|            **THE                  WILBER CORPORATION** **ANNUAL                    REPORT ON SECURITIES AND EXCHANGE****COMMISSION                    FORM 10-K**for                    the Year-Ended December 31, 2006           |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| **UNITED                STATES****SECURITIES                AND EXCHANGE COMMISSION**Washington,                D.C. 20549**FORM                10-K**                                                                                                                                               |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| [                X                ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES                EXCHANGE                ACT OF 1934For                the fiscal year ended December 31, 2006 Commission                file number: 001-31896                               |
| **The                Wilber Corporation**(Exact                name of registrant as specified in its charter)                                                                                                                                                                                       |
| **New                York**(State                or other jurisdiction of incorporation or organization)                                                                                                                                                                                                  | **15-6018501**(I.R.S.                Employer Identification No.) |
|  **245                Main Street, P.O. Box 430, Oneonta, NY**(Address                of principal executive offices)                                                                                                                                                                                |  **13820**(Zip                Code) |
|  **607-432-1700**(Registrant’s                telephone number, including area code) **None**(Former                name, former address and former fiscal year, if changed since last                report) **Securities                registered pursuant to 12(b) of the Act:** |
| Title                of each class**Common                Stock, $0.01 par value per share**                                                                                                                                                                                                              | Name                of each exchange on which registered**American                Stock Exchange** |
|  **Securities                registered pursuant to 12(g) of the Act:                None**                                                                                                                                                                                                          |

| Large                  accelerated filer [  ] | Accelerated                  filer [ X ] | Non-accelerated                  filer [  ] |
|----------------------------------------------------|------------------------------------------|--------------------------------------------------|
|                                               |                                     |                                             |

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| Common                Stock(Common                Stock, $0.01 par value per share) | Outstanding                at March 12, 200710,569,182                shares |
|-------------------------------------------------------------------------------------|------------------------------------------------------------------------------|

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*This      page intentionally left blank*

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D

FORWARD-LOOKING      STATEMENTS

**PART        I**

| ITEM                    1: | BUSINESS |
|----------------------------|----------|

|   | A. | General                               |
|--------|----|---------------------------------------|
|   | B. | Market                    Area        |
|   | C. | Lending                    Activities |

|   | a. | Loan                      Products and Services             |
|--------|----|-------------------------------------------------------------|
|   | b. | Loan                      Approval Procedures and Authority |
|   | c. | Credit                      Quality Practices               |

|   | D. | Investment                      Securities Activities |
|--------|----|-------------------------------------------------------|
|   | E. | Sources                      of Funds                 |
|   | F. | Electronic                      and Payment Services  |
|   | G. | Trust                      and Investment Services    |
|   | H. | Insurance                      Services               |
|   | I. | Supervision                      and Regulation       |

|   | a. | The                      Company |
|--------|----|----------------------------------|
|   | b. | The                      Bank    |
|   | c. | Subsidiaries                     |

|   | J.     | Competition                                                |
|--------|--------|------------------------------------------------------------|
|   | K.     | Legislative                    and Regulatory Developments |
|   |   |                                                       |

| ITEM                    1A: | RISK                    FACTORS                                                           |
|-----------------------------|-------------------------------------------------------------------------------------------|
|                        |                                                                                      |
| ITEM                    1B: | UNRESOLVED                    STAFF COMMENTS                                              |
|                        |                                                                                      |
| ITEM                    2:  | PROPERTIES                                                                                |
|                        |                                                                                      |
|                        |                                                                                      |
| ITEM                    3:  | LEGAL                    PROCEEDINGS                                                      |
|                        |                                                                                      |
|                        |                                                                                      |
| ITEM 4:           | SUBMISSION                    OF MATTERS TO A VOTE OF SECURITY                    HOLDERS |

**PART          II**

| ITEM                    5: | MARKET                    FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER                    PURCHASES OF EQUITY SECURITIES |
|----------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | A. | Market                    Information; Dividends on Common Stock; and Recent Sales of Unregistered                    Securities |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------|
|   | B. | Use                    of Proceeds from Registered Securities                                                                    |
|   | C. | Purchases                    of Equity Securities by Issuer and Affiliated                    Purchasers                         |

|   | a. | Comparison                        of Financial Condition at December 31, 2006 and December                        31,                        2005 |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------|

|   | D. | Results                      of Operations |
|--------|----|--------------------------------------------|

|   | a. | Comparison                    of Operating Results for the Years Ended December 31, 2006 and                    December                    31, 2005 |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------|

| ITEM                      6: | SELECTED                      FINANCIAL DATA                                                                                      |
|------------------------------|-----------------------------------------------------------------------------------------------------------------------------------|
|                         |                                                                                                                              |
| ITEM                      7: | MANAGEMENT’S                    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF                    OPERATIONS |

|   | A. | General                                   |
|--------|----|-------------------------------------------|
|   | B. | Performance                      Overview |
|   | C. | Financial                      Condition  |

|   | a. | Comparison                  of Financial Condition at December 31, 2006 and December 31,                  2005 |
|--------|----|----------------------------------------------------------------------------------------------------------------|

|   | D. | Results                  of Operations |
|--------|----|----------------------------------------|

|   | a. | Comparison                  of Operating Results for the Years Ended December 31, 2006 and                  December                  31, 2005 |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------|

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*Index*

|   | b. | Comparison                  of Operating Results for the Years Ended December 31, 2005 and                  December                  31, 2004 |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | E. | Liquidity                                        |
|--------|----|--------------------------------------------------|
|   | F. | Capital                  Resources and Dividends |

|                      |                                                                                                                   |
|---------------------------|------------------------------------------------------------------------------------------------------------------------|
| ITEM                  7A: | QUANTITATIVE                  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                            |
|                      |                                                                                                                   |
| ITEM                  8:  | FINANCIAL                  STATEMENTS AND SUPPLEMENTARY DATA                                                           |
|                      |                                                                                                                   |
|                      |                                                                                                                   |
| ITEM                  9:  | CHANGES                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL                  DISCLOSURE |
|                      |                                                                                                                   |
|                      |                                                                                                                   |
| ITEM                  9A: | CONTROLS                  AND PROCEDURES                                                                               |
|                      |                                                                                                                   |
| ITEM                  9B: | OTHER                  INFORMATION                                                                                     |

**PART      III**

| ITEM                  10: | DIRECTORS,                  EXECUTIVE OFFICERS AND CORPORATE                  GOVERNANCE |
|---------------------------|------------------------------------------------------------------------------------------|

|   | A. | Directors                  of the Registrant                                |
|--------|----|-----------------------------------------------------------------------------|
|   | B. | Executive                  Officers of the Registrant Who Are Not Directors |
|   | C. | Compliance                  With Section 16(a)                              |
|   | D. | Code                  of Ethics                                             |
|   | E. | Corporate                  Governance                                       |

|                      |                                                                                                                             |
|---------------------------|----------------------------------------------------------------------------------------------------------------------------------|
| ITEM                  11: | EXECUTIVE                  COMPENSATION                                                                                          |
|                      |                                                                                                                             |
|                      |                                                                                                                             |
| ITEM                  12: | SECURITY                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED                  STOCKHOLDER MATTERS |
|                      |                                                                                                                             |
|                      |                                                                                                                             |
| ITEM                  13: | CERTAIN                  RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR                  INDEPENDENCE                      |

|   | A. | Related                  Transactions  |
|--------|----|----------------------------------------|
|   | B. | Director                  Independence |

| ITEM                  14: | PRINCIPAL                  ACCOUNTING FEES AND SERVICES |
|---------------------------|---------------------------------------------------------|

**PART      IV**

| ITEM                  15: | EXHIBITS                  AND FINANCIAL STATEMENT                  SCHEDULES |
|---------------------------|------------------------------------------------------------------------------|

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*Index*

OKIN

----

*Index*

**PART      I**

**ITEM      1: BUSINESS**

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*Index*

*General.*

*Residential      Real Estate. *

*Wall      Street Journal*

*Commercial      Real Estate. *
* *

----

*Index*

*Commercial      Loans. *

*Standby      Letters of Credit. *

*Consumer      Loans. *

----

*Index*

*General.*

*Loans      to Directors and Executive Officers*

----

*Index*

*General.      *

*Delinquent      Loans and Collection Procedures. *

*Loan      Portfolio Monitoring Practices.*

----

*Index*

*Allowance      for Loan Loss.*

*Non-Performing      Loans*

*Foreclosure      and Repossession.*

*Loan      Charge-Offs.*

*General.      *

----

*Index*

*General.      *

*Deposits.      *

*Borrowed      Funds. *

----

*Index*

*General.      *

*General.      *

|                                                                   |   | December                            31, |   |
|------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                   |   | 2006                                    |   | 2005 |   |
| *dollars                            in thousands*                      |   | NumberOfAccounts                        |   | EstimatedMarketValue |   | NumberOfAccounts |   | EstimatedMarketValue |   |
| Trusts                                                                 |   |                                    | 348    |   | $ | 151,558 |   |   | 342 |   | $ | 166,041 |   |
| Estates                                                                |   |                                    | 12     |   |   | 4,540 |   |   | 8 |   |   | 4,522 |   |
| Custodian,                            Investment Management and Others |   |                                    | 232    |   |   | 154,795 |   |   | 227 |   |   | 139,357 |   |
| Total                                                                  |   |                                    | 592    |   | $ | 310,893 |   |   | 577 |   | $ | 309,920 |   |

*General.*

----

*Index*

*Bank      Holding Company Act*

*Federal      Securities Law.*

*Sarbanes-Oxley      Act of 2002*

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*Index*

*General*

*Business      Activities*

*Standards      for Safety and Soundness.*

*Branching.*

*Transactions      with Related Parties*

*Capital      Requirements*

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*Index*

*Payment      of Dividends*

*Insurance      of Deposit Accounts*

*Federal      Reserve System*

*Loans      to One Borrower.*
* *

*Real      Estate Lending Standards. *

*Community      Reinvestment Act.*

*Fair      Lending and Consumer Protection Laws.*

*Prohibitions      Against Tying Arrangements*

----

*Index*

*Privacy      Regulations. *

*The      USA PATRIOT Act. *

*Deposit      Insurance Reform Legislation*

*Executive      Officer and Director Compensation Disclosure*

*New      Legislative Developments.*

----

*Index*

**ITEM      1A: RISK FACTORS**

*General      Competitive and Economic Conditions.*

*Credit      Risk*

*The      Financial Performance of Large Borrowers.*

*Allowance      for Loan Losses May not be Sufficient to Cover Actual Loan      Losses.*

*Changes      in Interest Rates and Capital Markets.*

*Fraud      Risk.*

*Changes      in Government Laws, Regulations, and Policies. *

----

*Index*

*Changes      in Generally Accepted Accounting Principles.*

*Changes      in the Financial Condition of Government Agencies, Government Sponsored      Enterprises, and Local and State Governments.*

*Actions      of Regulatory Authorities. *

*Changes      in the Company’s Policies or Management. *

*Incidents      Affecting Our Reputation. *

*Technology      Risk. *

*Liquidity      of the Company’s Common Shares.*

*Changes      to the Markets or Exchanges On Which the Company’s Common Shares Are      Traded.*

**ITEM      1B: UNRESOLVED STAFF COMMENTS**

**ITEM      2: PROPERTIES**

----

*Index*

**ITEM      3: LEGAL PROCEEDINGS**

**ITEM      4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY      HOLDERS**

**PART      II**

**ITEM      5: **
**MARKET      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER      PURCHASES OF EQUITY SECURITIES**

|                                                                                                                                                                 |   | 2006   |   | 2005   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|                                                                                                                                                                 |   | High   |   | Low    |   | Dividend |   | High |   | Low |   | Dividend |   |
| 4th                Quarter                                                                                                                                           |   | $      | 10.25  |   | $      | 9.51 |   | $ | 0.0950 |   | $ | 12.00 |   | $ | 10.84 |   | $ | 0.0950 |   |
| 3rd                Quarter                                                                                                                                           |   | $      | 10.50  |   | $      | 9.85 |   | $ | 0.0950 |   | $ | 12.27 |   | $ | 11.80 |   | $ | 0.0950 |   |
| 2nd                Quarter                                                                                                                                           |   | $      | 11.35  |   | $      | 10.20 |   | $ | 0.0950 |   | $ | 12.45 |   | $ | 12.00 |   | $ | 0.0950 |   |
| 1st                Quarter                                                                                                                                           |   | $      | 10.85  |   | $      | 9.90 |   | $ | 0.0950 |   | $ | 12.90 |   | $ | 11.94 |   | $ | 0.0950 |   |
|                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)                The high and low bid quotations and trading prices provided in this                table                were obtained from www.finance.yahoo.com. |
|                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

*Shareholder      Return Performance Graph.*

----

*Index*

|                             |   | **2001** |   | **2002** |   | **2003** |   | **2004** |   | **2005** |   | **2006** |   |
|----------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|
|                             |   |     |   |     |   |     |   |     |   |     |   |     |   |
| S&P                500       |   | $        | 100    |     | $      | 78       |   | $        | 107    |     | $      | 117      |   | $ | 122 |   | $ | 138 |   |
| S&P                Financial |   | $        | 100    |     | $      | 84       |   | $        | 115    |     | $      | 126      |   | $ | 133 |   | $ | 152 |   |
| Wilber                Corp.      |   | $        | 100    |     | $      | 134      |   | $        | 166    |     | $      | 158      |   | $ | 151 |   | $ | 147 |   |

----

*Index*

**ITEM      6: SELECTED FINANCIAL DATA**

| **The                Wilber Corporation and Subsidiary**               |   | **As                of and for 12-month Period Ended December 31, (1)** |    |
|------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|---------|
|                                                                   |   | **2006**                                                                |    | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                                   |   | *(dollars                in thousands, except per share data)*          |    |
| **Consolidated                Statements of Income Data:**             |   |                                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                Income                                         |   | $                                                                       | 43,341  |   | $ | 40,310 |   | $ | 37,165 |   | $ | 38,628 |   | $ | 41,646 |   |
| Interest                Expense                                        |   |                                                                    | 18,360  |   |   | 14,930 |   |   | 12,761 |   |   | 14,153 |   |   | 17,170 |   |
| Net                Interest Income                                     |   |                                                                    | 24,981  |   |   | 25,380 |   |   | 24,404 |   |   | 24,475 |   |   | 24,476 |   |
| Provision                for Loan Losses                               |   |                                                                    | 1,560   |   |   | 1,580 |   |   | 1,200 |   |   | 1,565 |   |   | 1,920 |   |
| Net                Interest Income After Provision for Loan Losses     |   |                                                                    | 23,421  |   |   | 23,800 |   |   | 23,204 |   |   | 22,910 |   |   | 22,556 |   |
|                                                                   |   |                                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-Interest                Income (Excluding Net Gains on Securities) |   |                                                                    | 5,455   |   |   | 5,156 |   |   | 4,692 |   |   | 4,684 |   |   | 5,067 |   |
| Net                Gains on Securities Transactions                    |   |                                                                    | 514     |   |   | 469 |   |   | 1,031 |   |   | 1,064 |   |   | 272 |   |
| Non-Interest                Expense                                    |   |                                                                    | 20,032  |   |   | 18,966 |   |   | 17,307 |   |   | 16,668 |   |   | 15,975 |   |
| Income                Before Provision for Income Taxes                |   |                                                                    | 9,358   |   |   | 10,459 |   |   | 11,620 |   |   | 11,990 |   |   | 11,920 |   |
| Provision                for Income Taxes                              |   |                                                                    | 2,206   |   |   | 2,715 |   |   | 3,002 |   |   | 3,277 |   |   | 3,358 |   |
| Net                Income                                              |   | $                                                                       | 7,152   |   | $ | 7,744 |   | $ | 8,618 |   | $ | 8,713 |   | $ | 8,562 |   |
|                                                                   |   |                                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Per                Common Share: (2)**                               |   |                                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                (Basic)                                        |   | $                                                                       | 0.66    |   | $ | 0.69 |   | $ | 0.77 |   | $ | 0.78 |   | $ | 0.76 |   |
| Cash                Dividends                                          |   |                                                                    | 0.38    |   |   | 0.38 |   |   | 0.38 |   |   | 0.37 |   |   | 0.375 |   |
| Book                Value                                              |   |                                                                    | 5.99    |   |   | 6.08 |   |   | 6.04 |   |   | 5.74 |   |   | 5.61 |   |
| Tangible                Book Value (3)                                 |   |                                                                    | 5.52    |   |   | 5.61 |   |   | 5.77 |   |   | 5.46 |   |   | 5.32 |   |
| **Consolidated                Period-End Balance Sheet Data:**         |   |                                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                Assets                                            |   | $                                                                       | 761,981 |   | $ | 752,728 |   | $ | 750,861 |   | $ | 729,023 |   | $ | 708,984 |   |
| Securities                Available-for-Sale                           |   |                                                                    | 231,927 |   |   | 238,520 |   |   | 249,415 |   |   | 275,051 |   |   | 234,542 |   |
| Securities                Held-to-Maturity                             |   |                                                                    | 63,990  |   |   | 56,769 |   |   | 59,463 |   |   | 44,140 |   |   | 42,837 |   |
| Gross                Loans                                             |   |                                                                    | 405,832 |   |   | 403,665 |   |   | 391,043 |   |   | 360,906 |   |   | 358,295 |   |
| Allowance                for Loan Losses                               |   |                                                                    | 6,680   |   |   | 6,640 |   |   | 6,250 |   |   | 5,757 |   |   | 5,392 |   |
| Deposits                                                               |   |                                                                    | 629,044 |   |   | 604,958 |   |   | 571,929 |   |   | 580,633 |   |   | 549,081 |   |
| Long-Term                Borrowings                                    |   |                                                                    | 42,204  |   |   | 52,472 |   |   | 65,379 |   |   | 55,849 |   |   | 73,346 |   |
| Short-Term                Borrowings                                   |   |                                                                    | 18,459  |   |   | 19,357 |   |   | 37,559 |   |   | 20,018 |   |   | 13,260 |   |
| Shareholders’                Equity                              |   |                                                                    | 63,332  |   |   | 67,717 |   |   | 67,605 |   |   | 64,304 |   |   | 63,162 |   |
| **Selected                Key Ratios:**                                |   |                                                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return                on Average Assets                                |   |                                                                    | 0.95    | % |   | 1.02 | % |   | 1.17 | % |   | 1.20 | % |   | 1.25 | % |
| Return                on Average Equity                                |   |                                                                    | 11.20   | % |   | 11.40 | % |   | 13.08 | % |   | 13.67 | % |   | 14.36 | % |
| Net                Interest Margin (tax-equivalent) (4)                |   |                                                                    | 3.81    | % |   | 3.82 | % |   | 3.76 | % |   | 3.77 | % |   | 3.96 | % |
| Efficiency                Ratio (5)                                    |   |                                                                    | 61.14   | % |   | 57.67 | % |   | 55.50 | % |   | 53.76 | % |   | 51.31 | % |
| Dividend                Payout                                         |   |                                                                    | 57.58   | % |   | 55.07 | % |   | 49.35 | % |   | 47.44 | % |   | 49.34 | % |

