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--12-31
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Smaller Reporting Company
Q2
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CNB CORP /MI/
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Note 8 – Stock Options</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company adopted a stock option plan in May 1996 under which
the stock options may be issued at market prices to employees.  The plan states that no grant or award shall be made
under the plan more than ten years from the date of adoption of the plan and therefore the plan ended in 2006.  Stock
options were used to reward certain officers and provide them with an additional equity interest.  Options were issued
for 10 year periods and have varying vesting schedules.  The exercise price of options granted is equivalent to the market
value of underlying stock at the grant date.  The Company has a policy of issuing new shares to satisfy option exercises.  There
were no modification of awards during the periods ended June 30, 2011 and 2010.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Due to the plan end date, there are no options available for grant
as of June 30, 2011 and 2010.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Information about options outstanding and options exercisable follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Weighted</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Weighted</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Average</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Average</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Remaining</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Aggregate</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center">Options</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Exercise</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Contractual</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Intrinsic</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Outstanding</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Price</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Term</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Value</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%">Balance at January 1, 2011</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right">4,462</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">48.57</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"> </td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right">0</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>    Options exercised</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>    Options expired</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt">    Options forfeited</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt">Balance at June 30, 2011</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">4,462</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">48.57</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td colspan="2" style="text-align: center">  2.5 years</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td>$</td>
<td style="padding-bottom: 3pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Exercisable at June 30, 2011</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">4,462</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td>$</td>
<td style="text-align: right">48.57</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">There were no options exercised during the six months ended June
30, 2011 and 2010 therefore the aggregate intrinsic value of options exercised was $0 for both periods.  There were no
shares vested for the same periods.  Also, there was no cash received or tax benefits realized from option exercises
during the same periods</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">There have been no significant changes in the Company’s critical
accounting policies since December 31, 2010.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Note 1 - Basis of Presentation</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The consolidated financial statements for June 30, 2011 and December
31, 2010 include CNB Corporation (“Company”)  and its wholly-owned subsidiary, Citizens National Bank of
Cheboygan (“Bank”).  All significant intercompany accounts and transactions are eliminated in the consolidation
process.  The statements have been prepared by management without an audit by independent certified public accountants.  However,
these statements reflect all adjustments (consisting of normal recurring accruals) and disclosures which are, in the opinion of
management, necessary for a fair presentation of the results for the interim periods presented and should be read in conjunction
with the notes to the consolidated financial statements included in the CNB Corporation’s Form 10-K for the year ended December
31, 2010.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally accepted in the United States of America have
been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Because the results of operations are so closely related to and
responsive to changes in economic conditions, the results for any interim period are not necessarily indicative of the results
that can be expected for the entire year.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Note 2 – New Accounting Standards</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In April 2011, the FASB issued, A Creditor's Determination of Whether
a Restructuring is a Troubled Debt Restructuring, amends FASB ASC 310-40 , Receivables — Troubled Debt Restructurings by
Creditors because of inconsistencies in practice and the increased volume of debt modifications.  The standard provides additional
clarifying guidance in determining whether a creditor has granted a concession and whether a debtor is experiencing financial
difficulties for purposes of determining whether a restructuring qualifies as a troubled debt restructuring. The effective date
is for the first interim or annual period ending after June 15, 2011 to be applied retrospectively to restructurings taking place
on or after the beginning of the fiscal year of adoption, with early application allowed.  As a result of the clarifying
guidance, receivables that are newly considered impaired for which impairment was previously measured using a general allowance
for credit losses may be identified. In respect of such receivables, disclosure is required of (1) the total recorded investment
in such receivables, and (2) the related allowance for credit losses as of the end of the period of adoption. For purposes of
measuring impairment of those receivables, the effective date is for the first interim or annual period beginning on or after
June 15, 2011 to be applied prospectively.  The Company is analyzing the impact on the standard and will adopt the requirements
in the third quarter of 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">FASB ASU 2010-06, Improving Disclosures about Fair Value Measurements.
