   |   | $ | 251 |   |
| Other real estate owned (Non-financial) |   | $                                                             | -      |   |                                         | $      | -      |                                     |   | $      | 1,989  |   |   | $ | 1,989 |   |
| Assets at December 31, 2011             |   |                                                          |   |   |                                         |   |   |                                     |   |   |   |   |   |   |   |   |
| Impaired loans (Financial)              |   | $                                                             | -      |   |                                         | $      | -      |                                     |   | $      | 311    |   |   | $ | 311 |   |
| Other real estate owned (Non-financial) |   | $                                                             | -      |   |                                         | $      | -      |                                     |   | $      | 1,989  |   |   | $ | 1,989 |   |

| Asset Type     |   | Valuation Method     |   | Unobservable Inputs                                                                                                  |   | Range             |
|----------------|--------|----------------------|--------|----------------------------------------------------------------------------------------------------------------------|--------|-------------------|
|           |   |                 |   |                                                                                                                 |   |              |
| Impaired Loans |   | Property appraisals  |   | Management discount for property type and/or recent market volatility                                                |   | 0% - 20% discount |
|           |   |                 |   |                                                                                                                 |   |              |
|           |   | Discounted cash flow |   | Estimated loss probability based on management’s knowledge of client or client’s business                |   | 0% - 50% discount |
|           |   |                 |   |                                                                                                                 |   |              |
| OREO           |   | Property appraisals  |   | Management discount for property type, recent market volatility, and/or management’s knowledge of the property |   | 0% - 20% discount |

----

----

| ($ in thousands)                               |   | Carrying |   |   | Fair Value Measurements at June 30, 2012 |   |
|------------------------------------------------|--------|----------|--------|--------|------------------------------------------|--------|
| Financial Assets:                              |   | Value    |   |   | Level 1                                  |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Cash and cash equivalents                      |   | $        | 849    |   |                                     | $      | 849 |   |   | $ | - |   |   | $ | - |   |   | $ | 849 |   |
| Interest-bearing deposits with banks           |   |     | 357    |   |                                     |   | - |   |   |   | 357 |   |   |   | - |   |   |   | 357 |   |
| Investment securities                          |   |     | 89,141 |   |                                     |   | - |   |   |   | 89,141 |   |   |   | - |   |   |   | 89,141 |   |
| Loans, net                                     |   |     | 57,622 |   |                                     |   | - |   |   |   | - |   |   |   | 57,836 |   |   |   | 57,836 |   |
| FHLB and FRB stocks                            |   |     | 1,164  |   |                                     |   | - |   |   |   | - |   |   | NA |   |   | NA |   |
| Bank-owned life insurance                      |   |     | 2,027  |   |                                     |   | - |   |   |   | - |   |   |   | 2,027 |   |   |   | 2,027 |   |
| Accrued interest receivable                    |   |     | 718    |   |                                     |   | - |   |   |   | 519 |   |   |   | 199 |   |   |   | 718 |   |
|                                           |   |     |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities:                         |   |     |   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits, demand, savings and money market     |   | $        | 69,002 |   |                                     | $      | - |   |   | $ | 69,002 |   |   | $ | - |   |   | $ | 69,002 |   |
| Time deposits                                  |   |     | 56,199 |   |                                     |   | - |   |   |   | 57,036 |   |   |   | - |   |   |   | 57,036 |   |
| Securities sold under agreements to repurchase |   |     | 254    |   |                                     |   | - |   |   |   | 254 |   |   |   | - |   |   |   | 254 |   |
| Federal funds purchased                        |   |     | 560    |   |                                     |   | 560 |   |   |   | - |   |   |   | - |   |   |   | 560 |   |
| FHLB advances                                  |   |     | 8,500  |   |                                     |   | - |   |   |   | 8,716 |   |   |   | - |   |   |   | 8,716 |   |
| Accrued interest payable                       |   |     | 63     |   |                                     |   | - |   |   |   | 63 |   |   |   | - |   |   |   | 63 |   |