----

*Index*

| **The                Wilber Corporation and Subsidiary**                                                                                                                                                                                                                                                                                      |   | **As                of and for 12-month Period Ended December 31, (1)** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                          |   | **2006**                                                                |   | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                                                                                                                                                                                                                                                                                                          |   | *(dollars                in thousands, except per share data)*          |   |
| **Asset                Quality:**                                                                                                                                                                                                                                                                                                             |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-performing                Loans                                                                                                                                                                                                                                                                                                           |   |                                                                    | 2,529  |   |   | 4,918 |   |   | 2,751 |   |   | 3,658 |   |   | 3,138 |   |
| Non-performing                Assets                                                                                                                                                                                                                                                                                                          |   |                                                                    | 2,632  |   |   | 4,938 |   |   | 2,829 |   |   | 3,678 |   |   | 3,160 |   |
| Net                Loan Charge-Offs to Average Loans                                                                                                                                                                                                                                                                                          |   |                                                                    | 0.38   | % |   | 0.30 | % |   | 0.19 | % |   | 0.33 | % |   | 0.29 | % |
| Allowance                for Loan Losses to Period-End Loans                                                                                                                                                                                                                                                                                  |   |                                                                    | 1.65   | % |   | 1.64 | % |   | 1.60 | % |   | 1.60 | % |   | 1.50 | % |
| Allowance                for Loan Losses to Non-performing Loans (6)                                                                                                                                                                                                                                                                          |   |                                                                    | 264    | % |   | 135 | % |   | 227 | % |   | 157 | % |   | 172 | % |
| Non-performing                Loans to Period-End Loans                                                                                                                                                                                                                                                                                       |   |                                                                    | 0.62   | % |   | 1.22 | % |   | 0.70 | % |   | 1.01 | % |   | 0.88 | % |
|                                                                                                                                                                                                                                                                                                                                          |   |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)                Certain figures have been reclassified to conform with the current                period                presentation.                                                                                                                                                                                                      |
| (2)                All per share amounts have been adjusted for the 4 for 1 stock split                approved on September 5, 2003.                                                                                                                                                                                                         |
| (3)                Tangible book value numbers exclude goodwill and intangible assets                associated with prior business combinations.                                                                                                                                                                                             |
| (4)                Net interest margin (tax-equivalent) is tax-equivalent net interest                income                divided by average earning assets.                                                                                                                                                                                |
| (5)                The efficiency ratio is calculated by dividing total non-interest                expense                less amortization of intangibles and other real estate expense by                tax-equivalent net interest income plus non-interest income other                than                securities gains and losses. |
| (6)                Non-performing loans include non-accrual loans, troubled debt restructured                loans and accruing loans 90 days or more                delinquent.                                                                                                                                                              |

|                                                                                                                                                                                                                                                                                                                                         |   | **2006**                                |       | **2005                (1)** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|-----------------------------|--------|
| **Selected                Unaudited****Quarterly                Financial Data**                                                                                                                                                                                                                                                             |   | **Fourth**                              |       | **Third**                   |   | **Second** |   | **First** |   | **Fourth** |   | **Third** |   | **Second** |   | **First** |   |
|                                                                                                                                                                                                                                                                                                                                         |   | *(Dollars                in Thousands)* |       |
| Interest                income                                                                                                                                                                                                                                                                                                               |   | $                                       | 11,291     |                        | $      | 10,934 |   | $ | 10,646 |   | $ | 10,470 |   | $ | 10,400 |   | $ | 10,150 |   | $ | 9,940 |   | $ | 9,820 |   |
| Interest                expense                                                                                                                                                                                                                                                                                                              |   |                                    | 5,061      |                        |   | 4,691 |   |   | 4,388 |   |   | 4,220 |   |   | 4,127 |   |   | 3,735 |   |   | 3,559 |   |   | 3,509 |   |
| Net                interest income                                                                                                                                                                                                                                                                                                           |   |                                    | 6,230      |                        |   | 6,243 |   |   | 6,258 |   |   | 6,250 |   |   | 6,273 |   |   | 6,415 |   |   | 6,381 |   |   | 6,311 |   |
| Provision                for loan losses                                                                                                                                                                                                                                                                                                     |   |                                    | 300        |                        |   | 420 |   |   | 420 |   |   | 420 |   |   | 800 |   |   | 300 |   |   | 240 |   |   | 240 |   |
| Net                interest income after provision for loan losses                                                                                                                                                                                                                                                                           |   |                                    | 5,930      |                        |   | 5,823 |   |   | 5,838 |   |   | 5,830 |   |   | 5,473 |   |   | 6,115 |   |   | 6,141 |   |   | 6,071 |   |
| Investment                Security Gains (Losses), Net                                                                                                                                                                                                                                                                                       |   |                                    | 129        |                        |   | 75 |   |   | 17 |   |   | 293 |   |   | 6 |   |   | 71 |   |   | 148 |   |   | 244 |   |
| Other                non-interest income                                                                                                                                                                                                                                                                                                     |   |                                    | 1,464      |                        |   | 1,300 |   |   | 1,334 |   |   | 1,357 |   |   | 1,282 |   |   | 1,332 |   |   | 1,335 |   |   | 1,207 |   |
| Non-interest                expense                                                                                                                                                                                                                                                                                                          |   |                                    | 4,618      |                        |   | 5,069 |   |   | 5,494 |   |   | 4,851 |   |   | 4,663 |   |   | 4,836 |   |   | 4,877 |   |   | 4,590 |   |
| Income                before income tax expense                                                                                                                                                                                                                                                                                              |   |                                    | 2,905      |                        |   | 2,129 |   |   | 1,695 |   |   | 2,629 |   |   | 2,098 |   |   | 2,682 |   |   | 2,747 |   |   | 2,932 |   |
| Income                tax expense                                                                                                                                                                                                                                                                                                            |   |                                    | 704        |                        |   | 485 |   |   | 341 |   |   | 676 |   |   | 505 |   |   | 700 |   |   | 748 |   |   | 762 |   |
| Net                income                                                                                                                                                                                                                                                                                                                    |   | $                                       | 2,201      |                        | $      | 1,644 |   | $ | 1,354 |   | $ | 1,953 |   | $ | 1,593 |   | $ | 1,982 |   | $ | 1,999 |   | $ | 2,170 |   |
|                                                                                                                                                                                                                                                                                                                                         |   |                                    |       |                        |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |   |   |   |   |  |   |
| Basic                earnings per share                                                                                                                                                                                                                                                                                                      |   | $                                       | 0.21       |                        | $      | 0.15 |   | $ | 0.12 |   | $ | 0.18 |   | $ | 0.14 |   | $ | 0.18 |   | $ | 0.18 |   | $ | 0.19 |   |
|                                                                                                                                                                                                                                                                                                                                         |   |                                    |       |                        |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |   |   |   |   |  |   |
| Basic                weighted average shares outstanding                                                                                                                                                                                                                                                                                     |   |                                    | 10,569,182 |                        |   | 10,579,400 |   |   | 10,966,693 |   |   | 11,145,937 |   |   | 11,158,813 |   |   | 11,163,092 |   |   | 11,171,114 |   |   | 11,186,275 |   |
|                                                                                                                                                                                                                                                                                                                                         |   |                                    |       |                        |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |   |   |   |   |  |   |
| Net                interest margin (tax equivalent) (2)                                                                                                                                                                                                                                                                                      |   |                                    | 3.74       | %                           |   | 3.83 | % |   | 3.84 | % |   | 3.81 | % |   | 3.78 | % |   | 3.85 | % |   | 3.85 | % |   | 3.82 | % |
| Return                on average assets                                                                                                                                                                                                                                                                                                      |   |                                    | 1.14       | %                           |   | 0.87 | % |   | 0.73 | % |   | 1.05 | % |   | 0.84 | % |   | 1.04 | % |   | 1.06 | % |   | 1.16 | % |
| Return                on average equity                                                                                                                                                                                                                                                                                                      |   |                                    | 13.92      | %                           |   | 10.78 | % |   | 8.37 | % |   | 11.71 | % |   | 9.37 | % |   | 11.54 | % |   | 11.76 | % |   | 12.94 | % |
| Efficiency                ratio (3)                                                                                                                                                                                                                                                                                                          |   |                                    | 55.52      | %                           |   | 62.34 | % |   | 67.44 | % |   | 59.36 | % |   | 57.42 | % |   | 58.09 | % |   | 58.73 | % |   | 56.42 | % |
|                                                                                                                                                                                                                                                                                                                                         |   |                                    |       |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)                Certain figures have been reclassified to conform with the current                period                presentation.                                                                                                                                                                                                     |   |                                    |       |                        |   |   |   |   |   |
| (2)                Net interest margin (tax-equivalent) is tax-equivalent net interest                income                divided by average earning assets.                                                                                                                                                                               |
| (3)                The Efficiency Ratio is calculated by dividing total non-interest                expense                less amortization of intangibles and other real estate expense by                tax-equivalent net interest income plus non-interest income other                than                securities gains and losses |
|                                                                                                                                                                                                                                                                                                                                         |   |                                    |       |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

*Index*

**ITEM      7: **
**MANAGEMENT’S      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND      RESULTS OF OPERATIONS**

*Critical      Accounting Policies.*

*Recent        Accounting Pronouncements*

----

*Index*

*Accounting        for Uncertainty in Income Taxes - An Interpretation of FASB Statement No        109*
*Accounting        for Income Taxes.*

*Accounting      for Servicing of Financial Assets - an amendment of FASB Statement No      140*

*Accounting      for Certain Hybrid Financial Instruments*

----

*Index*

*Please      refer to the Consolidated Financial Statements presented in PART II, Item 8,      of      this document.*

----

*Index*

|                                                                                                                                   |   | **At                December 31,** |    |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|
|                                                                                                                                   |   | **2006**                           |    | **2005** |   | **2004** |   |
|                                                                                                                                   |   | **Amortized****Cost**              |    | **Estimated****Fair                Value** |   | **Amortized****Cost** |   | **Estimated****Fair                Value** |   | **Amortized****Cost** |   | **Estimated****Fair                Value** |   |
|                                                                                                                                   |   | (In                thousands)      |    |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |   |   |   |   |   |
| **Trading                (1):**                                                                                                        |   | $                                  | 1,296   |   | $ | 1,625 |   | $ | 1,334 |   | $ | 1,542 |   | $ | 1,347 |   | $ | 1,504 |   |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Available-for-sale:**                                                                                                                |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.                Treasuries                                                                                                         |   | $                                  | 10,963  |   | $ | 10,807 |   | $ | 10,952 |   | $ | 10,866 |   | $ | 4,960 |   | $ | 5,016 |   |
| Obligations                of U.S. Government                                                                                          |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporations                and Agencies                                                                                               |   |                               | 21,486  |   |   | 21,336 |   |   | 25,444 |   |   | 25,091 |   |   | 11,989 |   |   | 11,954 |   |
| Obligations                of States and Political                                                                                     |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Subdivisions                (Municipal Bonds)                                                                                          |   |                               | 47,985  |   |   | 47,544 |   |   | 55,080 |   |   | 54,638 |   |   | 66,656 |   |   | 67,745 |   |
| Mortgage                - Backed Securities                                                                                            |   |                               | 149,400 |   |   | 146,086 |   |   | 146,463 |   |   | 143,248 |   |   | 159,289 |   |   | 158,645 |   |
| Corporate                Bonds                                                                                                         |   |                               | 2,274   |   |   | 2,267 |   |   | 0 |   |   | 0 |   |   | 0 |   |   | 0 |   |
| Equity                securities                                                                                                       |   |                               | 5,425   |   |   | 5,519 |   |   | 6,356 |   |   | 6,507 |   |   | 5,870 |   |   | 6,055 |   |
| Total                available-for-sale                                                                                                |   | $                                  | 237,533 |   | $ | 233,559 |   | $ | 244,295 |   | $ | 240,350 |   | $ | 248,764 |   | $ | 249,415 |   |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Held-to-maturity:**                                                                                                                  |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations                of States and Political Subdivisions                (Municipal Bonds)                                       |   | $                                  | 22,903  |   | $ | 22,916 |   | $ | 10,655 |   | $ | 10,633 |   | $ | 7,811 |   | $ | 7,999 |   |
| Mortgage-Backed                Securities                                                                                              |   |                               | 39,455  |   |   | 38,394 |   |   | 44,284 |   |   | 43,204 |   |   | 51,652 |   |   | 51,325 |   |
| Total                held-to-maturity                                                                                                  |   | $                                  | 62,358  |   | $ | 61,310 |   | $ | 54,939 |   | $ | 53,837 |   | $ | 59,463 |   | $ | 59,324 |   |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)                These securities are held by the Company for its non-qualified Executive                Deferred Compensation plan. |   |                               |    |   |   |   |

----

*Index*

|                                                                                                                                                                                                     |   | **At                December 31, 2006** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                                     |   | In                One Year or Less      |   | After                One Yearthrough                Five Years |   | After                Five Yearsthrough                Ten Years |   | After                Ten Years |   | Total |   |
| *Dollars                in Thousands*                                                                                                                                                                    |   | CarryingValue                           |   | WeightedAverageYield |   | CarryingValue |   | WeightedAverageYield |   | CarryingValue |   | WeightedAverageYield |   | CarryingValue |   | WeightedAverageYield |   | CarryingValue |   | WeightedAverageYield |   |
| U.S.                Treasuries                                                                                                                                                                           |   | $                                  | 1,987  |   |   | 4.18 | % | $ | 5,905 |   |   | 4.09 | % | $ | 2,915 |   |   | 4.26 | % |   | - |   |   | - |   | $ | 10,807 |   |   | 4.15 | % |
|                                                                                                                                                                                                     |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations                of U.S. Government                Corporations and                Agencies                                                                                                    |   |                                    | 11,437 |   |   | 3.85 | % |   | 9,899 |   |   | 4.76 | % |   | - |   |   | - |   |   | - |   |   | - |   |   | 21,336 |   |   | 4.27 | % |
|                                                                                                                                                                                                     |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations                of States andPolitical                Subdivisions(Municipal                Bonds)                                                                                            |   |                                    | 14,297 |   |   | 3.97 | % |   | 17,552 |   |   | 3.44 | % |   | 33,147 |   |   | 3.73 | % |   | 5,451 |   |   | 4.48 | % |   | 70,447 |   |   | 3.76 | % |
|                                                                                                                                                                                                     |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed                Securities                                                                                                                                                                |   |                                    | 14,148 |   |   | 4.62 | % |   | 151,519 |   |   | 4.69 | % |   | 17,844 |   |   | 5.55 | % |   | 2,030 |   |   | 5.30 | % |   | 185,541 |   |   | 4.77 | % |
|                                                                                                                                                                                                     |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate                Securities                                                                                                                                                                      |   |                                    | -      |   |   | - |   |   | 2,267 |   |   | 5.10 | % |   | - |   |   | - |    | 2,267 |   |   | 5.10 | % |
|                                                                                                                                                                                                     |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                securities (1)                                                                                                                                                                      |   | $                                       | 41,869 |   |   | 4.17 | % | $ | 187,142 |   |   | 4.56 | % | $ | 53,906 |   |   | 4.35 | % | $ | 7,481 |   |   | 4.70 | % | $ | 290,398 |   |   | 4.47 | % |
|                                                                                                                                                                                                     |   |                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)                This table excludes trading securities totaling $1.625 million and                other                equity securities totaling $5.519 million at December 31,                2006. |