The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06 to
amend ASC 820, Fair Value Measurement and Disclosures (“ASC 820”), to require additional disclosures regarding fair
value measurements. Specifically, the ASU requires disclosure of the amounts of significant transfers between Level 1 and Level
2 of the fair value hierarchy and the reasons for these transfers; the reasons for any transfers in or out of Level 3; and information
in the reconciliation of recurring Level 3 measurements about gross purchases, sales, issuances and settlements. Except for the
requirement to disclose purchases, sales, issuances and settlements in the reconciliation of recurring Level 3 measurements on
a gross basis, all the amendments to ASC 820 made by ASU 2010-06 were effective for the Corporation on January 1, 2010. The requirement
to separately disclose purchases, sales, issuances and settlements of recurring Level 3 measurements was effective for the Corporation
as of January 1, 2011. All required disclosures are incorporated into Note 6 (Fair Value Measurement).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">FASB ASU 2010-20, Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses. In July 2010, the FASB issued ASU 2010-20, which requires new qualitative and
quantitative disclosures on the allowance for credit losses, credit quality, impaired loans, modifications and nonaccrual and past
due financing receivables. The guidance requires that an entity provide disclosures facilitating financial statement users’
evaluation of the nature of credit risk inherent in the entity’s portfolio of financing receivables (i.e., loans), how that
risk is analyzed and assessed in arriving at the allowance for credit losses, and the changes and reasons for those changes in
the allowance for credit losses. These required disclosures are to be presented on a disaggregated basis at the portfolio segment
and the class of financing receivables level. As it relates to disclosures as of the end of a reporting period, ASU 2010-20 was
effective for the Company as of December 31, 2010. Disclosures that relate to activity during a reporting period were required
for the Company in the period beginning January 1, 2011 and are incorporated into Note 4 (Loans) and Note 5 (Allowance for Loan
Losses). In January 2011, the FASB temporarily deferred the effective date for disclosures about troubled debt restructurings under
ASU 2010-20. See ASU 2011-2 below which requires disclosures about troubled debt restructurings under ASU 2010-20 on a prospective
basis beginning in the quarter ended September 30, 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">FASB ASU 2011-02, A Creditor’s Determination of Whether a
Restructuring Is a Troubled Debt Restructuring. In April 2011, the FASB issued ASU 2011-02, which provides additional guidance
to help creditors in determining whether a creditor has granted a concession and whether a debtor is experiencing financial difficulties
for purposes of determining whether a restructuring constitutes a troubled debt restructuring. The amendments in this update are
effective for the Corporation beginning in the quarter ended September 30, 2011 and are to be applied retrospectively to January
1, 2011. In addition, the modification disclosures described in ASU 2010-20, which were subsequently deferred by ASU 2011-01, Deferral
of the Effective Date of Disclosures about Troubled Debt Restructurings, will be effective on a prospective basis beginning in
the quarter ended September 30, 2011. The Company has not completed evaluating the impact of ASU 2011-02 on its consolidated financial
statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The FASB has issued ASU 2011-04, Fair Value Measurement (Topic 820):
Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU represents the
converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their
staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information
about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the
common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements
prepared in accordance with U.S. GAAP and IFRSs. The amendments to the Codification in this ASU are to be applied prospectively.
For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application
by public entities is not permitted. The impact of adoption of this ASU is not expected to be material.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">FASB ASU 2011-05, Presentation of Comprehensive Income. In
June 2011, the FASB issued ASU 2011-05, which provides entities with the option to present the total of comprehensive income,
the components of net income, and the components of other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each
component of net income along with total net income, each component of other comprehensive income, along with a total for
other comprehensive income, and a total amount for comprehensive income. Regardless of whether an entity chooses to present
comprehensive income in a single continuous statement or in two separate but consecutive statements, the entity is required
to present on the face of the financial statements reclassification adjustments for items that are reclassified from other
comprehensive income to net income in the statement(s) where the components of net income and the components of other
comprehensive income are presented. This update should be applied retrospectively effective for fiscal years, and interim
periods within those years, beginning after December 15, 2011.  We anticipate this statement will be adopted with
our 2012 annual financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Note 3 – Securities</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The securities portfolio increased $3.1 million since December 31,
2010.  The available for sale portfolio increased to 89.7% of the investment portfolio at June 30, 2011 compared to 87.6%
at December 31, 2010.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The fair values and related unrealized gains and losses for securities
available for sale were as follows, in thousands of dollars:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Gross</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Gross</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center">Fair</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Unrealized</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Unrealized</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Value</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Gains</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Losses</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td>Available for Sale</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold">    June 30, 2011</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%">      U.S. Government and agency</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">44,979</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">230</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">(7</td>
<td nowrap="nowrap" style="width: 1%">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>      Mortgage-backed</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">14,130</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">233</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(19</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>      State and municipal</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">9,744</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">295</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(3</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>      Corporate Obligations</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,018</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">19</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>      Auction rate securities</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,000</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt">      Preferred Shares</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">194</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">172</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">71,065</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">949</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(29</td>
<td nowrap="nowrap" style="padding-bottom: 3pt">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> <font style="font-size: 10pt">    <b>December 31, 2010</b></font></td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>      U.S. Government and agency</td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">38,100</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">133</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">(123</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>      Mortgage-backed</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">15,902</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">139</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(24</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>      State and municipal</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">10,527</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">216</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(32</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>      Corporate Obligations</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,023</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">24</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>      Auction rate securities</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,000</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt">      Preferred Shares</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">36</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">14</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">66,588</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">526</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(179</td>