----

| ($ in thousands)                               |   | Carrying |   |   | Fair Value Measurements at December 31, 2011 |   |
|------------------------------------------------|--------|----------|--------|--------|----------------------------------------------|--------|
| Financial Assets:                              |   | Value    |   |   | Level 1                                      |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Cash and cash equivalents                      |   | $        | 1,800  |   |                                         | $      | 1,800 |   |   | $ | - |   |   | $ | - |   |   | $ | 1,800 |   |
| Interest-bearing deposits with banks           |   |     | 1,357  |   |                                         |   | - |   |   |   | 1,357 |   |   |   | - |   |   |   | 1,357 |   |
| Investment securities                          |   |     | 83,195 |   |                                         |   | - |   |   |   | 83,195 |   |   |   | - |   |   |   | 83,195 |   |
| Loans, net                                     |   |     | 54,501 |   |                                         |   | - |   |   |   | - |   |   |   | 54,788 |   |   |   | 54,788 |   |
| FHLB and FRB stocks                            |   |     | 1,134  |   |                                         |   | - |   |   |   | - |   |   | NA |   |   | NA |   |
| Accrued interest receivable                    |   |     | 584    |   |                                         |   | - |   |   |   | 423 |   |   |   | 161 |   |   |   | 584 |   |
|                                           |   |     |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities:                         |   |     |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits, demand, savings and money market     |   | $        | 71,759 |   |                                         | $      | - |   |   | $ | 71,759 |   |   | $ | - |   |   | $ | 71,759 |   |
| Time deposits                                  |   |     | 47,225 |   |                                         |   | - |   |   |   | 47,917 |   |   |   | - |   |   |   | 47,917 |   |
| Securities sold under agreements to repurchase |   |     | 253    |   |                                         |   | - |   |   |   | 253 |   |   |   | - |   |   |   | 253 |   |
| FHLB advances                                  |   |     | 6,500  |   |                                         |   | - |   |   |   | 6,692 |   |   |   | - |   |   |   | 6,692 |   |
| Accrued interest payable                       |   |     | 56     |   |                                         |   | - |   |   |   | 56 |   |   |   |   |   |   |   | 56 |   |

----

----

| ($ in thousands)                                                           | Three Months EndedJune 30, 2012 |   |    | Three Months EndedJune 30, 2011 |   |
|----------------------------------------------------------------------------|---------------------------------|--------|---------|---------------------------------|--------|
|                                                                       | Average Balance                 |   |    | Interest                        |   |   | Yield / Cost |   |   | Average Balance |   |   | Interest |   |   | Yield / Cost |   |
| Assets:                                                                    |                            |   |    |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                   |                            |   |    |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross loans, net of unearned fees                                          |                            | $      | 56,309  |                            |   | $ | 787 |   |   |   | 5.62 | % |   | $ | 58,154 |   |   | $ | 847 |   |   |   | 5.84 | % |
| Investment securities**                                                    |                            |   | 86,102  |                            |   |   | 540 |   |   |   | 2.52 |   |   |   | 75,115 |   |   |   | 646 |   |   |   | 3.45 |   |
| FHLB and FRB stocks                                                        |                            |   | 1,156   |                            |   |   | 10 |   |   |   | 3.43 |   |   |   | 1,116 |   |   |   | 8 |   |   |   | 2.94 |   |
| Federal funds sold                                                         |                            |   | 730     |                            |   |   | 1 |   |   |   | 0.22 |   |   |   | 1,431 |   |   |   | 1 |   |   |   | 0.22 |   |
| Interest-bearing deposits with banks                                       |                            |   | 357     |                            |   |   | 2 |   |   |   | 2.12 |   |   |   | 1,054 |   |   |   | 1 |   |   |   | 0.42 |   |
| Total interest-earning assets                                              |                            |   | 144,654 |                            |   | $ | 1,340 |   |   |   | 3.72 | % |   |   | 136,870 |   |   | $ | 1,503 |   |   |   | 4.41 | % |
| Noninterest-earning assets                                                 |                            |   | 6,067   |                            |   |   |   |   |   |   |   |   |   |   | 2,144 |   |   |   |   |   |   |   |   |   |
| Total assets                                                               |                            | $      | 150,721 |                            |   |   |   |   |   |   |   |   |   | $ | 139,014 |   |   |   |   |   |   |   |   |   |
|                                                                       |                            |   |    |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity:                                      |                            |   |    |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                              |                            |   |    |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Money market and savings deposits                                          |                            | $      | 56,875  |                            |   | $ | 85 |   |   |   | 0.60 | % |   | $ | 63,148 |   |   | $ | 175 |   |   |   | 1.11 | % |
| Interest-bearing checking accounts                                         |                            |   | 8,905   |                            |   |   | 18 |   |   |   | 0.82 |   |   |   | 11,623 |   |   |   | 34 |   |   |   | 1.16 |   |
| Time deposits                                                              |                            |   | 52,782  |                            |   |   | 176 |   |   |   | 1.34 |   |   |   | 37,555 |   |   |   | 145 |   |   |   | 1.55 |   |
| Securities sold under agreements to repurchase and federal funds purchased |                            |   | 568     |                            |   |   | 1 |   |   |   | 0.73 |   |   |   | 728 |   |   |   | 2 |   |   |   | 1.14 |   |
| FHLB advances                                                              |                            |   | 8,526   |                            |   |   | 33 |   |   |   | 1.56 |   |   |   | 4,624 |   |   |   | 49 |   |   |   | 4.25 |   |
| Other borrowings                                                           |                            |   | 11      |                            |   |   | 1 |   |   |   | 12.81 |   |   |   | 60 |   |   |   | 1 |   |   |   | 9.38 |   |
| Total interest-bearing liabilities                                         |                            |   | 127,667 |                            |   | $ | 314 |   |   |   | 0.99 | % |   |   | 117,738 |   |   | $ | 406 |   |   |   | 1.38 | % |
| Noninterest-bearing checking accounts                                      |                            |   | 3,137   |                            |   |   |   |   |   |   |   |   |   |   | 2,249 |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing liabilities                                            |                            |   | 366     |                            |   |   |   |   |   |   |   |   |   |   | 388 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                       |                            |   | 19,551  |                            |   |   |   |   |   |   |   |   |   |   | 18,639 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                 |                            | $      | 150,721 |                            |   |   |   |   |   |   |   |   |   | $ | 139,014 |   |   |   |   |   |   |   |   |   |
|                                                                       |                            |   |    |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                        |                            |   |    |                            |   | $ | 1,026 |   |   |   |   |   |   |   |   |   |   | $ | 1,097 |   |   |   |   |   |
|                                                                       |                            |   |    |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread                                                        |                            |   |    |                            |   |   | 2.73 | % |   |   |   |   |   |   |   |   |   | 3.03 | % |   |   |   |
|                                                                       |                            |   |    |                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest margin                                                        |                            |   |    |                            |   |   | 2.85 | % |   |   |   |   |   |   |   |   |   | 3.22 | % |   |   |   |