----

*Index*

*General*

|                                                                                                                                                                                                                       |   | **At                December 31,** |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|
|                                                                                                                                                                                                                       |   | **2006**                           |    | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                                                                                                                                                                                       |   | Amount                             |    | Percent |   | Amount |   | Percent |   | Amount |   | Percent |   | Amount |   | Percent |   | Amount |   | Percent |   |
| *(Dollars                in thousands)*                                                                                                                                                                                    |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                real estate (1)                                                                                                                                                                                 |   | $                                  | 117,815 |   |   | 29.0 | % | $ | 124,367 |   |   | 30.8 | % | $ | 119,103 |   |   | 30.5 | % | $ | 118,571 |   |   | 32.9 | % | $ | 125,464 |   |   | 35.0 | % |
| Commercial                real estate                                                                                                                                                                                      |   |                               | 152,128 |   |   | 37.5 | % |   | 143,552 |   |   | 35.6 | % |   | 129,516 |   |   | 33.1 | % |   | 115,733 |   |   | 32.1 | % |   | 104,967 |   |   | 29.3 | % |
| Commercial                (2)                                                                                                                                                                                              |   |                               | 74,033  |   |   | 18.2 | % |   | 69,651 |   |   | 17.3 | % |   | 78,003 |   |   | 19.9 | % |   | 65,031 |   |   | 18.0 | % |   | 65,595 |   |   | 18.3 | % |
| Consumer                                                                                                                                                                                                                   |   |                               | 61,856  |   |   | 15.2 | % |   | 66,095 |   |   | 16.4 | % |   | 64,421 |   |   | 16.5 | % |   | 61,571 |   |   | 17.1 | % |   | 62,269 |   |   | 17.4 | % |
| Total                loans                                                                                                                                                                                                 |   |                               | 405,832 |   |   | 100.0 | % |   | 403,665 |   |   | 100.0 | % |   | 391,043 |   |   | 100.0 | % |   | 360,906 |   |   | 100.0 | % |   | 358,295 |   |   | 100.0 | % |
|                                                                                                                                                                                                                       |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:                                                                                                                                                                                                                      |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                       |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance                for loan losses                                                                                                                                                                                   |   |                               | (6,680  | ) |   |   |   |   | (6,640 | ) |   |   |   |   | (6,250 | ) |   |   |   |   | (5,757 | ) |   |   |   |   | (5,392 | ) |   |   |   |
|                                                                                                                                                                                                                       |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                loans                                                                                                                                                                                                   |   | $                                  | 399,152 |   |   |   |   | $ | 397,025 |   |   |   |   | $ | 384,793 |   |   |   |   | $ | 355,149 |   |   |   |   | $ | 352,903 |   |   |   |   |
|                                                                                                                                                                                                                       |   |                               |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)                Includes loans secured by 1-4 family residential dwellings, 5+ family                residential dwellings, home equity loans and residential construction                loans.                        |
| (2)                Includes commercial and industrial loans, agricultural loans and                obligations (other than securities and leases) of states and political                subdivisions in the United States |

----

*Index*

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | WithinOneYear                  (1) |    | OneThroughFiveYears |   | MoreThanFiveYears |   | Total  |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|---------------------|--------|-------------------|--------|--------|---------|
| Residential                  real estate (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                  | 49,006  |                | $      | 11,728            |   | $      | 57,081  |   | $ | 117,815 |   |
| Commercial                  real estate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                               | 39,584  |                |   | 17,461            |   |   | 95,083  |   |   | 152,128 |   |
| Commercial                  (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                               | 43,392  |                |   | 12,221            |   |   | 18,420  |   |   | 74,033 |   |
| Consumer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                               | 20,966  |                |   | 32,844            |   |   | 8,046   |   |   | 61,856 |   |
| Total                  loans receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                  | 152,948 |                | $      | 74,254            |   | $      | 178,630 |   | $ | 405,832 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                               |    |                |   |              |   |   |    |   |   |   |   |
| (1)                  Includes loans secured by 1-4 family residential dwellings, 5+                  family                  residential dwellings, home equity loans and residential construction                  loans. (2)                    Includes commercial and industrial loans, agricultural loans                    and                    obligations (other than securities and leases) of states and                    political                    subdivisions in the United                    States. |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **Due                  After December 31, 2007** |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **Fixed**                                        |    | **Adjustable** |   | **Total** |   |
| Residential                  real estate (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                                | 65,115  |   | $ | 42,621 |   | $ | 107,736 |   |
| Commercial                  real estate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                             | 88,985  |   |   | 59,901 |   |   | 148,886 |   |
| Commercial                  (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                             | 30,869  |   |   | 9,870 |   |   | 40,739 |   |
| Consumer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                             | 56,398  |   |   | 1,323 |   |   | 57,721 |   |
| Total                  loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                                | 241,367 |   | $ | 113,715 |   | $ | 355,082 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                             |    |   |   |   |   |   |   |   |
| (1)                  Includes loans secured by 1-4 family residential dwellings, 5+                  family                  residential dwellings, home equity loans and residential construction                  loans. (2)                    Includes commercial and industrial loans, agricultural loans                    and                    obligations (other than securities and leases) of states and                    political                    subdivisions in the United                    States. |

*Commitments      and Lines of Credit*

----

*Index*

| Commitment                Expiration of Standby Letters of Credit |   |
|-------------------------------------------------------------------|--------|
| *(dollars                in thousands)*                           |   |
| Within                one year                                    |   | $ | 1,297 |   |
| After                one but within three years                   |   |   | 2,943 |   |
| After                three but within five years                  |   |   | 0 |   |
| Five                years or greater                              |   |   | 2,734 |   |
| Total                                                             |   | $ | 6,974 |   |

----

*Index*

*General.      *

*Delinquent      Loans.*

*Non-accrual,      Past Due and Restructured Loans. *
** **

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **At                  December 31,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
| *Dollars                  in Thousands*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **2006**                             |   | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
| Loans                  in Non-Accrual Status:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                  real estate (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                    | 450    |   | $ | 327 |   | $ | 141 |   | $ | 257 |   | $ | 222 |   |
| Commercial                  real estate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                 | 1,626  |   |   | 2,287 |   |   | 2,168 |   |   | 1,199 |   |   | 1,049 |   |
| Commercial                  (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                 | 271    |   |   | 1,191 |   |   | 243 |   |   | 1,700 |   |   | 760 |   |
| Consumer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                 | 0      |   |   | 61 |   |   | 9 |   |   | 8 |   |   | 3 |   |
| Total                  non-accruing loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                 | 2,347  |   |   | 3,866 |   |   | 2,561 |   |   | 3,164 |   |   | 2,034 |   |
| Loans                  Contractually Past Due 90 Days or More and Still Accruing                  Interest                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                 | 182    |   |   | 181 |   |   | 190 |   |   | 123 |   |   | 717 |   |
| Troubled                  Debt Restructured Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 | 0      |   |   | 871 |   |   | 0 |   |   | 371 |   |   | 387 |   |
| Total                  non-performing loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                 | 2,529  |   |   | 4,918 |   |   | 2,751 |   |   | 3,658 |   |   | 3,138 |   |
| Other                  real estate owned                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                 | 103    |   |   | 20 |   |   | 78 |   |   | 20 |   |   | 22 |   |
| Total                  non-performing assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                    | 2,632  |   | $ | 4,938 |   | $ | 2,829 |   | $ | 3,678 |   | $ | 3,160 |   |
| Total                  non-performing assets as a percentage of total assets                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                 | 0.35   | % |   | 0.66 | % |   | 0.38 | % |   | 0.50 | % |   | 0.45 | % |
| Total                  non-performing loans as a percentage of total loans                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                 | 0.62   | % |   | 1.22 | % |   | 0.70 | % |   | 1.01 | % |   | 0.88 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)                  Includes loans secured by 1-4 family residential dwellings, 5+                  family                  residential dwellings, home equity loans and residential construction                  loans. (2)                    Includes commercial and industrial loans, agricultural loans                    and                    obligations (other than securities and leases) of states and                    political                    subdivisions in the United                    States. |

*Other      Real Estate Owned and Repossessed Assets. *

----

*Index*

*Potential      Problem Loans. *
* *

*Loan      Concentrations. *

*Summary      of Loss Experience (Charge-Offs) and Allowance for Loan Losses*

----

*Index*

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **Years                  Ended December 31,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **2006**                                      |   | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | (Dollars                  in thousands)       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                          |   |   |   |   |   |   |   |   |   |
| Balance                  at beginning of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | $                                             | 6,640  |   | $ | 6,250 |   | $ | 5,757 |   | $ | 5,392 |   | $ | 4,476 |   |
| Charge                  offs:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                  real estate (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                          | 56     |   |   | 20 |   |   | 133 |   |   | 174 |   |   | 93 |   |
| Commercial                  real estate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                          | 2      |   |   | 0 |   |   | 51 |   |   | 0 |   |   | 0 |   |
| Commercial                  (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                          | 1,161  |   |   | 364 |   |   | 121 |   |   | 193 |   |   | 402 |   |
| Consumer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                          | 887    |   |   | 1,091 |   |   | 639 |   |   | 1,109 |   |   | 926 |   |
| Total                  charge offs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                          | 2,106  |   |   | 1,475 |   |   | 944 |   |   | 1,476 |   |   | 1,421 |   |
| Recoveries:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                  real estate (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                          | 31     |   |   | 39 |   |   | 20 |   |   | 10 |   |   | 0 |   |
| Commercial                  real estate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                          | 73     |   |   | 0 |   |   | 0 |   |   | 0 |   |   | 0 |   |
| Commercial                  (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                          | 143    |   |   | 29 |   |   | 51 |   |   | 78 |   |   | 250 |   |
| Consumer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                          | 339    |   |   | 217 |   |   | 166 |   |   | 188 |   |   | 167 |   |
| Total                  recoveries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                          | 586    |   |   | 285 |   |   | 237 |   |   | 276 |   |   | 417 |   |
| Net                  charge-offs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                          | 1,520  |   |   | 1,190 |   |   | 707 |   |   | 1,200 |   |   | 1,004 |   |
| Provision                  for loan losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                          | 1,560  |   |   | 1,580 |   |   | 1,200 |   |   | 1,565 |   |   | 1,920 |   |
| Balance                  at end of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                             | 6,680  |   | $ | 6,640 |   | $ | 6,250 |   | $ | 5,757 |   | $ | 5,392 |   |
| Ratio                  of net charge-offs during the year to average loans outstanding                  during the                  year                                                                                                                                                                                                                                                                                                                                                                                         |   |                                          | 0.38   | % |   | 0.30 | % |   | 0.19 | % |   | 0.33 | % |   | 0.29 | % |
| Allowance                  for loan losses to total loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                          | 1.65   | % |   | 1.64 | % |   | 1.60 | % |   | 1.60 | % |   | 1.50 | % |
| Allowance                  for loan losses to non-performing loans                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                          | 264    | % |   | 135 | % |   | 227 | % |   | 157 | % |   | 172 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)                  Includes loans secured by 1-4 family residential dwellings, 5+                  family                  residential dwellings, home equity loans and residential construction                  loans. (2)                    Includes commercial and industrial loans, agricultural loans                    and                    obligations (other than securities and leases) of states and                    political                    subdivisions in the United                    States. |

*Allocation      of the Allowance for Loan Losses. *

----

*Index*

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **At                  December 31,**                               |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | **2006**                                                           |   | **2005** |   | **2004** |   | **2003** |   | **2002** |   |
| *Dollars                  in Thousands*                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Amount                  ofAllowancefor                  LoanLosses |   | Percent                  ofAllowancefor                  LoanLosses                  inEachCategory |   | Amount                  ofAllowancefor                  LoanLosses |   | Percent                  ofAllowancefor                  LoanLosses                  inEachCategory |   | Amount                  ofAllowancefor                  LoanLosses |   | Percent                  ofAllowancefor                  LoanLosses                  inEachCategory |   | Amount                  ofAllowancefor                  LoanLosses |   | Percent                  ofAllowancefor                  LoanLosses                  inEachCategory |   | Amount                  ofAllowancefor                  LoanLosses |   | Percent                  ofAllowancefor                  LoanLosses                  inEachCategory |   |
| Residential                  realestate                  (1)                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $                                                                  | 501    |   |   | 7.5 | % | $ | 595 |   |   | 9.0 | % | $ | 670 |   |   | 10.7 | % | $ | 545 |   |   | 9.5 | % | $ | 718 |   |   | 13.3 | % |
| Commercial                  realestate                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                               | 3,083  |   |   | 46.2 | % |   | 3,171 |   |   | 47.8 | % |   | 2,454 |   |   | 39.3 | % |   | 2,248 |   |   | 39.0 | % |   | 2,051 |   |   | 38.0 | % |
| Commercial                  (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                               | 1,462  |   |   | 21.9 | % |   | 1,512 |   |   | 22.8 | % |   | 1,435 |   |   | 23.0 | % |   | 1,297 |   |   | 22.5 | % |   | 1,282 |   |   | 23.8 | % |
| Consumer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                               | 1,114  |   |   | 16.7 | % |   | 1,114 |   |   | 16.8 | % |   | 1,080 |   |   | 17.3 | % |   | 966 |   |   | 16.8 | % |   | 1,017 |   |   | 18.9 | % |
| Unallocated                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                               | 520    |   |   | 7.8 | % |   | 248 |   |   | 3.7 | % |   | 611 |   |   | 9.8 | % |   | 701 |   |   | 12.2 | % |   | 324 |   |   | 6.0 | % |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                                                  | 6,680  |   |   | 100.0 | % | $ | 6,640 |   |   | 100.0 | % | $ | 6,250 |   |   | 100.0 | % | $ | 5,757 |   |   | 100.0 | % | $ | 5,392 |   |   | 100.0 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)                  Includes loans secured by 1-4 family residential dwellings, 5+                  family                  residential dwellings, home equity loans and residential construction                  loans. (2)                  Includes commercial and industrial loans, agricultural loans and                  obligations (other than securities and leases) of states and political                  subdivisions in the United                  States. |

*Cash      and Due from Banks*

*Premises      and Equipment. *

*Bank-Owned      Life Insurance. *

*Goodwill      and Other Intangible Assets. *

*Other      Assets.*

----

*Index*

*Deposits.*

|                                                       |   | **Maturity                as of December 31, 2006**   |   |
|------------------------------------------------------------|--------|-------------------------------------------------------|--------|
| *Dollars                in Thousands*                      |   | **3                Months****or                Less** |   | **Over                3 to****6                Months** |   | **Over                6 to****12                Months** |   | **Over                12****Months** |   | **Total** |   |
|                                                       |   |                                                  |   |   |   |   |   |   |   |   |   |
| Certificates                of Deposit of $100,000 or more |   | $                                                     | 31,349 |   | $ | 24,187 |   | $ | 25,487 |   | $ | 20,002 |   | $ | 101,025 |   |
| Certificates                of Deposit less than $100,000  |   |                                                  | 24,324 |   |   | 29,960 |   |   | 61,044 |   |   | 73,058 |   |   | 188,386 |   |
|                                                       |   |                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                of time accounts                      |   | $                                                     | 55,673 |   | $ | 54,147 |   | $ | 86,531 |   | $ | 93,060 |   | $ | 289,411 |   |

*Borrowings      and Other Contractual Obligations.*

| Contractual                Obligations as of December 31, 2006 |   |                                      |   |     |   |     |   |     |   |     |   |
|----------------------------------------------------------------|--------|-------------------------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|
|                                                           |   | **Payments                Due by Period** |   |     |   |
| (In                thousands)                                  |   | **2007**                                  |   | **2008** |   | **2009** |   | **2010** |   | **2011** |   | **Thereafter** |   | **Total** |   |
| Long-term                debt obligations                      |   | $                                         | 25,642 |     | $      | 6,185    |   | $        | 1,881  |     | $      | 1,723 |   | $ | 1,316 |   | $ | 5,457 |   | $ | 42,204 |   |
| Operating                lease obligations                     |   |                                      | 116    |     |   | 76       |   |     | 51     |     |   | 48 |   |   | 39 |   |   | 778 |   |   | 1,108 |   |
| Retirement                plan obligations                     |   |                                      | 777    |     |   | 827      |   |     | 827    |     |   | 860 |   |   | 913 |   |   | 11,506 |   |   | 15,710 |   |
| Total                contractual obligations                   |   | $                                         | 26,535 |     | $      | 7,088    |   | $        | 2,759  |     | $      | 2,631 |   | $ | 2,268 |   | $ | 17,741 |   | $ | 59,022 |   |

----

*Index*

*Please      refer to the Consolidated Financial Statements presented in PART II, Item 8,      of      this document.*

*Summary.      *

*Net      Interest Income.*
*Asset      and Yield Summary Table*
*Interest      Rate Table*
*Rate      and Volume Table*