<td nowrap="nowrap" style="padding-bottom: 3pt">)</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The carrying amount, unrecognized gains and losses, and fair value
of securities held to maturity were as follows, in thousands of dollars:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Gross</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Gross</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center">Carrying</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Unrecognized</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Unrecognized</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Fair</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Amount</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Gains</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Losses</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Value</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td>Held to Maturity</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold">     June 30, 2011</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-left: 9pt">      State and municipal</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">7,116</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">582</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">7,699</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="font-weight: bold">     December 31, 2010</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt">      State and municipal</td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">8,442</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">285</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">8,727</td>
<td nowrap="nowrap"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><br/>
 </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The carrying amount and fair value of securities by contractual
maturity at June 30, 2011 are shown below, in thousands of dollars.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center">Available for sale</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Held to Maturity</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center">Fair</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Carrying</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Fair</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Value</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Amount</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Value</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 64%">Due in one year or less</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">17,381</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">306</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">311</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Due from one to five years</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">35,528</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">4,306</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">4,601</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Due from five to ten years</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">2,370</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,894</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">2,093</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt">Due after ten years</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">462</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">610</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">694</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>     Subtotal</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">55,741</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">7,116</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">7,699</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Mortgage-backed securities</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">14,130</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Auction Rate Securities</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,000</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt">Preferred Shares</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">194</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">71,065</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">7,116</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">7,699</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Note 4 – Loans</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The table below shows total loans outstanding by type, in thousands
of dollars, at June 30, 2011 and December 31, 2010 and their percentages of the total loan portfolio.  All loans are
domestic.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center">June 30, 2011</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="6" style="text-align: center">December 31, 2010</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Balance</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">% of total</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Balance</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">% of total</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td>Portfolio loans:</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%">    Residential real estate</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">66,069</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right">52.32</td>
<td nowrap="nowrap" style="width: 1%">%</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">67,309</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right">51.24</td>
<td nowrap="nowrap" style="width: 1%">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>    Consumer</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">5,422</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">4.29</td>
<td nowrap="nowrap">%</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">6,016</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">4.58</td>
<td nowrap="nowrap">%</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>    Commercial real estate</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">49,444</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">39.16</td>
<td nowrap="nowrap">%</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">52,654</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">40.09</td>
<td nowrap="nowrap">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt">    Commercial</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">5,336</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">4.23</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt">%</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">5,375</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">4.09</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt">%</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt">       Gross Loans</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right">126,271</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">100.00</td>
<td nowrap="nowrap" style="padding-bottom: 3pt">%</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right">131,354</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">100.00</td>
<td nowrap="nowrap" style="padding-bottom: 3pt">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>    Deferred loan origination fees, net</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(234</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(224</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt">    Allowance for loan losses</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(2,090</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt">)</td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(2,354</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt">)</td>
<td style="padding-bottom: 1.5pt"> </td>
<td> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt">       Loans, net</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">123,947</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">128,776</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><br/>
Net portfolio loans at June 30, 2011 decreased $5.1 million from December 31, 2010.  During the first six months of 2011
and over the most recent twelve months total loans has decreased as a result of slowing loan demand, charge-offs, and the Company’s
effective use of loan sales and servicing to mitigate interest rate risk.  The Company generally sells its fixed long-term
mortgages on the secondary market.  Since December 31, 2010 commercial real estate mortgages have decreased $3.2 million
while consumer mortgages have decreased $1.2 million.  This decrease in commercial real estate mortgage loans is primarily
due to the foreclosure of a large commercial mortgage loan.  The foreclosure process transferred the loan balance from
a commercial mortgage loan to other real estate owned. Minimal loan demand is expected to continue and overall total loan growth
is not expected in 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><br/>
A quarterly review of loan concentrations at June 30, 2011 indicates the pattern of loans in the portfolio has not changed significantly.  There
is no individual industry with more than a 10% concentration.  However, all tourism related businesses, when combined,
total 14.9% of total loans.  For purposes of this definition, tourism related businesses includes loans to motels, hotels,
restaurants, novelty & gift shops, golf course, marine and campgrounds.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company uses a seven grade risk rating system to monitor
the ongoing credit quality of its commercial loan portfolio.  These loan ratings rank the credit quality of a
borrower by measuring liquidity, debt capacity, and payment behavior as shown in the borrower’s financial statements.