----

| ($ in thousands)                                                           |   | Three Months Ended June 30, 2012Compared to Three Months Ended June 30, 2011 |   |
|----------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|
|                                                                       |   | Net Change                                                                   |   |   | Rate |   |   | Volume |   |
| Interest income:                                                           |   |                                                                         |   |   |   |   |   |   |   |
| Gross loans, net of unearned fees                                          |   | $                                                                            | (60    | ) |   | $ | (36 | ) |   | $ | (24 | ) |
| Investment securities                                                      |   |                                                                         | (106   | ) |   |   | (225 | ) |   |   | 119 |   |
| FHLB and FRB stocks                                                        |   |                                                                         | 2      |   |   |   | 2 |   |   |   | - |   |
| Federal funds sold                                                         |   |                                                                         | -      |   |   |   | - |   |   |   | - |   |
| Interest-bearing deposits with banks                                       |   |                                                                         | 1      |   |   |   | 1 |   |   |   | - |   |
| Total interest income                                                      |   | $                                                                            | (163   | ) |   | $ | (258 | ) |   | $ | 95 |   |
|                                                                       |   |                                                                         |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                                                          |   |                                                                         |   |   |   |   |   |   |   |   |   |   |
| Money market and savings deposits                                          |   | $                                                                            | (90    | ) |   | $ | (75 | ) |   | $ | (15 | ) |
| Interest-bearing checking accounts                                         |   |                                                                         | (16    | ) |   |   | (9 | ) |   |   | (7 | ) |
| Time deposits                                                              |   |                                                                         | 31     |   |   |   | (17 | ) |   |   | 48 |   |
| Securities sold under agreements to repurchase and federal funds purchased |   |                                                                         | (1     | ) |   |   | - |   |   |   | (1 | ) |
| FHLB advances                                                              |   |                                                                         | (16    | ) |   |   | (151 | ) |   |   | 135 |   |
| Other borrowings                                                           |   |                                                                         | -      |   |   |   | 1 |   |   |   | (1 | ) |
| Total interest expense                                                     |   | $                                                                            | (92    | ) |   | $ | (251 | ) |   | $ | 159 |   |
|                                                                       |   |                                                                         |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                        |   | $                                                                            | (71    | ) |   | $ | (7 | ) |   | $ | (64 | ) |

----

----

| ($ in thousands)                           |   | Three Months EndedJune 30, |   |   | Increase/ |   |
|--------------------------------------------|--------|----------------------------|--------|--------|-----------|--------|
| Other general and administrative expenses: |   | 2012                       |   |   | 2011      |   |   | (Decrease) |   |
| Data processing                            |   | $                          | 84     |   |      | $      | 77 |   |   | $ | 7 |   |
| FDIC assessment                            |   |                       | 50     |   |      |   | 38 |   |   |   | 12 |   |
| Regulatory and reporting fees              |   |                       | 41     |   |      |   | 48 |   |   |   | (7 | ) |
| Marketing and promotions                   |   |                       | 29     |   |      |   | 25 |   |   |   | 4 |   |
| Directors’ fees                      |   |                       | 23     |   |      |   | 22 |   |   |   | 1 |   |
| Loan and collection expenses               |   |                       | 21     |   |      |   | 16 |   |   |   | 5 |   |
| OREO expense                               |   |                       | 11     |   |      |   | - |   |   |   | 11 |   |
| Insurance                                  |   |                       | 12     |   |      |   | 6 |   |   |   | 6 |   |
| Telephone/communication                    |   |                       | 12     |   |      |   | 12 |   |   |   | - |   |
| Travel and entertainment                   |   |                       | 11     |   |      |   | 5 |   |   |   | 6 |   |
| Dues and memberships                       |   |                       | 10     |   |      |   | 7 |   |   |   | 3 |   |
| Printing, stationery and supplies          |   |                       | 8      |   |      |   | 7 |   |   |   | 1 |   |
| ATM and debit card fees                    |   |                       | 4      |   |      |   | 3 |   |   |   | 1 |   |
| Postage and shipping                       |   |                       | 4      |   |      |   | 3 |   |   |   | 1 |   |
| Training and education                     |   |                       | 2      |   |      |   | 3 |   |   |   | (1 | ) |
| Franchise taxes                            |   |                       | 3      |   |      |   | 3 |   |   |   | - |   |
| Miscellaneous                              |   |                       | 13     |   |      |   | 8 |   |   |   | 5 |   |
| Total                                      |   | $                          | 338    |   |      | $      | 283 |   |   | $ | 55 |   |