----

*Index*

|                                                                           |   | **For                        the Years Ended December 31,** |
|--------------------------------------------------------------------------------|--------|-------------------------------------------------------------|
|                                                                           |   | **2006**                                                    |   | **2005** |   | **2004** |   |
|                                                                           |   | AverageOutstandingBalance                                   |   | InterestEarned                        /Paid |   | Yield                        /Rate |   | AverageOutstandingBalance |   | InterestEarned                        /Paid |   | Yield                        /Rate |   | AverageOutstandingBalance |   | InterestEarned                        /Paid |   | Yield                        /Rate |   |
|                                                                           |   |
| **Earning                        Assets:**                                     |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                        funds sold                                      |   | $                                                           | 11,548 |   | $ | 596 |   |   | 5.16 | % | $ | 8,110 |   | $ | 270 |   |   | 3.33 | % | $ | 6,346 |   | $ | 81 |   |   | 1.28 | % |
| Interest-                        bearing deposits                              |   |                                                        | 2,446 |   |   | 90 |   |   | 3.68 | % |   | 9,006 |   |   | 449 |   |   | 4.99 | % |   | 8,581 |   |   | 534 |   |   | 6.22 | % |
| Securities                        (1)                                          |   |                                                        | 294,151 |   |   | 12,312 |   |   | 4.19 | % |   | 297,965 |   |   | 11,908 |   |   | 4.00 | % |   | 308,101 |   |   | 11,685 |   |   | 3.79 | % |
| Loans                                                                          |   |                                                        | 402,200 |   |   | 30,343 |   |   | 7.54 | % |   | 398,616 |   |   | 27,683 |   |   | 6.94 | % |   | 373,348 |   |   | 24,865 |   |   | 6.66 | % |
| Total                        earning assets                                    |   |                                                        | 710,345 |   |   | 43,341 |   |   | 6.10 | % |   | 713,697 |   |   | 40,310 |   |   | 5.65 | % |   | 696,376 |   |   | 37,165 |   |   | 5.34 | % |
|                                                                           |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-earning                        assets                                      |   |                                                        | 41,650 |   |   |   |   |   |   |   |   | 41,968 |   |   |   |   |   |   |   |   | 40,374 |   |   |   |   |   |   |   |
| Total                        assets                                            |   | $                                                           | 751,995 |   |   |   |   |   |   |   | $ | 755,665 |   |   |   |   |   |   |   | $ | 736,750 |   |   |   |   |   |   |   |
|                                                                           |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities:**                                                               |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                        accounts                                        |   | $                                                           | 87,453 |   | $ | 549 |   |   | 0.63 | % | $ | 98,356 |   | $ | 677 |   |   | 0.69 | % | $ | 95,657 |   | $ | 602 |   |   | 0.63 | % |
| Money                        market accounts                                   |   |                                                        | 65,103 |   |   | 2,408 |   |   | 3.70 | % |   | 42,667 |   |   | 1,145 |   |   | 2.68 | % |   | 28,773 |   |   | 328 |   |   | 1.14 | % |
| NOW                        accounts                                            |   |                                                        | 89,845 |   |   | 1,026 |   |   | 1.14 | % |   | 112,042 |   |   | 1,134 |   |   | 1.01 | % |   | 122,640 |   |   | 1,022 |   |   | 0.83 | % |
| Time                        & other deposit accounts                       |   |                                                        | 302,127 |   |   | 11,805 |   |   | 3.91 | % |   | 277,649 |   |   | 8,984 |   |   | 3.24 | % |   | 271,317 |   |   | 7,526 |   |   | 2.77 | % |
| Borrowings                                                                     |   |                                                        | 67,908 |   |   | 2,572 |   |   | 3.79 | % |   | 83,255 |   |   | 2,990 |   |   | 3.59 | % |   | 82,929 |   |   | 3,283 |   |   | 3.96 | % |
| Total                        interest-bearing liabilities                      |   |                                                        | 612,436 |   |   | 18,360 |   |   | 3.00 | % |   | 613,969 |   |   | 14,930 |   |   | 2.43 | % |   | 601,316 |   |   | 12,761 |   |   | 2.12 | % |
|                                                                           |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest                        bearing deposits                           |   |                                                        | 71,792 |   |   |   |   |   |   |   |   | 67,788 |   |   |   |   |   |   |   |   | 61,626 |   |   |   |   |   |   |   |
| Other                        non-interest bearing liabilities                  |   |                                                        | 3,918 |   |   |   |   |   |   |   |   | 5,958 |   |   |   |   |   |   |   |   | 7,913 |   |   |   |   |   |   |   |
| Total                        liabilities                                       |   |                                                        | 688,146 |   |   |   |   |   |   |   |   | 687,715 |   |   |   |   |   |   |   |   | 670,855 |   |   |   |   |   |   |   |
| Shareholders'                        equity                                    |   |                                                        | 63,849 |   |   |   |   |   |   |   |   | 67,950 |   |   |   |   |   |   |   |   | 65,895 |   |   |   |   |   |   |   |
| Total                        liabilities and shareholders' equity              |   | $                                                           | 751,995 |   |   |   |   |   |   |   | $ | 755,665 |   |   |   |   |   |   |   | $ | 736,750 |   |   |   |   |   |   |   |
| Net                        interest income                                     |   |                                                        |   |   | $ | 24,981 |   |   |   |   |   |   |   | $ | 25,380 |   |   |   |   |   |   |   | $ | 24,404 |   |   |   |   |
| Net                        interest rate spread (2)                            |   |                                                        |   |   |   |   |   |   | 3.10 | % |   |   |   |   |   |   |   | 3.22 | % |   |   |   |   |   |   |   | 3.22 | % |
| Net                        earning assets                                      |   | $                                                           | 97,909 |   |   |   |   |   |   |   | $ | 99,728 |   |   |   |   |   |   |   | $ | 95,060 |   |   |   |   |   |   |   |
| Net                        interest margin (3)                                 |   |                                                        |   |   |   |   |   |   | 3.52 | % |   |   |   |   |   |   |   | 3.56 | % |   |   |   |   |   |   |   | 3.50 | % |
|                                                                           |   |                                                        |  |   |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |
| Ratio                        of earning assets to interest-bearing liabilities |   |                                                        | 115.99 | % |   |   |   |   |   |   |   | 116.24 | % |   |   |   |   |   |   |   | 115.81 | % |   |   |   |   |   |   |
|                                                                           |   |                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (1)                  Securities are shown at average amortized cost with net unrealized                  gains                  or losses on securities available-for-sale included as a component                  of                  non-earning assets.              |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                     |
| (2)                  Net interest rate spread represents the difference between the                  weighted                  average yield on interest-earning assets and the weighted average                  cost of                  interest-bearing liabilities. |
|                                                                                                                                                                                                                                                                     |
| (3)                  The net interest margin, also known as the net yield on average                  interest-earning assets, represents net interest income as a percentage                  of                  average interest-earning assets.                      |

----

*Index*

----

*Index*

|                                                                                                     | 2006     |      | 2005  |
|----------------------------------------------------------------------------------------------------------|----------|-----------|-------|
| Interest                  Rates (1)                                                                      | December | September | June  | March |   | December | September | June | March |
| Target                  Federal Funds Rate                                                               | 5.25%    | 5.25%     | 5.25% | 4.75% |   | 4.25% | 3.75% | 3.25% | 2.75% |
| NYC                  Prime                                                                               | 8.25%    | 8.25%     | 8.25% | 7.75% |   | 7.25% | 6.75% | 6.25% | 5.75% |
| 90                  Day Treasury Bill                                                                    | 5.05%    | 4.89%     | 5.06% | 4.64% |   | 3.97% | 3.48% | 2.98% | 2.78% |
| 6                  Month Treasury Bill                                                                   | 5.06%    | 5.01%     | 5.26% | 4.82% |   | 4.32% | 3.87% | 3.12% | 3.09% |
| 1                  Year Treasury Note                                                                    | 4.96%    | 4.97%     | 5.27% | 4.77% |   | 4.37% | 3.88% | 3.40% | 3.38% |
| 2                  Year Treasury Note                                                                    | 4.79%    | 4.69%     | 5.17% | 4.79% |   | 4.34% | 4.08% | 3.65% | 3.83% |
| 3                  Year Treasury Note                                                                    | 4.71%    | 4.58%     | 5.14% | 4.78% |   | 4.30% | 4.08% | 3.69% | 4.03% |
| 5                  Year Treasury Note                                                                    | 4.68%    | 4.55%     | 5.11% | 4.77% |   | 4.31% | 4.14% | 3.77% | 4.27% |
| 10                  Year Treasury Note                                                                   | 4.68%    | 4.58%     | 5.15% | 4.78% |   | 4.34% | 4.29% | 4.00% | 4.59% |
| Federal                  Housing Finance Board National Avg. Mortgage Contract Rate                  (2) | 6.45%    | 6.75%     | 6.61% | 6.31% |   | 6.22% | 5.83% | 5.80% | 5.68% |

| (1)                  The yields and interest rates presented in this table are provided                  to us                  by a third party vendor on a bi-weekly basis. The interest rates                  provided                  in the table were obtained from the report nearest to the                  month-end. (2)                    The Federal Housing Finance Board national average mortgage contract                    rate                    is presented with a one-month lag.  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

|                                              |   | **Year                Ended December 31,** |   |
|---------------------------------------------------|--------|--------------------------------------------|--------|
|                                              |   | **2006                vs. 2005**           |   | **2005                vs. 2004** |   |
|                                              |   | **Rate**                                   |   | **Volume** |   | **Total** |   | **Rate** |   | **Volume** |   | **Total** |   |
|                                              |   | **(In                thousands)**          |   |
| **Earning                assets:**                |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                funds sold                 |   | $                                          | 184    |   | $ | 142 |   | $ | 326 |   | $ | 161 |   | $ | 28 |   | $ | 189 |   |
| Interest-bearing                deposits          |   |                                       | (94    | ) |   | (265 | ) |   | (359 | ) |   | (110 | ) |   | 25 |   |   | (85 | ) |
| Securities                                        |   |                                       | 557    |   |   | (153 | ) |   | 404 |   |   | 621 |   |   | (398 | ) |   | 223 |   |
| Loans                                             |   |                                       | 2,409  |   |   | 251 |   |   | 2,660 |   |   | 1,091 |   |   | 1,727 |   |   | 2,818 |   |
| Total                earning assets               |   |                                       | 3,056  |   |   | (25 | ) |   | 3,031 |   |   | 1,763 |   |   | 1,382 |   |   | 3,145 |   |
|                                              |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest                bearing liabilities:**  |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                accounts                   |   |                                       | (56    | ) |   | (71 | ) |   | (127 | ) |   | 58 |   |   | 17 |   |   | 75 |   |
| Money                market accounts              |   |                                       | 526    |   |   | 736 |   |   | 1,262 |   |   | 603 |   |   | 214 |   |   | 817 |   |
| NOW                accounts                       |   |                                       | 134    |   |   | (242 | ) |   | (108 | ) |   | 205 |   |   | (93 | ) |   | 112 |   |
| Time                & other deposit accounts  |   |                                       | 1,911  |   |   | 910 |   |   | 2,821 |   |   | 1,234 |   |   | 224 |   |   | 1,458 |   |
| Borrowings                                        |   |                                       | 156    |   |   | (574 | ) |   | (418 | ) |   | (306 | ) |   | 13 |   |   | (293 | ) |
| Total                interest bearing liabilities |   |                                       | 2,671  |   |   | 759 |   |   | 3,430 |   |   | 1,794 |   |   | 375 |   |   | 2,169 |   |
|                                              |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Change                in net interest income      |   | $                                          | 385    |   |   | ($784 | ) |   | ($399 | ) |   | ($31 | ) | $ | 1,007 |   | $ | 976 |   |

*Rate      and Volume Analysis: *

----

*Index*

----

*Index*

*Provision      for Loan Losses. *

*Non-Interest      Income. *

----

*Index*

*Non-Interest      Expense. *

----

*Index*

|                                                                                 |   | **Year**                                            |   |   |   |
|--------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|--------|--------|
| Description                  of Other Miscellaneous Expense                          |   | 2006                                                |   | 2005   |   | Increase                  / (Decrease) |   |
|                                                                                 |   |  *dollars                  in thousands*  |   |
| Directors                  fees                                                      |   | $                                                   | 259    |   | $      | 200 |   | $ | 59 |   |
| Collection                  and non-filing expense                                   |   |                                                | 186    |   |   | 127 |   |   | 59 |   |
| Correspondent                  bank services                                         |   |                                                | 131    |   |   | 151 |   |   | (20 | ) |
| Donations                                                                            |   |                                                | 106    |   |   | 84 |   |   | 22 |   |
| Dues                  and memberships                                                |   |                                                | 63     |   |   | 52 |   |   | 11 |   |
| Office                  Supplies                                                     |   |                                                | 290    |   |   | 318 |   |   | (28 | ) |
| Postage                  and shipping                                                |   |                                                | 234    |   |   | 270 |   |   | (36 | ) |
| Deferred                  reserves for unfunded loan commitments                     |   |                                                | (24    | )      |   | 12 |   |   | (36 | ) |
| Travel                  and entertainment                                            |   |                                                | 212    |   |   | 229 |   |   | (17 | ) |
| Software                  amortization                                               |   |                                                | 174    |   |   | 125 |   |   | 49 |   |
| Other                  losses                                                        |   |                                                | 18     |   |   | 36 |   |   | (18 | ) |
| Minority                  interest for Mang - Wilber LLC insurance agency subsidiary |   |                                                | 79     |   |   | 90 |   |   | (11 | ) |
| Loss                  / (Gain) on Disposal / Impairment of Fixed Assets              |   |                                                | 362    |   |   | (5 | ) |   | 367 |   |
| All                  other miscellaneous expense items, net                          |   |                                                | 1,163  |   |   | 1,221 |   |   | (58 | ) |
| Total                  Other Miscellaneous Expense                                   |   | $                                                   | 3,253  |   | $      | 2,910 |   | $ | 343 |   |

*Income      Taxes. *

----

*Index*

* *

*Please      refer to the Consolidated Financial Statements presented in PART II, Item 8,      of      this document.*

*Summary.      *

*Net      Interest Income.*
*Asset      and Yield Summary Table*
*Rate      and Volume Table*
*Comparative      Interest Rate Table*

----

*Index*

|                                                                                                     | 2005     |      | 2004  |
|----------------------------------------------------------------------------------------------------------|----------|-----------|-------|
| Interest                  Rates (1)                                                                      | December | September | June  | March |   | December | September | June | March |
| Target                  Federal Funds Rate                                                               | 4.25%    | 3.75%     | 3.25% | 2.75% |   | 2.25% | 1.75% | 1.00% | 1.00% |
| NYC                  Prime                                                                               | 7.25%    | 6.75%     | 6.25% | 5.75% |   | 5.25% | 4.75% | 4.00% | 4.00% |
| 90                  Day Treasury Bill                                                                    | 3.97%    | 3.48%     | 2.98% | 2.78% |   | 2.23% | 1.71% | 1.32% | 0.95% |
| 6                  Month Treasury Bill                                                                   | 4.32%    | 3.87%     | 3.12% | 3.09% |   | 2.56% | 1.95% | 1.68% | 0.99% |
| 1                  Year Treasury Note                                                                    | 4.37%    | 3.88%     | 3.40% | 3.38% |   | 2.77% | 2.14% | 2.20% | 1.17% |
| 2                  Year Treasury Note                                                                    | 4.34%    | 4.08%     | 3.65% | 3.83% |   | 3.09% | 2.53% | 2.84% | 1.53% |
| 3                  Year Treasury Note                                                                    | 4.30%    | 4.08%     | 3.69% | 4.03% |   | 3.27% | 2.81% | 3.32% | 1.93% |
| 5                  Year Treasury Note                                                                    | 4.31%    | 4.14%     | 3.77% | 4.27% |   | 3.65% | 3.29% | 3.97% | 2.71% |
| 10                  Year Treasury Note                                                                   | 4.34%    | 4.29%     | 4.00% | 4.59% |   | 4.29% | 4.04% | 4.75% | 3.76% |
| Federal                  Housing Finance Board National Avg. Mortgage Contract Rate                  (2) | 6.22%    | 5.83%     | 5.80% | 5.68% |   | 5.65% | 5.77% | 5.73% | 5.69% |

*Rate      and Volume Analysis*

----

*Index*

*Provision      for Loan Losses.*

*Non-Interest      Income. *

----

*Index*

*Non-Interest      Expense. *

----

*Index*

----

*Index*

|                                                                             |   | **Year**                                      |   |   |   |
|----------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|--------|--------|
| Description                  of Other Miscellaneous Expense                      |   | 2005                                          |   |   | 2004   |   |  Increase                  / (Decrease) |   |
|                                                                             |   |  *dollars                  in thousands* |   |
| Directors                  fees                                                  |   | $                                             | 200    |   | $      | 150 |   | $ | 50 |   |
| Accounts                  receivable financing servicing expense                 |   |                                          | 165    |   |   | 152 |   |   | 13 |   |
| Customer                  relations expense                                      |   |                                          | 79     |   |   | 67 |   |   | 12 |   |
| Charitable                  donations                                            |   |                                          | 84     |   |   | 107 |   |   | (23 | ) |
| Office                  Supplies                                                 |   |                                          | 318    |   |   | 261 |   |   | 57 |   |
| Postage                  and Shipping                                            |   |                                          | 270    |   |   | 224 |   |   | 46 |   |
| Travel                  and entertainment                                        |   |                                          | 229    |   |   | 198 |   |   | 31 |   |
| Software                  amortization                                           |   |                                          | 183    |   |   | 165 |   |   | 18 |   |
| Amortization                  of Intangible Assets                               |   |                                          | 171    |   |   | 84 |   |   | 87 |   |
| Minority                  interest for Mang - Wilber insurance agency subsidiary |   |                                          | 90     |   |   | 110 |   |   | (20 | ) |
| Other                  losses                                                    |   |                                          | 36     |   |   | 25 |   |   | 11 |   |
| American                  stock exchange listing fees                            |   |                                          | 20     |   |   | 73 |   |   | (53 | ) |
| (Gain)                  / loss on disposal of assets                             |   |                                          | (5     | )      |   | 30 |   |   | (35 | ) |
| All                  other expense items, net                                    |   |                                          | 1,070  |   |   | 986 |   |   | 84 |   |
| Total                  Other Miscellaneous Expense                               |   | $                                             | 2,910  |   | $      | 2,632 |   | $ | 278 |   |