The loan ratings also measure the quality o fthe borrower’s management and the repayment support offered by any
guarantors. A summary of the Company’s loan ratings (or, characteristics of the loans within each rating) follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><u>Credit Quality Indicators</u></b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Risk Ratings 1-3 (Pass)</u> — All loans in risk ratings
1— 3 are considered to be acceptable credit risks by the Company and are grouped for purposes of allowance for loan loss
considerations and financial reporting. The three ratings essentially represent a ranking of loans that are all viewed to be of
acceptable credit quality, taking into consideration the various factors mentioned above, but with varying degrees of financial
strength, debt coverage, management and factors that could impact credit quality.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Risk Rating 4 (Special Mention)</u> — A special mention
business credit has potential weaknesses that deserve management’s close attention.  If left uncorrected, these
potential weaknesses may result in deterioration of the repayment prospects or in the Company’s credit position at some future
date.  Special mention business credits are not adversely ranked and do not expose the Company to sufficient risk to
warrant adverse ranking.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Risk Rating 5 (Substandard)</u> — A substandard business
credit is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if
any.  Business credit classified as substandard must have a well-defined weakness, or weaknesses, that jeopardize the
liquidation of the debt.  They are characterized by the distinct possibility that the Company will sustain some loss
if the deficiencies are not corrected.  If the likelihood of full collection of interest and principal may be in doubt;
such loans are placed on nonaccrual status.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Risk Rating 6 (Doubtful)</u> — A business credit rated
as doubtful has all the weaknesses inherent in substandard as risk rating 5 with the added characteristic that the weaknesses make
collection or liquidation in full, on the basis or currently existing fact, conditions, and values, highly questionable and improbable.  Due
to the high probability of loss, nonaccrual treatment is required for doubtful rated loans.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Risk Rating 7 (Loss)</u> — A business credit rated as loss
is considered uncollectible and of such little value that it’s continuance as a collectable loan is not warranted.  This
rating does not necessarily result in absolutely no recovery or salvage value, but rather it is not practical or desirable to defer
charging off even if partial recovery may be a consideration in the future.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table presents the recorded investment of loans in
the commercial loan portfolio by risk rating categories:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center">Commercial</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font-weight: bold"> </td>
<td style="padding-bottom: 1.5pt; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center">Commercial Real Estate</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center">June 30,</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">December 31,</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">June 30,</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">December 31,</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2010</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2010</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center">(In thousands)</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-left: 9pt">1</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">148</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">18</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">949</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">148</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt">2</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,586</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,334</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">4,047</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">5,166</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt">3</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">2,994</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">3,318</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">30,050</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">28,903</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt">4</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">24</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">35</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">6,845</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">4,582</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt">5</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">584</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">670</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">7,553</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">13,855</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt">6</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 9pt">7</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt">Total</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">5,336</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">5,375</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">49,444</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">52,654</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company evaluates the credit quality of loans in the residential
loan portfolio based primarily on the aging status of the loan and payment activity. The following schedule presents the recorded
investment of loans in the residential loan portfolio based on the credit risk profile of loans in a pass, special mention and
substandard rating:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center">Residential</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center">June 30,</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">December 31,</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2010</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center">(In thousands)</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 76%">Grade:</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"> </td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"> </td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 9pt">Pass</td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">65,499</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">66,884</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 9pt">Special mention</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">118</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 9pt">Substandard</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">452</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">425</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt; padding-left: 42.85pt">Total</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">66,069</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">67,309</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">__________________</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><br/>
The Company evaluates the credit quality of loans in the consumer loan portfolio, based primarily on the aging status of the loan.  Accordingly
loans past due as to principal or interest 90 days or more are considered in a nonperforming status for purposes of credit quality
evaluation.  The following schedule presents the recorded investment of loans in the consumer loan portfolio based on
the credit risk profile of loans in a performing status and loans in a nonperforming status:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; font-weight: bold"> </td>
<td colspan="3" style="border-bottom: black 1.5pt solid; font-weight: bold; text-align: center">Consumer</td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center">June 30,</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">December 31,</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2010</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center">(In thousands)</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%">Performing</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">  5,422</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">6,008</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt">Nonperforming</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">8</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt; padding-left: 42.85pt">Total</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">5,422</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">6,016</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Note 5 – Allowance for Loan Losses</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following is a summary of transactions in the allowance for