----

| ($ in thousands)                                                           | Six Months EndedJune 30, 2012 |   |    | Six Months EndedJune 30, 2011 |   |
|----------------------------------------------------------------------------|-------------------------------|--------|---------|-------------------------------|--------|
|                                                                       | Average Balance               |   |    | Interest                      |   |   | Yield / Cost |   |   | Average Balance |   |   | Interest |   |   | Yield / Cost |   |
| Assets:                                                                    |                          |   |    |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                   |                          |   |    |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross loans, net of unearned fees                                          |                          | $      | 55,425  |                          |   | $ | 1,575 |   |   |   | 5.71 | % |   | $ | 58,168 |   |   | $ | 1,671 |   |   |   | 5.79 | % |
| Investment securities**                                                    |                          |   | 84,609  |                          |   |   | 1,043 |   |   |   | 2.48 |   |   |   | 74,530 |   |   |   | 1,319 |   |   |   | 3.57 |   |
| FHLB and FRB stocks                                                        |                          |   | 1,148   |                          |   |   | 18 |   |   |   | 3.15 |   |   |   | 1,137 |   |   |   | 17 |   |   |   | 3.04 |   |
| Federal funds sold                                                         |                          |   | 677     |                          |   |   | 1 |   |   |   | 0.22 |   |   |   | 1,023 |   |   |   | 1 |   |   |   | 0.22 |   |
| Interest-bearing deposits with banks                                       |                          |   | 385     |                          |   |   | 4 |   |   |   | 2.04 |   |   |   | 728 |   |   |   | 2 |   |   |   | 0.46 |   |
| Total interest-earning assets                                              |                          |   | 142,244 |                          |   | $ | 2,641 |   |   |   | 3.73 | % |   |   | 135,586 |   |   | $ | 3,010 |   |   |   | 4.48 | % |
| Noninterest-earning assets                                                 |                          |   | 5,421   |                          |   |   |   |   |   |   |   |   |   |   | 2,676 |   |   |   |   |   |   |   |   |   |
| Total assets                                                               |                          | $      | 147,665 |                          |   |   |   |   |   |   |   |   |   | $ | 138,262 |   |   |   |   |   |   |   |   |   |
|                                                                       |                          |   |    |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity:                                      |                          |   |    |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                              |                          |   |    |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Money market and savings deposits                                          |                          | $      | 57,768  |                          |   | $ | 195 |   |   |   | 0.68 | % |   | $ | 61,757 |   |   | $ | 354 |   |   |   | 1.16 | % |
| Interest-bearing checking accounts                                         |                          |   | 8,937   |                          |   |   | 37 |   |   |   | 0.84 |   |   |   | 11,524 |   |   |   | 67 |   |   |   | 1.18 |   |
| Time deposits                                                              |                          |   | 49,989  |                          |   |   | 347 |   |   |   | 1.39 |   |   |   | 37,745 |   |   |   | 302 |   |   |   | 1.61 |   |
| Securities sold under agreements to repurchase and federal funds purchased |                          |   | 539     |                          |   |   | 2 |   |   |   | 0.75 |   |   |   | 664 |   |   |   | 4 |   |   |   | 1.13 |   |
| FHLB advances                                                              |                          |   | 7,513   |                          |   |   | 64 |   |   |   | 1.71 |   |   |   | 5,523 |   |   |   | 106 |   |   |   | 3.89 |   |
| Other borrowings                                                           |                          |   | 19      |                          |   |   | 1 |   |   |   | 10.07 |   |   |   | 66 |   |   |   | 3 |   |   |   | 9.47 |   |
| Total interest-bearing liabilities                                         |                          |   | 124,765 |                          |   | $ | 646 |   |   |   | 1.04 | % |   |   | 117,279 |   |   | $ | 836 |   |   |   | 1.44 | % |
| Noninterest-bearing checking accounts                                      |                          |   | 3,178   |                          |   |   |   |   |   |   |   |   |   |   | 2,276 |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing liabilities                                            |                          |   | 409     |                          |   |   |   |   |   |   |   |   |   |   | 364 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                       |                          |   | 19,313  |                          |   |   |   |   |   |   |   |   |   |   | 18,343 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                 |                          | $      | 147,665 |                          |   |   |   |   |   |   |   |   |   | $ | 138,262 |   |   |   |   |   |   |   |   |   |
|                                                                       |                          |   |    |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                        |                          |   |    |                          |   | $ | 1,995 |   |   |   |   |   |   |   |   |   |   | $ | 2,174 |   |   |   |   |   |
|                                                                       |                          |   |    |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest spread                                                        |                          |   |    |                          |   |   | 2.69 | % |   |   |   |   |   |   |   |   |   | 3.04 | % |   |   |   |
|                                                                       |                          |   |    |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest margin                                                        |                          |   |    |                          |   |   | 2.82 | % |   |   |   |   |   |   |   |   |   | 3.23 | % |   |   |   |