*Income      Taxes.*

----

*Index*

| **Source                of Funding**                                                                                             |
|----------------------------------------------------------------------------------------------------------------------------------|
| •                Currency*                                                                                                 |
| •                Federal Reserve and Correspondent Bank Balances*                                                          |
| •                Federal Funds Sold*                                                                                       |
| •                Loan and Investment Principal and Interest Payments*                                                      |
| •                Investment Security Maturities and Calls*                                                                 |
| •                Demand Deposits & NOW Accounts*                                                                       |
| •                Savings & Money Market Deposits*                                                                      |
| •                Certificates of Deposit and Other Time Deposits*                                                          |
| •                Repurchase Agreements*                                                                                    |
| •                FHLBNY Advances / Lines of Credit*                                                                        |
| •                Sale of Available-for-Sale Investment Securities                                                          |
| •                Brokered Deposits                                                                                         |
| •                Correspondent Lines of Credit                                                                             |
| •                Fed. Reserve Discount Window Borrowings                                                                   |
| •                Sale of Loans                                                                                             |
| •                Proceeds from Issuance of Equity Securities                                                               |
| •                Branch Acquisition•                Cash Surrender Value of Bank-Owned Life                Insurance |

| Liquidity                Measure                                                                                                                                       | December                31, |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
| *Dollars                in Thousands*                                                                                                                                  | 2006                        | 2005 |
| Cash                and Cash Equivalents                                                                                                                               | $25,859                     | $18,417 |
| Available                for Sale Investment Securities at Estimated Fair Value less Securities                Pledged for State and Municipal Deposits and Borrowings | $72,240                     | $64,622 |
| Total                Loan to Total Asset Ratio                                                                                                                         | 53.26%                      | 53.63% |
| FHLBNY                Remaining Borrowing Capacity                                                                                                                     | $24,128                     | $19,413 |
| Available                Correspondent Bank Lines of Credit                                                                                                            | $15,000                     | $10,000 |

----

*Index*

----

*Index*

**ITEM      7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

----

*Index*

| Interest                Rates                         | *Dollars                in Thousands* |
|-------------------------------------------------------|---------------------------------------|
| Interest                Rate                Shock (1) | Prime                Rate             | ProjectedAnnualizedNetInterestIncome | ProjectedDollarChangein                NetInterestIncome | Projected                PercentageChange                inNetInterestIncome | ProjectedChange                inNet                InterestIncome                as aPercent                ofTotal                Shareholders' Equity |
| 3.00%                                                 | 11.25%                                | $24,383 | (436) | -1.76% | -0.69% |
| 2.00%                                                 | 10.25%                                | $24,220 | (599) | -2.41% | -0.95% |
| 1.00%                                                 | 9.25%                                 | $24,387 | (432) | -1.74% | -0.68% |
| No                change                              | 8.25%                                 | $24,819 | - | - | - |
| -1.00%                                                | 7.25%                                 | $24,878 | 59 | 0.24% | 0.09% |
| -2.00%                                                | 6.25%                                 | $23,915 | (904) | -3.64% | -1.43% |
| -3.00%                                                | 5.25%                                 | $23,253 | (1,566) | -6.31% | -2.47% |

| (1)                  Under a ramped interest rate shock, interest rates are modeled                  to change                  at a rate of 0.50% per month. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

*Index*

**ITEM      8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

**Report      of Independent Registered Public Accounting Firm**

*Internal      Control-Integrated Framework *

|   |   |
|--------|--------|

----

*Index*

| ***The                  Wilber Corporation***                                                   |     |                              |        |                              |   |
|-------------------------------------------------------------------------------------------------|----------|-----------------------------------|-------------|-----------------------------------|--------|
| ***Consolidated                  Statements of Condition***                                     |     |                              |        |                              |   |
|                                                                                            |     |                              |        |                              |   |
|                                                                                            |     | **December                  31,** |        | **December                  31,** |   |
| ***dollars                  in thousands except share and per share data***                     | **2006** |                              | **2005**    |                              |
| **Assets**                                                                                      |     |                              |        |                              |   |   |   |
| Cash                  and Due from Banks                                                        |     | **$**                             | **12,742**  |                              | $      | 12,817 |   |
| Time                  Deposits with Other Banks                                                 |     |                              | **800**     |                              |   | 2,700 |   |
| Federal                  Funds Sold                                                             |     |                              | **12,317**  |                              |   | 2,900 |   |
| Total                  Cash and Cash Equivalents                                                |     |                              | **25,859**  |                              |   | 18,417 |   |
| Securities                                                                                      |     |                              |        |                              |   |   |   |
| Trading,                  at Fair Value                                                         |     |                              | **1,625**   |                              |   | 1,542 |   |
| Available-for-Sale,                  at Fair Value                                              |     |                              | **233,559** |                              |   | 240,350 |   |
| Held-to-Maturity,                  Fair Value of $61,310 at December 31, 2006                   |     |                              |        |                              |   |   |   |
| and                  $53,837 at December 31, 2005                                               |     |                              | **62,358**  |                              |   | 54,939 |   |
| Loans                                                                                           |     |                              | **405,832** |                              |   | 403,665 |   |
| Allowance                  for Loan Losses                                                      |     |                              | **(6,680**  | **)**                             |   | (6,640 | ) |
| Loans,                  Net                                                                     |     |                              | **399,152** |                              |   | 397,025 |   |
| Premises                  and Equipment, Net                                                    |     |                              | **5,686**   |                              |   | 6,430 |   |
| Bank                  Owned Life Insurance                                                      |     |                              | **16,108**  |                              |   | 15,530 |   |
| Goodwill                                                                                        |     |                              | **4,518**   |                              |   | 4,518 |   |
| Intangible                  Assets, Net                                                         |     |                              | **520**     |                              |   | 698 |   |
| Other                  Assets                                                                   |     |                              | **12,596**  |                              |   | 13,279 |   |
| Total                  Assets                                                                   |     | **$**                             | **761,981** |                              | $      | 752,728 |   |
|                                                                                            |     |                              |        |                              |   |   |   |
| **Liabilities                  and Shareholders’ Equity**                                 |     |                              |        |                              |   |   |   |
| Deposits:                                                                                       |     |                              |        |                              |   |   |   |
| Demand                                                                                          |     | **$**                             | **71,914**  |                              | $      | 72,986 |   |
| Savings,                  NOW and Money Market Deposit Accounts                                 |     |                              | **243,249** |                              |   | 244,484 |   |
| Certificates                  of Deposit (Over $100M)                                           |     |                              | **101,025** |                              |   | 78,147 |   |
| Certificates                  of Deposit (Under $100M)                                          |     |                              | **188,386** |                              |   | 183,716 |   |
| Other                  Deposits                                                                 |     |                              | **24,470**  |                              |   | 25,625 |   |
| Total                  Deposits                                                                 |     |                              | **629,044** |                              |   | 604,958 |   |
| Short-Term                  Borrowings                                                          |     |                              | **18,459**  |                              |   | 19,357 |   |
| Long-Term                  Borrowings                                                           |     |                              | **42,204**  |                              |   | 52,472 |   |
| Other                  Liabilities                                                              |     |                              | **8,942**   |                              |   | 8,224 |   |
| Total                  Liabilities                                                              |     |                              | **698,649** |                              |   | 685,011 |   |
|                                                                                            |     |                              |        |                              |   |   |   |
| Shareholders’                  Equity:                                                    |     |                              |        |                              |   |   |   |
| Common                  Stock, $.01 Par Value, 16,000,000 Shares Authorized,                    |     |                              |        |                              |   |   |   |
| and                  13,961,664 Shares Issued at December 31, 2006,                             |     |                              |        |                              |   |   |   |
| and                  December 31, 2005                                                          |     |                              | **140**     |                              |   | 140 |   |
| Additional                  Paid in Capital                                                     |     |                              | **4,224**   |                              |   | 4,224 |   |
| Retained                  Earnings                                                              |     |                              | **89,921**  |                              |   | 86,900 |   |
| Accumulated                  Other Comprehensive Loss                                           |     |                              | **(3,247**  | **)**                             |   | (2,409 | ) |
| Treasury                  Stock at Cost, 3,392,482 Shares at December 31, 2006                  |     |                              |        |                              |   |   |   |
| and                  2,815,727 Shares at December 31, 2005                                      |     |                              | **(27,706** | **)**                             |   | (21,138 | ) |
| Total                  Shareholders’ Equity                                               |     |                              | **63,332**  |                              |   | 67,717 |   |
| Total                  Liabilities and Shareholders’ Equity                               |     | **$**                             | **761,981** |                              | $      | 752,728 |   |
|                                                                                            |     |                              |        |                              |   |   |   |
| *See                  accompanying notes to Consolidated Financial                  Statements* |     |                              |        |                              |   |   |   |

----

*Index*

| ***The                  Wilber Corporation***                                                   |           |                                          |           |   |     |       |   |
|-------------------------------------------------------------------------------------------------|----------------|----------------------------------------------------|----------------|--------|----------|------------|--------|
| ***Consolidated                  Statements of Income***                                        |           |                                          |           |   |     |       |   |
|                                                                                            |           |  **Year                  Ended December 31,** |           |
| ***dollars                  in thousands except share and per share data***                     |  **2006** |                                               | **2005**       |   | **2004** |       |
| **Interest                  and Dividend Income**                                               |           |                                               |           |   |     |       |   |   |   |   |
| Interest                  and Fees on Loans                                                     |           | **$**                                              | **30,343**     |   | $        | 27,683     |   | $ | 24,865 |   |
| Interest                  and Dividends on Securities:                                          |           |                                               |           |   |     |       |   |   |   |   |
| U.S.                  Government and Agency Obligations                                         |           |                                               | **9,549**      |   |     | 9,124      |   |   | 8,605 |   |
| State                  and Municipal Obligations                                                |           |                                               | **2,499**      |   |     | 2,569      |   |   | 2,665 |   |
| Other                                                                                           |           |                                               | **264**        |   |     | 215        |   |   | 415 |   |
| Interest                  on Federal Funds Sold and Time Deposits                               |           |                                               | **686**        |   |     | 719        |   |   | 615 |   |
| Total                  Interest and Dividend Income                                             |           |                                               | **43,341**     |   |     | 40,310     |   |   | 37,165 |   |
|                                                                                            |           |                                               |           |   |     |       |   |   |   |   |
| **Interest                  Expense**                                                           |           |                                               |           |   |     |       |   |   |   |   |
| Interest                  on Deposits:                                                          |           |                                               |           |   |     |       |   |   |   |   |
| Savings,                  NOW and Money Market Deposit Accounts                                 |           |                                               | **3,983**      |   |     | 2,956      |   |   | 1,952 |   |
| Certificates                  of Deposit (Over $100M)                                           |           |                                               | **3,842**      |   |     | 2,445      |   |   | 2,197 |   |
| Certificates                  of Deposit (Under $100M)                                          |           |                                               | **7,033**      |   |     | 5,944      |   |   | 4,782 |   |
| Other                  Deposits                                                                 |           |                                               | **930**        |   |     | 595        |   |   | 547 |   |
| Interest                  on Short-Term Borrowings                                              |           |                                               | **670**        |   |     | 633        |   |   | 212 |   |
| Interest                  on Long-Term Borrowings                                               |           |                                               | **1,902**      |   |     | 2,357      |   |   | 3,071 |   |
| Total                  Interest Expense                                                         |           |                                               | **18,360**     |   |     | 14,930     |   |   | 12,761 |   |
| **Net                  Interest Income**                                                        |           |                                               | **24,981**     |   |     | 25,380     |   |   | 24,404 |   |
| Provisions                  for Loan Losses                                                     |           |                                               | **1,560**      |   |     | 1,580      |   |   | 1,200 |   |
| Net                  Interest Income After Provision for Loan Losses                            |           |                                               | **23,421**     |   |     | 23,800     |   |   | 23,204 |   |
|                                                                                            |           |                                               |           |   |     |       |   |   |   |   |
| **Non                  Interest Income**                                                        |           |                                               |           |   |     |       |   |   |   |   |
| Trust                  Fees                                                                     |           |                                               | **1,585**      |   |     | 1,472      |   |   | 1,325 |   |
| Service                  Charges on Deposit Accounts                                            |           |                                               | **1,659**      |   |     | 1,615      |   |   | 1,556 |   |
| Commissions                  Income                                                             |           |                                               | **487**        |   |     | 489        |   |   | 524 |   |
| Investment                  Security Gains, Net                                                 |           |                                               | **514**        |   |     | 469        |   |   | 1,031 |   |
| Increase                  in Cash Surrender Value of Bank Owned Life Insurance                  |           |                                               | **578**        |   |     | 555        |   |   | 570 |   |
| Other                  Service Fees                                                             |           |                                               | **370**        |   |     | 471        |   |   | 286 |   |
| Other                  Income                                                                   |           |                                               | **776**        |   |     | 554        |   |   | 431 |   |
| Total                  Non Interest Income                                                      |           |                                               | **5,969**      |   |     | 5,625      |   |   | 5,723 |   |
|                                                                                            |           |                                               |           |   |     |       |   |   |   |   |
| **Non                  Interest Expense**                                                       |           |                                               |           |   |     |       |   |   |   |   |
| Salaries                                                                                        |           |                                               | **9,369**      |   |     | 9,040      |   |   | 8,425 |   |
| Employee                  Benefits                                                              |           |                                               | **2,572**      |   |     | 2,612      |   |   | 2,316 |   |
| Occupancy                  Expense of Bank Premises                                             |           |                                               | **1,840**      |   |     | 1,678      |   |   | 1,535 |   |
| Furniture                  and Equipment Expense                                                |           |                                               | **793**        |   |     | 764        |   |   | 751 |   |
| Computer                  Service Fees                                                          |           |                                               | **807**        |   |     | 745        |   |   | 598 |   |
| Advertising                  and Marketing                                                      |           |                                               | **506**        |   |     | 508        |   |   | 538 |   |
| Professional                  Fees                                                              |           |                                               | **892**        |   |     | 709        |   |   | 512 |   |
| Other                  Miscellaneous Expenses                                                   |           |                                               | **3,253**      |   |     | 2,910      |   |   | 2,632 |   |
| Total                  Non Interest Expense                                                     |           |                                               | **20,032**     |   |     | 18,966     |   |   | 17,307 |   |
| Income                  Before Taxes                                                            |           |                                               | **9,358**      |   |     | 10,459     |   |   | 11,620 |   |
| Income                  Taxes                                                                   |           |                                               | **(2,206**     | **)**  |     | (2,715     | )      |   | (3,002 | ) |
| **Net                  Income**                                                                 |           | **$**                                              | **7,152**      |   | $        | 7,744      |   | $ | 8,618 |   |
|                                                                                            |           |                                               |           |   |     |       |   |   |   |   |
| Weighted                  Average Shares Outstanding                                            |           |                                               | **10,813,076** |   |     | 11,169,730 |   |   | 11,207,215 |   |
| Basic                  Earnings Per Share                                                       |           | **$**                                              | **0.66**       |   | $        | 0.69       |   | $ | 0.77 |   |
|                                                                                            |           |                                               |           |   |     |       |   |   |   |   |
| *See                  accompanying notes to Consolidated Financial                  Statements* |           |                                               |           |   |     |       |   |   |   |   |

----

*Index*

| ***Consolidated                  Statements of Changes in Shareholders' Equity and Comprehensive                  Income*** |      |       |        |
|-----------------------------------------------------------------------------------------------------------------------------|-----------|------------|-------------|
|                                                                                                                        |      |       |        |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                        |      |       |        |   |   |   |   | **Accumulated** |   |   |   |   |   |
|                                                                                                                        |      |       |        | **Additional** |   |   |   | **Other** |   |   |   |   |   |
|                                                                                                                        |      | **Common** |        | **Paid                  in** |   | **Retained** |   | **Comprehensive** |   | **Treasury** |   |   |   |
| ***dollars                  in thousands except share and per share data***                                                 | **Stock** |       | **Capital** |   | **Earnings** |   | **Income                  (Loss)** |   | **Stock** |   | **Total** |   |
| Balance                  December 31, 2003                                                                                  |      | $          | 140         |   | $ | 4,224 |   | $ | 79,043 |   | $ | 1,272 |   | $ | (20,375 | ) | $ | 64,304 |   |
| Comprehensive                  Income:                                                                                      |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  Income                                                                                                 |      |       | -           |   |   | - |   |   | 8,618 |   |   | - |   |   | - |   |   | 8,618 |   |
| Change                  in Net Unrealized Income                                                                            |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| on                  Securities, Net of Taxes                                                                                |      |       | -           |   |   | - |   |   | - |   |   | (876 | ) |   | - |   |   | (876 | ) |
| Total                  Comprehensive Income                                                                                 |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 7,742 |   |
| Cash                  Dividends ($.38 per share)                                                                            |      |       | -           |   |   | - |   |   | (4,259 | ) |   | - |   |   | - |   |   | (4,259 | ) |
| Purchase                  of Treasury Stock (14,800 shares)                                                                 |      |       | -           |   |   | - |   |   | - |   |   | - |   |   | (182 | ) |   | (182 | ) |
| Balance                  December 31, 2004                                                                                  |      | $          | 140         |   | $ | 4,224 |   | $ | 83,402 |   | $ | 396 |   | $  | (20,557 | ) | $ | 67,605 |   |
| Comprehensive                  Income:                                                                                      |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  Income                                                                                                 |      |       | -           |   |   | - |   |   | 7,744 |   |   | - |   |   | - |   |   | 7,744 |   |
| Change                  in Net Unrealized Income                                                                            |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| on                  Securities, Net of Taxes                                                                                |      |       | -           |   |   | - |   |   | - |   |   | (2,805 | ) |   | - |   |   | (2,805 | ) |
| Total                  Comprehensive Income                                                                                 |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 4,939 |   |
| Cash                  Dividends ($.38 per share)                                                                            |      |       | -           |   |   | - |   |   | (4,246 | ) |   | - |   |   | - |   |   | (4,246 | ) |
| Purchase                  of Treasury Stock (48,655 shares)                                                                 |      |       | -           |   |   | - |   |   |   |   |   | - |   |   | (581 | ) |   | (581 | ) |
| Balance                  December 31, 2005                                                                                  |      | $          | 140         |   | $ | 4,224 |   | $ | 86,900 |   | $  | (2,409 | ) | $  | (21,138 | ) | $ | 67,717 |   |
| Comprehensive                  Income:                                                                                      |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  Income                                                                                                 |      |       | -           |   |   | - |   |   | **7,152** |   |   | - |   |   | - |   |   | **7,152** |   |
| Change                  in Net Unrealized Loss                                                                              |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| on                  Securities, Net of Taxes                                                                                |      |       | -           |   |   | - |   |   | - |   |   | **(18** | **)** |   | - |   |   | **(18** | **)** |
| Total                  Comprehensive Income                                                                                 |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   | **7,134** |   |
| Adjustment                  to Initally Apply FASB                                                                          |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Statement                  No. 158, Net of Tax                                                                              |      |       | -           |   |   | - |   |   | - |   |   | **(820** | **)** |   | - |   |   | **(820** | **)** |
| Cash                  Dividends ($.38 per share)                                                                            |      |       | -           |   |   | - |   |   | **(4,131** | **)** |   | - |   |   | - |   |   | **(4,131** | **)** |
| Purchase                  of Treasury Stock (576,755 shares)                                                                |      |       | -           |   |   | - |   |   | **-** |   |   | - |   |   | **(6,568** | **)** |   | **(6,568** | **)** |
| **Balance                  December 31, 2006**                                                                              |      | **$**      | **140**     |   | **$** | **4,224** |   | **$** | **89,921** |   | **$**  | **(3,247** | **)** | **$**  | **(27,706** | **)** | **$** | **63,332** |   |
|                                                                                                                        |      |       |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *See                  accompanying notes to Consolidated Financial                  Statements.*                            |