loan losses for the three and six month periods ending June 30, in thousands of dollars:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center">Three Months Ended</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="6" style="text-align: center">Six Month Ended</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center">June 30,</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">June 30,</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2010</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2010</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%">Beginning balance</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">1,845</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">3,038</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">2,354</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">2,863</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Provision for loan losses</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">400</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">150</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">700</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">375</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Charge-offs</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(280</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(2,069</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(1,130</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(2,131</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt">Recoveries</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">125</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">95</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">166</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">107</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt">Ending balance</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">2,090</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,214</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">2,090</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,214</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following schedule presents, by loan type, the changes in the
allowance for the period ending June 30 and details regarding the balance in the allowance and the recorded investment in loans
at June 30 by impairment evaluation method (in thousands).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="3" style="border-bottom: black 1.5pt solid; text-align: center">Commercial</td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Commercial Real Estate</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Consumer</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Residential</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Unallocated</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Total</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="5" style="font-weight: bold">For the six months ended June 30, 2011</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="4" style="font-weight: bold">Allowance for credit losses:</td>
<td nowrap="nowrap" style="font-weight: bold"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 28%">Beginning balance</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">43</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">2,000</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">107</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">186</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">18</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">2,354</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 42.85pt">Charge-offs</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(1,009</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(50</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(71</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">(1,130</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 42.85pt">Recoveries</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">126</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">12</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">28</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">166</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt; padding-left: 42.85pt">Provision</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">49</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">558</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">8</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">37</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">48</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">700</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt">Ending Balance</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">92</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,675</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">77</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">180</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">66</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">2,090</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt">Ending balance: individually evaluated for impairment</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">77</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">606</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">33</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">716</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt">Ending balance: collectively evaluated for impairment</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">15</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,069</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">77</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">147</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">66</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,374</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="5" style="font-weight: bold">For the six months ended June 30, 2010</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="4" style="font-weight: bold">Allowance for credit losses:</td>
<td nowrap="nowrap" style="font-weight: bold"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Beginning balance</td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">116</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">2,277</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">107</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">343</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">20</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">2,863</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 42.85pt">Charge-offs</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(285</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(1,747</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(61</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(38</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">(2,131</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 42.85pt">Recoveries</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">43</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">22</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">42</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">107</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 42.85pt">Provision</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">315</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">31</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">57</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(145</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt">)</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">117</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid">$</td>
<td style="border-bottom: black 1.5pt solid; text-align: right">375</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt">Ending Balance</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">146</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">604</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">125</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">202</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">137</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,214</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt">Ending balance: individually evaluated for impairment</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">108</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">29</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">10</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">147</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt">Ending balance: collectively evaluated for impairment</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">38</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">575</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">115</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">202</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">137</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">1,067</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><br/>
Net charge-offs for the year to date period totaled $964,000 as of June 30, 2011 compared to $2.0 million at June 30, 2010.  The
majority of the net charge offs from 2010 was related to 5 loans; all 5 loans had a specific allocation in the allowance for loan
losses prior to being charged off.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The balance of the allowance for loan loss at June 30, 2011 is $2.1