----

| ($ in thousands)                                                           |   | Six Months Ended June 30, 2012Compared to Six Months Ended June 30, 2011 |   |
|----------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|--------|
|                                                                       |   | Net Change                                                               |   |   | Rate |   |   | Volume |   |
| Interest income:                                                           |   |                                                                     |   |   |   |   |   |   |   |
| Gross loans, net of unearned fees                                          |   | $                                                                        | (96    | ) |   | $ | (18 | ) |   | $ | (78 | ) |
| Investment securities                                                      |   |                                                                     | (276   | ) |   |   | (498 | ) |   |   | 222 |   |
| FHLB and FRB stocks                                                        |   |                                                                     | 1      |   |   |   | 1 |   |   |   | - |   |
| Federal funds sold                                                         |   |                                                                     | -      |   |   |   | - |   |   |   | - |   |
| Interest-bearing deposits with banks                                       |   |                                                                     | 2      |   |   |   | 2 |   |   |   | - |   |
| Total interest income                                                      |   | $                                                                        | (369   | ) |   | $ | (513 | ) |   | $ | 144 |   |
|                                                                       |   |                                                                     |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                                                          |   |                                                                     |   |   |   |   |   |   |   |   |   |   |
| Money market and savings deposits                                          |   | $                                                                        | (159   | ) |   | $ | (138 | ) |   | $ | (21 | ) |
| Interest-bearing checking accounts                                         |   |                                                                     | (30    | ) |   |   | (17 | ) |   |   | (13 | ) |
| Time deposits                                                              |   |                                                                     | 45     |   |   |   | (31 | ) |   |   | 76 |   |
| Securities sold under agreements to repurchase and federal funds purchased |   |                                                                     | (2     | ) |   |   | - |   |   |   | (2 | ) |
| FHLB advances                                                              |   |                                                                     | (42    | ) |   |   | (119 | ) |   |   | 77 |   |
| Other borrowings                                                           |   |                                                                     | (2     | ) |   |   | - |   |   |   | (2 | ) |
| Total interest expense                                                     |   | $                                                                        | (190   | ) |   | $ | (305 | ) |   | $ | 115 |   |
|                                                                       |   |                                                                     |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                        |   | $                                                                        | (179   | ) |   | $ | (208 | ) |   | $ | 29 |   |

----

----

| A)   | Decreased salaries and employee benefits expense of $163,000, or 12%, related to the following:  1) costs associated with the separation agreement of an employee recorded during the first quarter of 2011, 2) increased salary expense deferral on loan originations which directly correlates to more loans closed during the first half of 2012 compared to 2011, and 3) reduced stock option expense, as many of the Company’s options are now fully vested. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| B)   | Decreased occupancy expense of $13,000, or 5%, year-over-year primarily due to a lease extension that was negotiated at a reduced rate. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| C)   | Decreased professional fees of $3,000, partially offset by a $51,000, or 9%, increase in other general and administrative expenses as detailed in Table 6, below: |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ($ in thousands)                           |   | Six Months EndedJune 30, |   |   | Increase/ |   |
|--------------------------------------------|--------|--------------------------|--------|--------|-----------|--------|
| Other general and administrative expenses: |   | 2012                     |   |   | 2011      |   |   | (Decrease) |   |
| Data processing                            |   | $                        | 159    |   |      | $      | 155 |   |   | $ | 4 |   |
| FDIC assessment                            |   |                     | 96     |   |      |   | 117 |   |   |   | (21 | ) |
| Regulatory and reporting fees              |   |                     | 73     |   |      |   | 82 |   |   |   | (9 | ) |
| Marketing and promotions                   |   |                     | 48     |   |      |   | 41 |   |   |   | 7 |   |
| Directors’ fees                      |   |                     | 42     |   |      |   | 45 |   |   |   | (3 | ) |
| Loan and collection expenses               |   |                     | 52     |   |      |   | 35 |   |   |   | 17 |   |
| OREO expense                               |   |                     | 33     |   |      |   | - |   |   |   | 33 |   |
| Insurance                                  |   |                     | 24     |   |      |   | 12 |   |   |   | 12 |   |
| Telephone/communication                    |   |                     | 24     |   |      |   | 23 |   |   |   | 1 |   |
| Travel and entertainment                   |   |                     | 23     |   |      |   | 15 |   |   |   | 8 |   |
| Dues and memberships                       |   |                     | 15     |   |      |   | 13 |   |   |   | 2 |   |
| Printing, stationery and supplies          |   |                     | 13     |   |      |   | 14 |   |   |   | (1 | ) |
| ATM and debit card fees                    |   |                     | 8      |   |      |   | 7 |   |   |   | 1 |   |
| Postage and shipping                       |   |                     | 7      |   |      |   | 7 |   |   |   | - |   |
| Training and education                     |   |                     | 5      |   |      |   | 7 |   |   |   | (2 | ) |
| Franchise taxes                            |   |                     | 5      |   |      |   | 7 |   |   |   | (2 | ) |
| Miscellaneous                              |   |                     | 19     |   |      |   | 15 |   |   |   | 4 |   |
| Total                                      |   | $                        | 646    |   |      | $      | 595 |   |   | $ | 51 |   |