----

*Index*

| ***The                  Wilber Corporation***                                                            |     |                                         |        |   |     |    |   |
|----------------------------------------------------------------------------------------------------------|----------|----------------------------------------------|-------------|--------|----------|---------|--------|
| ***Consolidated                  Statements of Cash Flows***                                             |     |                                         |        |   |     |    |   |
|                                                                                                     |     |                                         |        |   |     |    |   |
|                                                                                                     |     | **Year                  Ended December 31,** |        |
| ***dollars                  in thousands***                                                              | **2006** |                                         | **2005**    |   | **2004** |    |
| **Cash                  Flows from Operating Activities:**                                               |     |                                         |        |   |     |    |   |   |   |   |
| Net                  Income                                                                              |     | **$**                                        | **7,152**   |   | $        | 7,744   |   | $ | 8,618 |   |
| Adjustments                  to Reconcile Net Income to Net Cash                                         |     |                                         |        |   |     |    |   |   |   |   |
| Used                  by Operating Activities:                                                           |     |                                         |        |   |     |    |   |   |   |   |
| Provision                  for Loan Losses                                                               |     |                                         | **1,560**   |   |     | 1,580   |   |   | 1,200 |   |
| Depreciation                  and Amortization                                                           |     |                                         | **1,133**   |   |     | 1,151   |   |   | 1,022 |   |
| Net                  Loss on Disposal/Impairment of Fixed Assets                                         |     |                                         | **324**     |   |     | 5       |   |   | (30 | ) |
| Net                  Amortization of Premiums and Accretion of Discounts on                  Investments |     |                                         | **647**     |   |     | 1,027   |   |   | 2,180 |   |
| Available-for-Sale                  Investment Security Gains, net                                       |     |                                         | **(326**    | **)**  |     | (370    | )      |   | (871 | ) |
| Deferred                  Income Tax Benefit                                                             |     |                                         | **(130**    | **)**  |     | (138    | )      |   | (56 | ) |
| Other                  Real Estate Losses                                                                |     |                                         | **0**       |   |     | 0       |   |   | 41 |   |
| Increase                  in Cash Surrender Value of Bank Owned Life Insurance                           |     |                                         | **(578**    | **)**  |     | (555    | )      |   | (570 | ) |
| Net                  Decrease (Increase) in Trading Securities                                           |     |                                         | **105**     |   |     | 61      |   |   | (319 | ) |
| Net                  Gains on Trading Securities                                                         |     |                                         | **(188**    | **)**  |     | (99     | )      |   | (160 | ) |
| Decrease                  (Increase) in Other Assets                                                     |     |                                         | **7**       |   |     | (180    | )      |   | (302 | ) |
| Increase                  (Decrease) in Other Liabilities                                                |     |                                         | **579**     |   |     | (223    | )      |   | 226 |   |
| Net                  Cash Provided by Operating Activities                                               |     |                                         | **10,285**  |   |     | 10,003  |   |   | 10,979 |   |
|                                                                                                     |     |                                         |        |   |     |    |   |   |   |   |
| **Cash                  Flows from Investing Activities:**                                               |     |                                         |        |   |     |    |   |   |   |   |
| Net                  Cash Acquired from Acquisition of a Branch                                          |     |                                         | **0**       |   |     | 22,521  |   |   | 0 |   |
| Proceeds                  from Maturities of Held-to-Maturity Investment Securities                      |     |                                         | **7,507**   |   |     | 9,932   |   |   | 24,150 |   |
| Purchases                  of Held-to-Maturity Investment Securities                                     |     |                                         | **(15,061** | **)**  |     | (5,528  | )      |   | (39,767 | ) |
| Proceeds                  from Maturities of Available-for-Sale Investment                  Securities   |     |                                         | **42,842**  |   |     | 60,950  |   |   | 151,552 |   |
| Proceeds                  from Sales of Available-for-Sale Investment Securities                         |     |                                         | **5,637**   |   |     | 9,350   |   |   | 12,986 |   |
| Purchases                  of Available-for-Sale Investment Securities                                   |     |                                         | **(41,903** | **)**  |     | (66,367 | )      |   | (141,352 | ) |
| Net                  Increase in Loans                                                                   |     |                                         | **(3,777**  | **)**  |     | (6,177  | )      |   | (31,295 | ) |
| Proceeds                  from Sale of Loans                                                             |     |                                         | **0**       |   |     | 0       |   |   | 294 |   |
| Purchase                  of Premises and Equipment, Net of Disposals                                    |     |                                         | **(349**    | **)**  |     | (932    | )      |   | (882 | ) |
| Proceeds                  from Sale of Premises and Equipment                                            |     |                                         | **40**      |   |     | 0       |   |   | 0 |   |
| Proceeds                  from Sale of Other Real Estate                                                 |     |                                         | **0**       |   |     | 0       |   |   | 58 |   |
| Net                  Cash (Used by) Provided by Investing Activities                                     |     |                                         | **(5,064**  | **)**  |     | 23,749  |   |   | (24,256 | ) |
|                                                                                                     |     |                                         |        |   |     |    |   |   |   |   |
| **Cash                  Flows from Financing Activities:**                                               |     |                                         |        |   |     |    |   |   |   |   |
| Net                  Decrease in Demand Deposits, Savings, NOW,                                          |     |                                         |        |   |     |    |   |   |   |   |
| Money                  Market and Other Time Deposits                                                    |     |                                         | **(3,462**  | **)**  |     | (8,100  | )      |   | (8,614 | ) |
| Net                  Increase (Decrease) in Certificates of Deposit                                      |     |                                         | **27,548**  |   |     | 8,162   |   |   | (90 | ) |
| Net                  (Decrease) Increase in Short-Term Borrowings                                        |     |                                         | **(898**    | **)**  |     | (18,202 | )      |   | 17,541 |   |
| Increase                  in Long-Term Borrowings                                                        |     |                                         | **0**       |   |     | 24,900  |   |   | 15,000 |   |
| Repayment                  of Long-Term Borrowings                                                       |     |                                         | **(10,268** | **)**  |     | (37,807 | )      |   | (5,470 | ) |
| Purchase                  of Treasury Stock                                                              |     |                                         | **(6,568**  | **)**  |     | (581    | )      |   | (182 | ) |
| Cash                  Dividends Paid                                                                     |     |                                         | **(4,131**  | **)**  |     | (4,246  | )      |   | (4,259 | ) |
| Net                  Cash Provided by (Used by) Financing Activities                                     |     |                                         | **2,221**   |   |     | (35,874 | )      |   | 13,926 |   |
| Net                  Increase (Decrease) in Cash and Cash Equivalents                                    |     |                                         | **7,442**   |   |     | (2,122  | )      |   | 649 |   |
| Cash                  and Cash Equivalents at Beginning of Year                                          |     |                                         | **18,417**  |   |     | 20,539  |   |   | 19,890 |   |
| Cash                  and Cash Equivalents at End of Year                                                |     | **$**                                        | **25,859**  |   | $        | 18,417  |   | $ | 20,539 |   |

----

*Index*

| **Supplemental                Disclosures of Cash Flow Information:**                        |   |        |       |   |    |   |   |    |   |   |
|----------------------------------------------------------------------------------------------|--------|-------------|------------|--------|---------|--------|--------|---------|--------|--------|
| Cash                Paid during Period for:                                                  |   |        |       |   |    |   |   |    |   |   |
| Interest                                                                                     |   | **$**       | **18,082** |   | $       | 14,918 |   | $       | 12,852 |   |
| Income                Taxes                                                                  |   | **$**       | **2,727**  |   | $       | 3,085  |   | $       | 2,874  |   |
| Non                Cash Investing Activities:                                                |   |        |       |   |    |   |   |    |   |   |
| Change                in Unrealized Loss on Securities                                       |   | **$**  | **(29**    | **)**  | $  | (4,596 | )      | $  | (1,435 | )      |
| Transfer                of Loans to Other Real Estate                                        |   | **$**       | **83**     |   | $       | 0      |   | $       | 157    |   |
| Adjustment                to Initally Apply FASB Statement No. 158, Net of Tax               |   | **$**  | **(820**   | **)**  | $       | 0      |   | $       | 0      |   |
| Fair                Value of Tangible Assets Acquired                                        |   | **$**       | **0**      |   | $       | 8,119  |   | $       | 0      |   |
| Fair                Value of Liabilities Assumed                                             |   | **$**       | **0**      |   | $       | 32,967 |   | $       | 0      |   |
|                                                                                         |   |        |       |   |    |   |   |    |   |   |
| *See                accompanying notes to Consolidated Financial                Statements.* |   |        |       |   |    |   |   |    |   |   |

----

*Index*

***Note      1. Summary of Significant Accounting Policies***

----

*Index*

***Note      1. Summary of Significant Accounting Policies,      Continued***

----

*Index*

***Note      1. Summary of Significant Accounting Policies,      Continued***

----

*Index*

----

*Index*

| ***Note                  2. Investment Securities***                                                         |           |                                   |            |           |             |           |            |          |      |
|--------------------------------------------------------------------------------------------------------------|----------------|----------------------------------------|-----------------|----------------|------------------|----------------|-----------------|---------------|-----------|
|                                                                                                         |           |                                   |            |           |             |           |            |          |      |
| The                  amortized cost and fair value of investment securities are as                  follows: |           |                                   |            |           |             |           |            |          |      |
|                                                                                                         |           | **December                  31, 2006** |            |
|                                                                                                         |           |                                   |            | **Gross**      |             | **Gross**      |            | **Estimated** |      |
|                                                                                                         |           | **Amortized**                          |            | **Unrealized** |             | **Unrealized** |            | **Fair**      |      |
| ***dollars                  in thousands***                                                                  |  **Cost** |                                   |  **Gains** |           |  **Losses** |           |  **Value** |          |
| **Available-for-Sale                  Portfolio**                                                            |           |                                   |            |           |             |           |            |          |      |   |   |   |   |
| U.S.                  Treasuries                                                                             |           | **$**                                  | **10,963**      |           | **$**            | **0**          |            | **$**         | **156**   |   | **$** | **10,807** |   |
| Obligations                  of U.S. Government Corporations and Agencies                                    |           |                                   | **21,486**      |           |             | **0**          |            |          | **150**   |   |   | **21,336** |   |
| Obligations                  of States and Political Subdivisions                                            |           |                                   | **47,985**      |           |             | **240**        |            |          | **681**   |   |   | **47,544** |   |
| Mortgage-Backed                  Securities                                                                  |           |                                   | **149,400**     |           |             | **100**        |            |          | **3,414** |   |   | **146,086** |   |
| Corporate                  Securities                                                                        |           |                                   | **2,274**       |           |             | **0**          |            |          | **7**     |   |   | **2,267** |   |
| Equity                  Securities                                                                           |           |                                   | **5,425**       |           |             | **95**         |            |          | **1**     |   |   | **5,519** |   |
|                                                                                                         |           | **$**                                  | **237,533**     |           | **$**            | **435**        |            | **$**         | **4,409** |   | **$** | **233,559** |   |
|                                                                                                         |           |                                   |            |           |             |           |            |          |      |
| **Trading                  Portfolio**                                                                       |           | **$**                                  | **1,296**       |           | **$**            | **329**        |            | **$**         | **0**     |   | **$** | **1,625** |   |
|                                                                                                         |           |                                   |            |           |             |           |            |          |      |   |   |   |   |
| **Held-to-Maturity                  Portfolio**                                                              |           |                                   |            |           |             |           |            |          |      |   |   |   |   |
| Obligations                  of States and Political Subdivisions                                            |           | **$**                                  | **22,903**      |           | **$**            | **48**         |            | **$**         | **35**    |   | **$** | **22,916** |   |
| Mortgage-Backed                  Securities                                                                  |           |                                   | **39,455**      |           |             | **0**          |            |          | **1,061** |   |   | **38,394** |   |
|                                                                                                         |           | **$**                                  | **62,358**      |           | **$**            | **48**         |            | **$**         | **1,096** |   | **$** | **61,310** |   |

|                                                                                                       |   | December                31, 2005 |    |
|------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                                       |   |                             |    | Gross |   | Gross |   | Estimated |   |
|                                                                                                       |   | Amortized                        |    | Unrealized |   | Unrealized |   | Fair |   |
| ***dollars                in thousands***                                                                  | Cost   |                             | Gains   |   | Losses |   | Value |   |
| **Available-for-Sale                Portfolio**                                                            |   |                             |    |   |   |   |   |   |   |   |   |   |   |
| U.S.                Treasuries                                                                             |   | $                                | 10,952  |   | $ | 0 |   | $ | 86 |   | $ | 10,866 |   |
| Obligations                of U.S. Government Corporations and Agencies                                    |   |                             | 25,444  |   |   | 0 |   |   | 353 |   |   | 25,091 |   |
| Obligations                of States and Political Subdivisions                                            |   |                             | 55,080  |   |   | 519 |   |   | 961 |   |   | 54,638 |   |
| Mortgage-Backed                Securities                                                                  |   |                             | 146,463 |   |   | 156 |   |   | 3,371 |   |   | 143,248 |   |
| Equity                Securities                                                                           |   |                             | 6,356   |   |   | 154 |   |   | 3 |   |   | 6,507 |   |
|                                                                                                       |   | $                                | 244,295 |   | $ | 829 |   | $ | 4,774 |   | $ | 240,350 |   |
|                                                                                                       |   |                             |    |   |   |   |   |   |   |
| **Trading                Portfolio**                                                                       |   | $                                | 1,334   |   | $ | 208 |   | $ | 0 |   | $ | 1,542 |   |
|                                                                                                       |   |                             |    |   |   |   |   |   |   |   |   |   |   |
| **Held-to-Maturity                Portfolio**                                                              |   |                             |    |   |   |   |   |   |   |   |   |   |   |
| Obligations                of States and Political Subdivisions                                            |   | $                                | 10,655  |   | $ | 27 |   | $ | 49 |   | $ | 10,633 |   |
| Mortgage-Backed                Securities                                                                  |   |                             | 44,284  |   |   | 1 |   |   | 1,081 |   |   | 43,204 |   |
|                                                                                                       |   | $                                | 54,939  |   | $ | 28 |   | $ | 1,130 |   | $ | 53,837 |   |
|                                                                                                       |   |                             |    |   |   |   |   |   |   |   |   |   |   |
| The                following tables provide information on temporarily impaired                securities: |   |                             |    |   |   |   |   |   |   |   |   |   |   |

|                                                              |                            | **December                  31, 2006**   |       |
|-------------------------------------------------------------------|---------------------------------|------------------------------------------|------------|
|                                                              |                            | **Less                  Than 12 Months** |       | **12                  Months or Longer** |   | **Total** |   |
|                                                              |                            | **Estimated**                            |       | **Unrealized** |   | **Estimated** |   | **Unrealized** |   | **Estimated** |   | **Unrealized** |   |
| ***dollars                  in thousands***                       | **Fair                  Value** |                                     | **Losses** |   | **Fair                  Value** |   | **Losses** |   | **Fair                  Value** |   | **Losses** |   |
| U.S.                  Treasuries                                  |                            | **$**                                    | **0**      |   | **$** | **0** |   | **$** | **10,808** |   | **$** | **156** |   | **$** | **10,808** |   | **$** | **156** |   |
| Obligations                  of U.S. Government                   |                            |                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporations                  and Agencies                        |                            |                                     | **5,990**  |   |   | **10** |   |   | **15,346** |   |   | **140** |   |   | **21,336** |   |   | **150** |   |
| Obligations                  of States and Political Subdivisions |                            |                                     | **4,425**  |   |   | **42** |   |   | **28,724** |   |   | **674** |   |   | **33,149** |   |   | **716** |   |
| Mortgage-Backed                  Securities                       |                            |                                     | **35,204** |   |   | **206** |   |   | **138,972** |   |   | **4,269** |   |   | **174,176** |   |   | **4,475** |   |
| Corporate                  Securities                             |                            |                                     | **2,267**  |   |   | **7** |   |   | **0** |   |   | **0** |   |   | **2,267** |   |   | **7** |   |
| Equity                  Securities                                |                            |                                     | **94**     |   |   | **1** |   |   | **0** |   |   | **0** |   |   | **94** |   |   | **1** |   |
|                                                              |                            | **$**                                    | **47,980** |   | **$** | **266** |   | **$** | **193,850** |   | **$** | **5,239** |   | **$** | **241,830** |   | **$** | **5,505** |   |
|                                                              |                            |                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