million compared to $1.2 million at June 30, 2010.  Management performs an analysis of the adequacy of the allowance
on a regular basis.  Based on the most recent analysis, management believes the current level to be adequate to provide
for potential losses.  As exhibited in the credit quality section below, the Company has started to see decreases in
its levels of nonperforming loans.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Management continually monitors its allowance for loan losses and
as a result of this monitoring process recorded a loan loss provision of $700,000 for the first six months of 2011 compared to
the prior year amount of $375,000 in the first six months of 2010.  The amount of provision for loan losses recognized
by the Company is based on management’s evaluation as to the amount required to maintain an allowance adequate to provide
for potential losses inherent in the loan portfolio.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Note 6 – Fair Value Measurements</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following tables present information about the Company’s
assets measured at fair value on a recurring basis at June 30, 2011, and the valuation techniques used by the Company to determine
those fair values.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In general, fair values determined by Level 1 inputs use quoted
prices in active markets for identical assets or liabilities that the company has the ability to access.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Fair values determined by Level 2 inputs use other inputs that are
observable, either directly or indirectly.  These Level 2 inputs include quoted prices for similar assets and liabilities
in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Level 3 inputs are unobservable inputs, including inputs that are
available in situations where there is little, if any, market activity for the related asset or liability.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">In instances where inputs used to measure fair value fall into different
levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input
that is significant to the valuation.  The Company’s assessment of the significance of particular inputs to these
fair value measurements required judgment and considers factors specific to each asset or liability.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Disclosures concerning assets measured at fair value are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Quoted Prices in Active Markets for Identical Assets (Level 1)</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Significant Other Observable Inputs (Level 2)</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Significant Unobservable Inputs (Level 3)</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Balance</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center">Assets</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold">June 30, 2011</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td colspan="4">Investment securities-available-for-sale:</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%">      U.S. Government and agency</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">44,979</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">44,979</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>      Mortgage-backed</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">14,130</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">14,130</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>      State and municipal</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">9,744</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">9,744</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>      Corporate Obligations</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,018</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,018</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>      Auction rate securities</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,000</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,000</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt">      Preferred Shares</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">194</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">194</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">60,321</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">10,744</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">71,065</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="font-weight: bold">December 31, 2010</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td colspan="4">Investment securities-available-for-sale:</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>      U.S. Government and agency</td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">38,100</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">38,100</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>      Mortgage-backed</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">15,902</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">15,902</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>      State and municipal</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">10,527</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">10,527</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>      Corporate Obligations</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,023</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,023</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>      Auction rate securities</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,000</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">1,000</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.5pt">      Preferred Shares</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">36</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">36</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">55,061</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">11,527</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">66,588</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Changes in Level 3 Assets and Liabilities Measured
at Fair Value on a Recurring Basis</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(dollars in thousands)</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center">Investment securities available-for-sale:</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2010</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; font-weight: bold">Balance at January 1,</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">11,527</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">8,836</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 6.1pt">Total realized and unrealized gains (losses) included in income</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">5</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 6.1pt">Total unrealized gains (losses) included in other comprehensive income</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">108</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(52</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 6.1pt">Net purchases, sales, calls and maturities</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(891</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(2,625</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.5pt; padding-left: 6.1pt">Net transfers in/out of Level 3</td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 3pt; font-weight: bold">Balance at June 30,</td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">10,744</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">6,164</td>
<td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Available-for-sale investment securities categorized as Level 3
assets primarily consist of bonds issued by local municipalities and an auction rate security which has no recent trades. The Company
estimates the fair value of these assets based on the present value of expected future cash flows using management’s best
estimate of key assumptions, including forecasted interest yield and payment rates, credit quality and a discount rate commensurate
with the current market and other risks involved.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Both observable and unobservable inputs may be used to determine
the fair value of positions classified as Level 3 assets and liabilities. As a result, the unrealized gains and losses for these
assets and liabilities presented in the tables above may include changes in fair value that were attributable to both observable
and unobservable inputs.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Assets Measured at Fair Value on a Nonrecurring
Basis</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(dollars in thousands)</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Balance</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Prices in Active Markets for Identical Assets (Level 1)</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Significant Other Observable Inputs (Level 2)</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Significant Unobservable Inputs (Level 3)</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Total Losses for the Period</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold; text-align: center">Assets</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold">June 30, 2011</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 40%">Impaired loans</td>