----

| Ratio:                           |   | June 30, 2012 |   |   | December 31, 2011 |   |
|----------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Return on Average Assets         |   |          | 0.13   | %      |              |   | 0.17 | % |
| Return on Average Equity         |   |          | 0.98   | %      |              |   | 1.29 | % |
| Average Equity to Average Assets |   |          | 13.08  | %      |              |   | 13.39 | % |

|                          |   | At June 30, 2012 |   |
|-------------------------------|--------|------------------|--------|
| ($ in thousands)              |   | Within One Year  |   |   | After One Year but within Five Years |   |   | After Five Years but within Ten Years |   | After Ten Years |   |
| Securities available-for-sale |   | Amount           |   |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   | Amount |   |   | Yield |   |
| Corporate                     |   | $                | 519    |   |   |   | 5.44 | % |   | $ | 4,820 |   |   |   | 3.03 | % |   | $ | 10,940 |   |   |   | 3.80 | % |   | $ | - |   |   |   | - | % |
| State and municipal           |   |             | -      |   |   |   | - |   |   |   | 2,197 |   |   |   | 4.13 |   |   |   | 10,923 |   |   |   | 3.56 |   |   |   | 3,287 |   |   |   | 3.19 |   |
| Residential agency MBS        |   |             | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,026 |   |   |   | 2.25 |   |   |   | 54,429 |   |   |   | 2.18 |   |
| Total                         |   | $                | 519    |   |   |   | 5.44 | % |   | $ | 7,017 |   |   |   | 3.37 | % |   | $ | 23,889 |   |   |   | 3.56 | % |   | $ | 57,716 |   |   |   | 2.24 | % |

----

|                          |   | At December 31, 2011 |
|-------------------------------|--------|----------------------|
| ($ in thousands)              |   | Within One Year      |   |   | After One Year but within Five Years |   |   | After Five Years but within Ten Years |   |   | After Ten Years |
| Securities available-for-sale |   | Amount               |   |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |
| Corporate                     |   | $                    | - |   |   |   | - | % |   | $ | 6,794 |   |   |   | 3.39 | % |   | $ | 8,024 |   |   |   | 4.14 | % |   | $ | - |   |   |   | - | % |
| State and municipal           |   |                 | - |   |   |   | - |   |   |   | 1,789 |   |   |   | 4.33 |   |   |   | 2,096 |   |   |   | 4.39 |   |   |   | - |   |   |   | - |   |
| Residential agency MBS        |   |                 | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,600 |   |   |   | 2.86 |   |   |   | 60,892 |   |   |   | 2.00 |   |
| Total                         |   | $                    | - |   |   |   | - | % |   | $ | 8,583 |   |   |   | 3.59 | % |   | $ | 13,720 |   |   |   | 3.84 | % |   | $ | 60,892 |   |   |   | 2.00 | % |

| ($ in thousands)                     |   | June 30, 2012 |   |   | December 31, 2011 |   |
|--------------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                                 |   | Amount        |   |   | % of Total        |   |   | Amount |   |   | % of Total |   |
| Commercial real estate               |   | $             | 38,163 |   |              |   | 66 | % |   | $ | 37,862 |   |   |   | 68 | % |
| Commercial and industrial            |   |          | 7,832  |   |              |   | 13 |   |   |   | 5,971 |   |   |   | 11 |   |
| Residential real estate              |   |          | 11,083 |   |              |   | 19 |   |   |   | 10,460 |   |   |   | 19 |   |
| Construction and land development    |   |          | 1,405  |   |              |   | 2 |   |   |   | 1,307 |   |   |   | 2 |   |
| Consumer                             |   |          | 54     |   |              |   | - |   |   |   | 45 |   |   |   | - |   |
| GROSS LOANS                          |   |          | 58,537 |   |              |   | 100 | % |   |   | 55,645 |   |   |   | 100 | % |
| Deferred loan expenses / (fees), net |   |          | 94     |   |              |   |   |   |   |   | (77 | ) |   |   |   |   |
| Allowance for loan and lease losses  |   |          | (1,009 | )      |              |   |   |   |   |   | (1,067 | ) |   |   |   |   |
| LOANS, NET                           |   | $             | 57,622 |   |              |   |   |   |   | $ | 54,501 |   |   |   |   |   |