*Index*

| ***Note                  2. Investment Securities, Continued***   |                        |                                 |    |                                 |                        |      |   |       |                        |      |   |       |   |
|-------------------------------------------------------------------|-----------------------------|--------------------------------------|---------|--------------------------------------|-----------------------------|-----------|--------|------------|-----------------------------|-----------|--------|------------|--------|
|                                                              |                        |                                 |    |                                 |                        |      |   |       |                        |      |   |       |   |
|                                                              |                        | December                  31, 2005   |    |
|                                                              |                        | Less                  Than 12 Months |    | 12                  Months or Longer |                        | Total     |   |
|                                                              |                        | Estimated                            |    | Unrealized                           |                        | Estimated |   | Unrealized |                        | Estimated |   | Unrealized |   |
| ***dollars                  in thousands***                       | Fair                  Value |                                 | Losses  |                                 | Fair                  Value |      | Losses |       | Fair                  Value |      | Losses |       |
| U.S.                  Treasuries                                  |                        | $                                    | 10,866  |                                 | $                           | 86        |   | $          | 0                           |      | $      | 0          |   | $ | 10,866 |   | $ | 86 |   |
| Obligations                  of U.S. Government                   |                        |                                 |    |                                 |                        |      |   |       |                        |      |   |       |   |   |   |   |   |   |   |
| Corporations                  and Agencies                        |                        |                                 | 15,255  |                                 |                        | 193       |   |       | 9,837                       |      |   | 160        |   |   | 25,092 |   |   | 353 |   |
| Obligations                  of States and Political Subdivisions |                        |                                 | 17,608  |                                 |                        | 235       |   |       | 18,296                      |      |   | 775        |   |   | 35,904 |   |   | 1,010 |   |
| Mortgage-Backed                  Securities                       |                        |                                 | 69,924  |                                 |                        | 1,193     |   |       | 104,396                     |      |   | 3,259      |   |   | 174,320 |   |   | 4,452 |   |
| Equity                  Securities                                |                        |                                 | 210     |                                 |                        | 3         |   |       | 0                           |      |   | 0          |   |   | 210 |   |   | 3 |   |
|                                                              |                        | $                                    | 113,863 |                                 | $                           | 1,710     |   | $          | 132,529                     |      | $      | 4,194      |   | $ | 246,392 |   | $ | 5,904 |   |

|                                                      |     | **December                    31, 2006** |        |
|-----------------------------------------------------------|----------|------------------------------------------|-------------|
|                                                      |     | **Amortized**                            |        | **Fair** |   |
| ***dollars                    in thousands***             | **Cost** |                                     | **Value**   |   |
| **Available-for-Sale                    Securities**      |     |                                     |        |   |   |   |   |
| Due                    in One Year or Less                |     | **$**                                    | **13,941**  |   | **$** | **13,880** |   |
| Due                    After One Year Through Five Years  |     |                                     | **68,266**  |   |   | **66,546** |   |
| Due                    After Five Years Through Ten Years |     |                                     | **68,385**  |   |   | **67,298** |   |
| Due                    After Ten Years                    |     |                                     | **81,516**  |   |   | **80,316** |   |
|                                                      |     | **$**                                    | **232,108** |   | **$** | **228,040** |   |

|                                                    |     | **December                  31, 2006** |       |
|---------------------------------------------------------|----------|----------------------------------------|------------|
|                                                    |     | **Amortized**                          |       | **Fair** |   |
| ***dollars                  in thousands***             | **Cost** |                                   | **Value**  |   |
| **Held-to-Maturity                  Securities**        |     |                                   |       |   |   |   |   |
| Due                  in One Year or Less                |     | **$**                                  | **13,980** |   | **$** | **14,129** |   |
| Due                  After One Year Through Five Years  |     |                                   | **3,300**  |   |   | **3,332** |   |
| Due                  After Five Years Through Ten Years |     |                                   | **21,041** |   |   | **20,684** |   |
| Due                  After Ten Years                    |     |                                   | **24,037** |   |   | **23,165** |   |
|                                                    |     | **$**                                  | **62,358** |   | **$** | **61,310** |   |

----

*Index*

| ***Note                  2. Investment Securities, Continued***                                                                                                      |   |                                   |    |                                   |   |                                   |   |        |   |                             |   |        |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|---------|----------------------------------------|--------|----------------------------------------|--------|-------------|--------|----------------------------------|--------|-------------|--------|
|                                                                                                                                                                 |   |                                   |    |                                   |   |                                   |   |        |   |                             |   |        |   |
| The                  following table sets forth information with regard to securities                  gains and                  losses realized on sales or calls: |   |                                   |    |                                   |   |                                   |
|                                                                                                                                                                 |   |                                   |    |                                   |   |                                   |   |        |   |                             |   |        |   |
|                                                                                                                                                                 |   | **Year                  Ended**        |    | **Year                  Ended**        |   | **Year                  Ended**        |   |
|                                                                                                                                                                 |   | **December                  31, 2006** |    | **December                  31, 2005** |   | **December                  31, 2004** |   |
|                                                                                                                                                                 |   | **Available                  -**       |    |                                   |   | **Available                  -**       |   |        |   | **Available                  -** |   |        |   |
| ***dollars                  in thousands***                                                                                                                          |   | **-for-Sale**                          |    | **Trading**                            |   | **-for-Sale**                          |   | **Trading** |   | **-for-Sale**                    |   | **Trading** |   |
| Gross                  Gains                                                                                                                                         |   | **$**                                  | **326** |                                   | **$**  | **188**                                |   | $           | 383    |                             | $      | 99          |   | $ | 932 |   | $ | 161 |   |
| Gross                  Losses                                                                                                                                        |   |                                   | **0**   |                                   |   | **0**                                  |   |        | (13    | )                                |   | 0           |   |   | (61 | ) |   | (1 | ) |
| Net                  Securities Gains                                                                                                                                |   | **$**                                  | **326** |                                   | **$**  | **188**                                |   | $           | 370    |                             | $      | 99          |   | $ | 871 |   | $ | 160 |   |

| The                  proceeds from sales of Available-for Sale investment securities                  were                  $5,637,000, $9,350,000 and $12,986,000 for the years ended December                  31,                  2006, 2005 and 2004,                  respectively. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Federal                  Home Loan Bank and Federal Reserve Bank stock of $2,933,000 at                  December                  31, 2006, and $3,424,000 in 2005 is carried at cost as fair values                  are not                  readily determinable. Both investments are required for membership.                  At                  December 31, 2006, investment securities with an amortized cost                  of                  $168,411,000 and an estimated fair value of $165,013,000 were pledged                  as                  collateral for certain public deposits and other purposes as required                  or                  permitted by law. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ***Note                  3. Loans***             |     |                              |        |   |   |
|--------------------------------------------------|----------|-----------------------------------|-------------|--------|--------|
|                                             |     |                              |        |   |   |
|                                             |     | **December                  31,** |        |
| ***dollars                  in thousands***      | **2006** |                              | **2005**    |   |
| Residential                  Real Estate         |     | **$**                             | **117,815** |   | $      | 124,367 |   |
| Commercial                  Real Estate          |     |                              | **152,128** |   |   | 143,552 |   |
| Commercial                                       |     |                              | **74,033**  |   |   | 69,651 |   |
| Consumer                                         |     |                              | **61,856**  |   |   | 66,095 |   |
|                                             |     | **$**                             | **405,832** |   | $      | 403,665 |   |
| Less:                  Allowance for Loan Losses |     |                              | **(6,680**  | **)**  |   | (6,640 | ) |
| Net                  Loans                       |     | **$**                             | **399,152** |   | $      | 397,025 |   |

| At                  December 31, 2006, $52,033,000 in residential real estate loans                  were                  pledged as collateral for FHLBNY advances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| At                  the periods presented below, the subsidiary bank had loans to directors                  and executive officers of the Company and its subsidiary, or company                  in                  which they have ownership. Such loans are made in the ordinary                  course of                  business on substantially the same terms, including interest rates                  and                  collateral, as those prevailing at the time for comparable transactions                  with other persons and did not involve more than normal risk of                  collectibility or present other unfavorable features. Loan transactions                  with related parties are as                  follows: |

|                                          |     | **December                  31,** |       |
|-----------------------------------------------|----------|-----------------------------------|------------|
| ***dollars                  in thousands***   | **2006** |                              | **2005**   |   |
| Balance                  at Beginning of Year |     | **$**                             | **6,596**  |   | $ | 14,249 |   |
| Loan                  Payments                |     |                              | **(1,573** | **)** |   | (8,133 | ) |
| New                  Loans and Advances       |     |                              | **9,869**  |   |   | 480 |   |
| Ending                  Balance               |     | **$**                             | **14,892** |   | $ | 6,596 |   |

----

*Index*

| ***Note                  4. Allowance for Loan Losses***                                                           |     |                                         |       |   |     |   |   |
|--------------------------------------------------------------------------------------------------------------------|----------|----------------------------------------------|------------|--------|----------|--------|--------|
|                                                                                                               |     |                                         |       |   |     |   |   |
| Changes                  in the allowance for loan losses are presented in the following                  summary: |     |                                         |       |   |     |   |   |
|                                                                                                               |     |                                         |       |   |     |   |   |
|                                                                                                               |     | **Year                  Ended December 31,** |       |
| ***dollars                  in thousands***                                                                        | **2006** |                                         | **2005**   |   | **2004** |   |
| Balance                  at Beginning of Year                                                                      |     | **$**                                        | **6,640**  |   | $        | 6,250  |   | $ | 5,757 |   |
| Provision                  for Loan Losses                                                                         |     |                                         | **1,560**  |   |     | 1,580  |   |   | 1,200 |   |
| Recoveries                  Credited                                                                               |     |                                         | **586**    |   |     | 285    |   |   | 237 |   |
| Loans                  Charged-Off                                                                                 |     |                                         | **(2,106** | **)**  |     | (1,475 | )      |   | (944 | ) |
| Ending                  Balance                                                                                    |     | **$**                                        | **6,680**  |   | $        | 6,640  |   | $ | 6,250 |   |

| The                  following provides information on impaired loans for the periods                  presented:                                                                                                                                                                                   |     |                                         |      |   |     |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|----------------------------------------------|-----------|--------|----------|--------|--------|
|                                                                                                                                                                                                                                                                                                |     | **As                  of and For the Year**  |      |
|                                                                                                                                                                                                                                                                                                |     | **Year                  Ended December 31,** |      |
| ***dollars                  in thousands***                                                                                                                                                                                                                                                         | **2006** |                                         | **2005**  |   | **2004** |   |
| Impaired                  Loans                                                                                                                                                                                                                                                                     |     | **$**                                        | **1,896** |   | $        | 3,478  |   | $ | 2,411 |   |
| Allowance                  for Impaired Loans                                                                                                                                                                                                                                                       |     |                                         | **334**   |   |     | 1,179  |   |   | 651 |   |
| Average                  Recorded Investment in Impaired Loans                                                                                                                                                                                                                                      |     |                                         | **1,597** |   |     | 3,170  |   |   | 2,089 |   |
|                                                                                                                                                                                                                                                                                                |     |                                         |      |   |     |   |   |   |   |   |
| At                  December 31, 2006, $1,669,000 of the impaired loans had a specific                  reserve                  allocation of $334,000 compared to $3,478,000 of total impaired                  loans at                  December 31, 2005 with a related reserve of $1,179,000. |
|                                                                                                                                                                                                                                                                                                |     |                                         |      |   |     |   |   |   |   |   |
| The                  company did not record any interest income related to impaired                  loans for                  the years ended Decmeber 31, 2006, 2005 and 2004.                                                                                                                   |

| The                  following table sets forth information with regards to non-performing                  loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |     |                                    |      |   |     |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|-----------------------------------------|-----------|--------|----------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |     |                                    |      |   |     |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |     | **As                  of December 31,** |      |
| ***dollars                  in thousands***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | **2006** |                                    | **2005**  |   | **2004** |   |
| Loans                  in Non-Accrual Status                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |     | **$**                                   | **2,347** |   | $        | 3,866  |   | $ | 2,561 |   |
| Loans                  Contractually Past Due 90 Days or More                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |                                    |      |   |     |   |   |   |   |   |
| and                  Still Accruing Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |     |                                    | **182**   |   |     | 181    |   |   | 190 |   |
| Troubled                  Debt Restructured Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |     |                                    | **0**     |   |     | 871    |   |   | 0 |   |
| Total                  Non-Performing Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |     | **$**                                   | **2,529** |   | $        | 4,918  |   | $ | 2,751 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |     |                                    |      |   |     |   |   |   |   |   |
| The                  company did not record any interest income related to non-accrual                  loans                  for the years ended Decmeber 31, 2006, 2005 and 2004. Had the loans                  in                  non-accrual status performed in accordance with their original                  terms,                  additional interest income of $71,000 would have been recorded                  for the                  year ended December 31, 2006. In addition, in 2005 and 2004 interest                  income of $49,000, and $22,000, respectively, would have been recorded. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |     |                                    |      |   |     |   |   |   |   |   |
| Had                  the troubled debt restructured loans performed in accordance with                  their                  original terms, the Company would have recorded interest income                  of $3,000                  for the year ended December 31, 2005. Under the restructured terms,                  the                  Company recorded interest income of $4,000 for the year ended December                  31,                  2005.                                                                                                                                                |

----

*Index*

| ***Note                  5. Premises and Equipment***                                                                                                                            |     |                              |       |   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|-----------------------------------|------------|--------|--------|
|                                                                                                                                                                             |     | **December                  31,** |       |
| ***dollars                  in thousands***                                                                                                                                      | **2006** |                              | **2005**   |   |
| Land                                                                                                                                                                             |     | **$**                             | **598**    |   | $      | 599 |   |
| Buildings                                                                                                                                                                        |     |                              | **7,776**  |   |   | 8,614 |   |
| Furniture,                  Fixtures and Equipment                                                                                                                               |     |                              | **4,489**  |   |   | 6,046 |   |
| Construction                  in Progress                                                                                                                                        |     |                              | **122**    |   |   | 0 |   |
|                                                                                                                                                                             |     | **$**                             | **12,985** |   | $      | 15,259 |   |
| Less:                  Accumulated Depreciation                                                                                                                                  |     |                              | **(7,299** | **)**  |   | (8,829 | ) |
|                                                                                                                                                                             |     | **$**                             | **5,686**  |   | $      | 6,430 |   |
|                                                                                                                                                                             |     |                              |       |   |   |   |   |
| Depreciation                  expense was $729,000, $797,000, and $773,000 for the years ended                  December                  31, 2006, 2005 and 2004, respectively. |     |                              |       |   |   |   |   |

| ***Note                  6. Goodwill and Intangible Assets***                                                                                                                                                                                                                                                                                                                        |     |                              |      |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|-----------------------------------|-----------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                 |     |                              |      |   |   |
| Goodwill                  and intangible assets are presented in the following                  table:                                                                                                                                                                                                                                                                               |     |                              |      |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                 |     |                              |      |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                 |     | **December                  31,** |      |
| ***dollars                  in thousands***                                                                                                                                                                                                                                                                                                                                          | **2006** |                              | **2005**  |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                                                             |     | **$**                             | **4,518** |   | $      | 4,518 |   |
|                                                                                                                                                                                                                                                                                                                                                                                 |     |                              |      |   |   |   |   |
| Core                  Deposit Intangible                                                                                                                                                                                                                                                                                                                                             |     | **$**                             | **777**   |   | $      | 777 |   |
| Other                  Intangible Assets                                                                                                                                                                                                                                                                                                                                             |     |                              | **350**   |   |   | 350 |   |
| Total                  Intangible Assets                                                                                                                                                                                                                                                                                                                                             |     | **$**                             | **1,127** |   | $      | 1,127 |   |
| Accumulated                  Amortization                                                                                                                                                                                                                                                                                                                                            |     |                              | **(607**  | **)**  |   | (429 | ) |
| Intangible                  Assets, Net                                                                                                                                                                                                                                                                                                                                              |     | **$**                             | **520**   |   | $      | 698 |   |
|                                                                                                                                                                                                                                                                                                                                                                                 |     |                              |      |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                 |     |                              |      |   |   |   |   |
| Amortization                  expense on intangible assets was $178,000 for 2006, $171,000 for                  2005, and                  $84,000 for 2004. The core deposit intangible and other intangible                  assets                  are amortized over a weighted average period of approximately 5                  and 15                  years, respectively. |
|                                                                                                                                                                                                                                                                                                                                                                                 |     |                              |      |   |   |   |   |
| Estimated                  annual amortization expense of intangible assets, absent any impairment                  or                  change in estimated useful lives is summarized as follows for each                  of the                  next five years:                                                                                                                 |

| ***dollars                in thousands ***  |   |   |
|-------------------------------------------------------|--------|--------|
|                                                  | 2007   |   | **$** | **129** |   |
|                                                  | 2008   |   |   | **121** |   |
|                                                  | 2009   |   |   | **121** |   |
|                                                  | 2010   |   |   | **31** |   |
|                                                  | 2011   |   |   | **23** |   |

|                                                                        |   |
|-----------------------------------------------------------------------------|--------|
| ***Note                    7. Time Deposits***                              |   |
|                                                                        |   |
| Contractual                    maturities of time deposits were as follows: |   |

|                                        |       | **December                  31, 2006** |        |
|---------------------------------------------|------------|----------------------------------------|-------------|
| ***dollars                  in thousands*** | **Amount** |                                   | **%**       |   |
| 2007                                        |       | **$**                                  | **196,351** |   |   | **67.84** |   |
| 2008                                        |       |                                   | **62,822**  |   |   | **21.71** |   |
| 2009                                        |       |                                   | **24,124**  |   |   | **8.34** |   |
| 2010                                        |       |                                   | **5,040**   |   |   | **1.74** |   |
| 2011                                        |       |                                   | **974**     |   |   | **0.34** |   |
| Thereafter                                  |       |                                   | **100**     |   |   | **0.03** |   |
|                                        |       | **$**                                  | **289,411** |   |   | **100.00** | **%** |

