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## NOTES TO FINANCIAL STATEMENTS 

## 15. OTHER EXPENSES 

Other expenses for the years ended December 31, 2011 and 2010 consisted of the following: 

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## 16. PREFERRED STOCK 

## Small Business Lending Fund (“SBLF”) 

On September 15, 2011, as part of the Small Business Lending Fund (“SBLF”), the Bank entered into a Small Business Lending Fund Securities Purchase Agreement (“SBLF Purchase Agreement”) with the United States Department of the Treasury (“Treasury”). Under the SBLF Purchase Agreement, the Company issued 11,000 shares of Senior Non-Cumulative Perpetual Preferred Stock, Series C (the “Series C Preferred”) to the Treasury. The preferred stock series C shares qualify as Tier 1 capital and will pay quarterly dividends. The initial and current dividend as of December 31, 2011 is 1%. The dividend rate can fluctuate between 1% and 5% during the next 18 quarters based on the growth in qualified small business loans. 

## Capital Purchase Program (“CPP”) 

On September 15, 2011, as part of the SBLF Purchase Agreement and funding, the Bank redeemed its outstanding Series A and B Preferred shares, issued to the U.S. Treasury under the Capital Purchase Program, in the amount of $4,200,000 plus accrued interest to that date. 

On February 27, 2009, the Bank entered into a Letter Agreement (the “Purchase Agreement”) with the United States Department of the Treasury (the “Treasury”), pursuant to which the Bank issued and sold 4,000 shares of the Bank’s Fixed Rate Non-cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred”) for a purchase price of $4,000,000. Additionally, the Bank created and authorized 200.002 shares of the Bank’s Fixed Rate Non-cumulative Perpetual Preferred Stock, Series B stock, (the “Series B Preferred”), which were issued to the United States Department of the Treasury in exchange for warrants to purchase 200.002 shares of Preferred Stock with a liquidation value of $1,000 per share. 