----

|  ($ in thousands)                   |   | June 30, 2012 |   |
|------------------------------------------|--------|---------------|--------|
|                                     |   | <1 Year    |   |   | 1 - 5 Years |   |   | 5 – 15 Years |   |   | Over 15 Years |   |   | Total Loans |   |
| Commercial real estate                   |   | $             | 3,131  |   |   | $ | 10,977 |   |   | $ | 24,055 |   |   | $ | - |   |   | $ | 38,163 |   |
| Commercial and industrial                |   |          | 2,575  |   |   |   | 2,767 |   |   |   | 1,991 |   |   |   | 499 |   |   |   | 7,832 |   |
| Residential real estate                  |   |          | -      |   |   |   | 2,468 |   |   |   | 1,186 |   |   |   | 7,429 |   |   |   | 11,083 |   |
| Construction and land development        |   |          | 1,259  |   |   |   | 146 |   |   |   | - |   |   |   | - |   |   |   | 1,405 |   |
| Consumer                                 |   |          | 8      |   |   |   | 37 |   |   |   | - |   |   |   | 9 |   |   |   | 54 |   |
|    Gross Loans Receivable |   | $             | 6,973  |   |   | $ | 16,395 |   |   | $ | 27,232 |   |   | $ | 7,937 |   |   | $ | 58,537 |   |

|  ($ in thousands)                   |   | December 31, 2011 |   |
|------------------------------------------|--------|-------------------|--------|
|                                     |   | <1 Year        |   |   | 1 - 5 Years |   |   | 5 – 15 Years |   |   | Over 15 Years |   |   | Total Loans |   |
| Commercial real estate                   |   | $                 | 805    |   |   | $ | 13,064 |   |   | $ | 23,993 |   |   | $ | - |   |   | $ | 37,862 |   |
| Commercial and industrial                |   |              | 2,422  |   |   |   | 2,787 |   |   |   | 762 |   |   |   | - |   |   |   | 5,971 |   |
| Residential real estate                  |   |              | -      |   |   |   | 2,461 |   |   |   | 1,200 |   |   |   | 6,799 |   |   |   | 10,460 |   |
| Construction and land development        |   |              | 1,150  |   |   |   | 157 |   |   |   | - |   |   |   | - |   |   |   | 1,307 |   |
| Consumer                                 |   |              | 11     |   |   |   | 24 |   |   |   | - |   |   |   | 10 |   |   |   | 45 |   |
|    Gross Loans Receivable |   | $                 | 4,388  |   |   | $ | 18,493 |   |   | $ | 25,955 |   |   | $ | 6,809 |   |   | $ | 55,645 |   |

----

|  ($ in thousands)                                                      |   | June 30, 2012 |   |   | December 31, 2011 |   |
|-----------------------------------------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
| Nonaccrual loans and leases                                                 |   | $                  | 307    |   |              | $      | 610 |   |
| Other impaired loans                                                        |   |               | -      |   |              |   | - |   |
|       Total nonperforming loans               |   |               | 307    |   |              |   | 610 |   |
| Other real estate owned                                                     |   |               | 1,776  |   |              |   | 1,776 |   |
| Total nonperforming assets                                                  |   | $                  | 2,083  |   |              | $      | 2,386 |   |
|                                                                        |   |               |   |   |              |   |   |   |
| Nonperforming loans                                                         |   | $                  | 307    |   |              | $      | 610 |   |
| Allocated allowance for loan and lease losses to nonperforming loans        |   |               | -      |   |              |   | - |   |
|       Net investment in nonperforming loans   |   | $                  | 307    |   |              | $      | 610 |   |
|                                                                        |   |               |   |   |              |   |   |   |
| Accruing loans past due 90 days or more                                     |   | $                  | -      |   |              | $      | - |   |
| Loans past due 30-89 days                                                   |   | $                  | 170    |   |              | $      | 1,349 | (1) |
|                                                                        |   |               |   |   |              |   |   |   |
| Loans charged-off, year-to-date                                             |   | $                  | 88     |   |              | $      | 276 |   |
| Recoveries, year-to-date                                                    |   |               | (30    | )      |              |   | (13 | ) |
|       Net charge-offs, year-to-date           |   | $                  | 58     |   |              | $      | 263 |   |
| Allowance for loan and lease losses                                         |   | $                  | 1,009  |   |              | $      | 1,067 |   |
|                                                                        |   |               |   |   |              |   |   |   |
| Allowance for loan and lease losses to loans, net of deferred fees/expenses |   |               | 1.72   | %      |              |   | 1.92 | % |
| Allowance for loan and lease losses to nonaccrual loans                     |   |               | 328.66 | %      |              |   | 174.92 | % |
| Allowance for loan and lease losses to nonperforming loans                  |   |               | 328.66 | %      |              |   | 174.92 | % |
| Nonaccrual loans to loans, net of deferred fees/expenses                    |   |               | 0.52   | %      |              |   | 1.10 | % |
| Loans 30-89 days past due to loans, net of deferred fees/expenses           |   |               | 0.29   | %      |              |   | 2.43 | % |
| Nonperforming assets to total assets                                        |   |               | 1.35   | %      |              |   | 1.64 | % |