<td style="width: 1%"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">66</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"> </td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 9%; text-align: right"> </td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">66</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">(30</td>
<td nowrap="nowrap" style="width: 1%">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Other real estate owned</td>
<td> </td>
<td> </td>
<td style="text-align: right">698</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right">698</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right">(74</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="font-weight: bold">December 31, 2010</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td>Impaired loans</td>
<td> </td>
<td>$</td>
<td style="text-align: right">2,343</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td>$</td>
<td style="text-align: right">2,343</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td>$</td>
<td style="text-align: right">(890</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Other real estate owned</td>
<td> </td>
<td> </td>
<td style="text-align: right">978</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right">978</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right">(346</td>
<td nowrap="nowrap">)</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Loans categorized as Level 3 assets consist of non-homogeneous loans
that are considered impaired. The Company estimates the fair value of the loans based on using management’s best estimate
of key assumptions.  These assumptions include future payment ability and estimated realizable values of available collateral
(typically based on outside appraisals).  The impaired loan losses for the period ending June 30, 2011 represents charge-offs
of loan balances written down through the allowance for loan losses.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company’s other real estate owned is held at an estimated
fair value and that value changes periodically with the real estate market.  Losses for the period associated with other
real estate owned represent valuation adjustments and are write downs through the income statement.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Note 7 – Fair Value of Financial Instruments</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following methods and assumptions were used to estimate
fair values for financial instruments.  The carrying amount is considered to estimate fair value for cash and
variable rate loans or deposits that reprice frequently and fully.  Securities fair values are based on quoted
market prices or, if no quotes are available, on the rate and term of the security and on information about the
issuer.  For fixed rate loans or deposits and for variable loans or deposits with infrequent repricing or repricing
limits, the fair value is estimated by discounted cash flow analysis or underlying collateral values, where
applicable.  The fair value of off-balance sheet items approximates cost and is not considered significant to this
presentation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The estimated values of financial instruments were:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center">June 30, 2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center">December 31, 2010</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center">Carrying</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Fair</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Carrying</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" style="text-align: center">Fair</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Amount</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Value</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Amount</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">Value</td>
<td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center">(In thousands)</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td>Assets</td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; padding-left: 12.25pt">Cash and cash equivalents</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">14,924</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">14,924</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">22,553</td>
<td nowrap="nowrap" style="width: 1%"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%">$</td>
<td style="width: 9%; text-align: right">22,553</td>
<td nowrap="nowrap" style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 12.25pt">Time Deposits with other financial institutions</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">9,807</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">9,807</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">9,626</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">9,626</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 12.25pt">Securities available for sale</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">71,065</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">71,065</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">66,588</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">66,588</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 12.25pt">Securities held to maturity</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">7,116</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">7,699</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">8,442</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">8,727</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 12.25pt">Other securities</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">997</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">997</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">999</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">999</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 12.25pt">Loans held for sale</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">917</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">930</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">386</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">392</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 12.25pt">Loans, net</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">123,947</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">126,475</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">128,776</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">130,286</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 12.25pt">Accrued interest receivable on loans</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">468</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">468</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">433</td>
<td nowrap="nowrap"> </td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">433</td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td>Liabilities</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 12.25pt">Deposits:</td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 12.25pt">      Noninterest-bearing</td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">(46,631</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">(46,631</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">(42,106</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td>$</td>
<td style="text-align: right">(42,106</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-left: 12.25pt">      Interest bearing</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(175,970</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(176,180</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(188,060</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(188,329</td>
<td nowrap="nowrap">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-left: 12.25pt">Accrued interest payable on deposits</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(46</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(46</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(59</td>
<td nowrap="nowrap">)</td>
<td style="text-align: right"> </td>
<td> </td>
<td style="text-align: right">(59</td>
<td nowrap="nowrap">)</td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Note 9 – Earnings Per Share</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Basic earnings per share are calculated solely on weighted-average
common shares outstanding.  Diluted earnings per share will reflect the potential dilution of stock options and other
common stock equivalents.  For the three and six month periods ending June 30, 2011 the weighted average shares outstanding
in calculating basic and diluted earnings per share were 1,212,098.  For the three and six month periods ending June
30, 2010 the weighted average shares outstanding in calculating basic and diluted earnings per share were 1,213,021 and 1,213,308.  As
of June 30, 2011 and 2010 there were 10,231 options not considered in the three and six month earnings per share calculations because
they were antidilutive.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>