----

|  ($ in thousands)                      |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |   |
|---------------------------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
|                                        |   | 2012                       |   |   | 2011                     |   |   | 2012 |   |   | 2011 |   |
|                                        |   |                       |   |   |                     |   |   |   |   |   |   |   |
| Balance at beginning of period              |   | $                          | 1,077  |   |                     | $      | 1,175 |   |   | $ | 1,067 |   |   | $ | 1,175 |   |
| Provision charged to expense                |   |                       | -      |   |                     |   | 120 |   |   |   | - |   |   |   | 120 |   |
| Loans charged-off:                          |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate                      |   |                       | -      |   |                     |   | (11 | ) |   |   | - |   |   |   | (11 | ) |
| Commercial and industrial                   |   |                       | (85    | )      |                     |   | - |   |   |   | (85 | ) |   |   | - |   |
| Residential real estate                     |   |                       | -      |   |                     |   | - |   |   |   | - |   |   |   | - |   |
| Construction and land development           |   |                       | -      |   |                     |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                    |   |                       | -      |   |                     |   | - |   |   |   | (3 | ) |   |   | - |   |
| Total loans charged-off                     |   |                       | (85    | )      |                     |   | (11 | ) |   |   | (88 | ) |   |   | (11 | ) |
| Recoveries on loans previously charged-off: |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate                      |   |                       | -      |   |                     |   | - |   |   |   | - |   |   |   | - |   |
| Commercial and industrial                   |   |                       | -      |   |                     |   | - |   |   |   | - |   |   |   | - |   |
| Residential real estate                     |   |                       | 17     |   |                     |   | - |   |   |   | 30 |   |   |   | - |   |
| Construction and land development           |   |                       | -      |   |                     |   | - |   |   |   | - |   |   |   | -- |   |
| Consumer                                    |   |                       | -      |   |                     |   | - |   |   |   | - |   |   |   | - |   |
| Total recoveries                            |   |                       | 17     |   |                     |   | - |   |   |   | 30 |   |   |   | - |   |
| Balance at end of period                    |   | $                          | 1,009  |   |                     | $      | 1,284 |   |   | $ | 1,009 |   |   | $ | 1,284 |   |
|                                        |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Net charge-offs to average gross loans      |   |                       | 0.15   | %      |                     |   | 0.02 | % |   |   | 0.16 | % |   |   | 0.02 | % |

----

| ($ in thousands)             |   | Risk-based |   |   | Leverage      |   |
|------------------------------|--------|------------|--------|--------|---------------|--------|
|                         |   | Tier 1     |   |   | Total capital |   |   | Tier 1 |   |
| Actual regulatory capital    |   | $          | 16,387 |   |          | $      | 17,396 |   |   | $ | 16,387 |   |
| Well-capitalized requirement |   |       | 5,519  |   |          |   | 9,199 |   |   |   | 7,536 |   |
| Excess regulatory capital    |   | $          | 10,868 |   |          | $      | 8,197 |   |   | $ | 8,851 |   |
| Capital ratios               |   |       | 17.8   | %      |          |   | 18.9 | % |   |   | 10.9 | % |
| Minimum capital requirement  |   |       | 4.0    | %      |          |   | 8.0 | % |   |   | 4.0 | % |
| Well-capitalized requirement |   |       | 6.0    | %      |          |   | 10.0 | % |   |   | 5.0 | % |

----

----

----

|                        | SOLERA NATIONAL BANCORP, INC.                     |   |
|-----------------------------|---------------------------------------------------|--------|
|                        | (Registrant)                                      |   |
|                        |                                              |   |
| Dated: August 9, 2012       | /s/ Douglas Crichfield                            |   |
|                        | Douglas Crichfield                                |   |
|                        | President and Chief Executive Officer             |   |
|                        | (Principal Executive Officer)                     |   |
|                        |                                              |   |
|                        |                                              |   |
|  Dated: August 9, 2012 | /s/ Robert J. Fenton                              |   |
|                        | Robert J. Fenton                                  |   |
|                        | Executive Vice President, Chief Financial Officer |   |
|                        | (Principal Accounting and Financial Officer)      |   |

----

| Exhibit |   |                                                                                              |
|---------|--------|---------------------------------------------------------------------------------------------------|
| Number  |   | Description of Exhibit                                                                            |
|    |   |                                                                                              |
| 31.1*   |   | Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act.                          |
|    |   |                                                                                              |
| 31.2*   |   | Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act.                          |
|    |   |                                                                                              |
| 32.1*   |   | Certification pursuant to Rule 13a-14(b) of the Securities Exchange Act and 18 U.S.C. §1350. |
|    |   |                                                                                              |
| (*)     |   | Filed herewith.                                                                                   |

----