----

*Index*

| ***Note                  8. Borrowings***                                                              |     |                              |       |   |   |
|--------------------------------------------------------------------------------------------------------|----------|-----------------------------------|------------|--------|--------|
|                                                                                                   |     |                              |       |   |   |
| The                  following is a summary of borrowings:                                             |     |                              |       |   |   |
|                                                                                                   |     |                              |       |   |   |
|                                                                                                   |     | **December                  31,** |       |
| ***dollars                  in thousands***                                                            | **2006** |                              | **2005**   |   |
| Short-Term                  Borrowings:                                                                |     |                              |       |   |   |   |   |
| Securities                  Sold Under Agreements to Repurchase                                        |     | **$**                             | **16,748** |   | $      | 17,564 |   |
| Treasury                  Tax and Loan Notes                                                           |     |                              | **1,711**  |   |   | 1,793 |   |
| Total                  Short-Term Borrowings                                                           |     | **$**                             | **18,459** |   | $      | 19,357 |   |
|                                                                                                   |     |                              |       |   |   |   |   |
| Long-Term                  Borrowings:                                                                 |     |                              |       |   |   |   |   |
| Advances                  from Federal Home Loan Bank of New York                                      |     |                              |       |   |   |   |   |
| Bearing                  Interest at 5.77%, Due January 2006                                           |     |                              | **0**      |   |   | 1,000 |   |
| Bearing                  Interest at 1.81%, Due March 2006                                             |     |                              | **0**      |   |   | 3,000 |   |
| Bearing                  Interest at 5.22%, Due July 2006                                              |     |                              | **0**      |   |   | 223 |   |
| Bearing                  Interest at 4.30%, Due November 2010, Callable November                  2006 |     |                              | **0**      |   |   | 4,000 |   |
| Bearing                  Interest at 3.62%, Due February 2008, Callable February                  2007 |     |                              | **5,000**  |   |   | 5,000 |   |
| Bearing                  Interest at 2.35% to 2.43%, Due March 2007                                    |     |                              | **5,500**  |   |   | 5,500 |   |
| Bearing                  Interest at 3.85%, Due March 2010, Callable March 2007                        |     |                              | **5,000**  |   |   | 5,000 |   |
| Bearing                  Interest at 3.05%, Due December 2012, Callable December                  2007 |     |                              | **8,000**  |   |   | 8,000 |   |
| Bearing                  Interest at 5.56%, Due July 2008                                              |     |                              | **274**    |   |   | 427 |   |
| Bearing                  Interest at 4.31% Due November 2015, Callable November                  2008  |     |                              | **4,000**  |   |   | 4,000 |   |
| Bearing                  Interest at 5.03%, Due January 2009                                           |     |                              | **696**    |   |   | 992 |   |
| Bearing                  Interest at 3.85%, Due January 2010                                           |     |                              | **655**    |   |   | 846 |   |
| Bearing                  Interest at 3.12%, Due March 2011                                             |     |                              | **2,256**  |   |   | 2,735 |   |
| Bearing                  Interest at 5.89% to 5.95%, Due July 2011                                     |     |                              | **918**    |   |   | 1,084 |   |
| Bearing                  Interest at 5.30%, Due December 2011                                          |     |                              | **1,148**  |   |   | 1,340 |   |
| Bearing                  Interest at 4.11%, Due January 2012                                           |     |                              | **765**    |   |   | 896 |   |
| Bearing                  Interest at 4.42%, Due January 2015                                           |     |                              | **848**    |   |   | 932 |   |
| Bearing                  Interest at 6.26%, Due July 2016                                              |     |                              | **745**    |   |   | 800 |   |
| Bearing                  Interest at 5.77%, Due December 2016                                          |     |                              | **1,523**  |   |   | 1,631 |   |
| Bearing                  Interest at 6.04%, Due January 2017                                           |     |                              | **770**    |   |   | 823 |   |
| Bearing                  Interest at 6.46%, Due July 2021                                              |     |                              | **422**    |   |   | 439 |   |
| Bearing                  Interest at 5.07%, Due January 2025                                           |     |                              | **3,684**  |   |   | 3,804 |   |
| Total                  Long-Term Borrowings                                                            |     | **$**                             | **42,204** |   | $      | 52,472 |   |

| Borrowings                  from the Federal Home Loan Bank of New York (FHLBNY) are collateralized                  by                  mortgage loans, mortgage-backed securities or other government                  agency                  securities. At December 31, 2006, $23,500,000 of the long term                  borrowings                  were collateralized by securities with an amortized cost and estimated                  fair value of $27,529,000 and $26,863,000, respectively. The remaining                  long term borrowings totaling $18,704,000 are collateralized by                  the                  Company's mortgage loans. At December 31, 2006, the Bank had a                  line of                  credit of $75,906,000 with the FHLB. However, based on outstanding                  borrowings at FHLB the total potential borrowing capacity on these                  lines                  is reduced to $24,128,000 at December 31, 2006. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |   |   |   |   |   |
| At                  December 31, 2005, $26,500,000 of the long term borrowings were                  collateralized by securities with an amortized cost and estimated                  fair                  value of $30,492,000 and $29,773,000, respectively. The remaining                  long                  term borrowings totaling $25,972,000 are collateralized by the                  Company's                  mortgage loans. At December 31, 2005, the Bank had a line of credit                  of                  $75,432,000 with the FHLB. However, based on outstanding borrowings                  at                  FHLB the total potential borrowing capacity on these lines is reduced                  to                  $19,413,000 at December 31,                  2005.                                                                                                                                                                                          |

| Information                  related to short-term borrowings is as follows: |     |                                         |       |   |     |   |   |
|------------------------------------------------------------------------------|----------|----------------------------------------------|------------|--------|----------|--------|--------|
|                                                                         |     | **As                  of and For the**       |       |
|                                                                         |     | **Year                  Ended December 31,** |       |
| ***dollars                  in thousands***                                  | **2006** |                                         | **2005**   |   | **2004** |   |
| Outstanding                  Balance at End of Period                        |     | **$**                                        | **18,459** |   | $        | 19,357 |   | $ | 37,559 |   |
| Average                  Interest Rate at End of Period                      |     |                                         | **3.26**   | **%**  |     | 3.30   | %      |   | 1.77 | % |
| Maximum                  Outstanding at any Month-End                        |     |                                         | **25,778** |   |     | 39,447 |   |   | 37,559 |   |
| Average                  Amount Outstanding during Period                    |     |                                         | **19,980** |   |     | 22,747 |   |   | 17,288 |   |
| Average                  Interest Rate during Period                         |     |                                         | **3.36**   | **%**  |     | 2.78   | %      |   | 1.23 | % |

----

*Index*

| ***Note                  8. Borrowings, Continued***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |
| Average                  amounts outstanding and average interest rates are computed using                  weighted                  daily averages.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |   |   |   |   |   |
| Securities                  sold under agreements to repurchase included in short-term borrowings                  represent the purchase of interests in government securities by                  the Bank’s                  customers or other third parties, which are repurchased by the                  Bank on the                  following business day or at stated maturity. The underlying securities                  are held in a third party custodian account and are under the Company’s                  control. The amortized cost and estimated fair value of securities                  pledged                  as collateral for repurchase agreements was $32,926,000 and $32,196,000                  at                  December 31, 2006, respectively. These amounts are included in                  the total                  of investment securities pledged disclosed in Note                  2. |

| ***Note                  9. Income Taxes***                                                                                              |     |                                         |      |   |     |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------|----------|----------------------------------------------|-----------|--------|----------|--------|--------|
|                                                                                                                                     |     |                                         |      |   |     |   |   |
| Income                  tax expense attributable to income before taxes is comprised of                  the                  following: |     |                                         |      |   |     |   |   |
|                                                                                                                                     |     |                                         |      |   |     |   |   |
|                                                                                                                                     |     | **Year                  Ended December 31,** |      |
| ***dollars                  in thousands***                                                                                              | **2006** |                                         | **2005**  |   | **2004** |   |
| Current:                                                                                                                                 |     |                                         |      |   |     |   |   |   |   |   |
| Federal                                                                                                                                  |     | **$**                                        | **2,064** |   | $        | 2,541  |   | $ | 2,738 |   |
| State                                                                                                                                    |     |                                         | **272**   |   |     | 312    |   |   | 320 |   |
| Total                  Current                                                                                                           |     |                                         | **2,336** |   |     | 2,853  |   |   | 3,058 |   |
| Deferred:                                                                                                                                |     |                                         |      |   |     |   |   |   |   |   |
| Federal                                                                                                                                  |     |                                         | **(116**  | **)**  |     | (75    | )      |   | (109 | ) |
| State                                                                                                                                    |     |                                         | **(14**   | **)**  |     | (63    | )      |   | 53 |   |
| Total                  Deferred                                                                                                          |     |                                         | **(130**  | **)**  |     | (138   | )      |   | (56 | ) |
| Total                  Income Tax Expense                                                                                                |     | **$**                                        | **2,206** |   | $        | 2,715  |   | $ | 3,002 |   |

| The                  components of deferred income taxes, which are included in the                  consolidated statements of condition are: |     |                                         |      |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|----------|----------------------------------------------|-----------|--------|--------|
|                                                                                                                                           |     |                                         |      |   |   |
|                                                                                                                                           |     | **Year                  Ended December 31,** |      |
| ***dollars                  in thousands***                                                                                                    | **2006** |                                         | **2005**  |   |
| Assets:                                                                                                                                        |     |                                         |      |   |   |   |   |
| Allowance                  for Loan Losses                                                                                                     |     | **$**                                        | **2,601** |   | $      | 2,586 |   |
| Deferred                  Compensation                                                                                                         |     |                                         | **1,356** |   |   | 1,341 |   |
| Net                  Unrealized Loss on Securities                                                                                             |     |                                         |      |   |   |   |   |
| Available-for-Sale                                                                                                                             |     |                                         | **1,548** |   |   | 1,537 |   |
| Pension                  Assets - SFAS No. 158                                                                                                 |     |                                         | **524**   |   |   | 0 |   |
| Other                                                                                                                                          |     |                                         | **230**   |   |   | 203 |   |
|                                                                                                                                           |     |                                         | **6,259** |   |   | 5,667 |   |
| Liabilities:                                                                                                                                   |     |                                         |      |   |   |   |   |
| Securities                  Discount Accretion                                                                                                 |     |                                         | **315**   |   |   | 280 |   |
| Defined                  Benefit Pension Plan                                                                                                  |     |                                         | **1,442** |   |   | 1,544 |   |
| Equity                  Investment                                                                                                             |     |                                         | **283**   |   |   | 286 |   |
| Goodwill                  Amortization                                                                                                         |     |                                         | **329**   |   |   | 233 |   |
| Other                                                                                                                                          |     |                                         | **307**   |   |   | 406 |   |
|                                                                                                                                           |     |                                         | **2,676** |   |   | 2,749 |   |
| Net                  Deferred Tax Assets                                                                                                       |     | **$**                                        | **3,583** |   | **$**  | 2,918 |   |

----

*Index*

| ***Note                  9. Income Taxes, Continued***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |     |                                         |      |   |     |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|----------------------------------------------|-----------|--------|----------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |                                         |      |   |     |   |   |
| Realization                  of deferred tax assets is dependent upon the generation of future                  taxable                  income or the existence of sufficient taxable income within the                  carryback                  period. A valuation allowance is provided when it is more likely                  than not                  that some portion of the deferred tax assets will not be realized.                  In                  assessing the need for a valuation allowance, management considers                  the                  scheduled reversal of the deferred tax liabilities, the level of                  historical taxable income and projected future taxable income over                  the                  periods in which the temporary differences comprising the deferred                  tax                  assets will be deductible. Based on its assessment, management                  determined                  that no valuation allowance is necessary. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |                                         |      |   |     |   |   |
| A                  reconciliation of the statutory federal income tax rate to the                  effective                  income tax rate is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                                         |      |   |     |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |                                         |      |   |     |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     | **Year                  Ended December 31,** |      |
| ***dollars                  in thousands***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | **2006** |                                         | **2005**  |   | **2004** |   |
| Statutory                  Federal Income Tax Rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |                                         | **34.0**  | **%**  |     | 34.0   | %      |   | 34.0 | % |
| Variances                  from Statutory Rate:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |     |                                         |      |   |     |   |   |   |   |   |
| State                  Income Tax, Net of Federal Tax Benefit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |     |                                         | **1.8**   |   |     | 1.6    |   |   | 2.1 |   |
| Tax                  Exempt Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |                                         | **(13.2** | **)**  |     | (12.1  | )      |   | (10.2 | ) |
| Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |     |                                         | **1.0**   |   |     | 2.5    |   |   | (0.1 | ) |
| Effective                  Tax Rate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |     |                                         | **23.6**  | **%**  |     | 26.0   | %      |   | 25.8 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |                                         |      |   |     |   |   |   |   |   |

| ***Note.                  10. Employee Benefit Plans***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                               |                                |            |   |                               |                                |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|-------------------------------------|-----------------|--------|------------------------------------|-------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                               |                                |            |   |                               |                                |   |
| Effective                  February 28, 2006, the Company's defined benefit pension plan was                  frozen.                  Under the frozen plan, no future benefits will be accrued for plan                  participants, nor will any new participants be enrolled in the                  plan. This                  plan is sponsored by the Company's bank subsidiary. Prior to being                  frozen,                  the plan covered employees who had attained the age of 21 and completed                  one year of service. Although the plan was frozen, the Company                  mantains                  the responsibility for funding the plan. The Company's funding                  practice is                  to contribute at least the minimum amount annually to meet minimum                  funding                  requirements. An annual minimum contribution was not required in                  2006                  because the plan is more than 100% funded. Plan assets consist                  primarily                  of marketable fixed income securities and common stocks. Plan benefits                  are                  based on years of service and the employee’s average compensation during                  the five highest consecutive years of the last ten years of                  employment. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                               |                                |            |   |                               |                                |   |
| As                  discussed in Note 1, the Company adopted SFAS No. 158 effective                  December                  31, 2006. SFAS No. 158 requires an employer to (1) recognize the                  over                  funded or under funded status of defined benefit postretirement                  plans,                  which is measured as the difference between the plan assets at                  fair value                  and the benefit obligation, as an asset or liability in its balance                  sheet;                  (2) recognize changes in that funded status in the year in which                  the                  changes occur through comprehensive income; and (3) measure the                  defined                  benefit plan assets and obligations as of the date of its year-end                  balance                  sheet. SFAS No. 158 does not change how an employer determines                  the amount                  of net periodic benefit cost.                                                                                                                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                               |                                |            |   |                               |                                |   |
| The                  following table illustrates the incremental effect of applying                  SFAS No.                  158 on individual line items in the Consolidated Statement of Condition                  as                  of December 31, 2006:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                               |                                |            |   |                               |                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                               |                                |            |   |                               |                                |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                               | **Before**                          |            |   |                               | **After**                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                               | **Application                  of** |            |   |                               | **Application                  of** |   |
| ***dollars                  in thousands***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | **Statement                  158** |                                | **Adjustments** |   | **Statement                  158** |                                |
| Asset                  for Pension Benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                               | **$**                               | **3,702**       |   |                               | **($1,344**                         | **)**  | **$** | **2,358** |   |
| Deferred                  Tax Asset                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                               |                                | **2,930**       |   |                               | **524**                             |   |   | **3,454** |   |
| Total                  Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                               |                                | **762,801**     |   |                               | **(820**                            | **)**  |   | **761,981** |   |
| Accumulated                  Other Comprehensive Loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                               |                                | **(2,427**      | **)**  |                               | **(820**                            | **)**  |   | **(3,247** | **)** |
| Total                  Shareholders' Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                               |                                | **64,152**      |   |                               | **(820**                            | **)**  |   | **63,332** |   |

----

*Index*

| ***Note.                  10. Employee Benefit Plans, Continued***                                                                                                                                                                                                                                                                                                                                                   |     |         |       |   |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|--------------|------------|--------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                 |     |         |       |   |    |
| The                  following table sets forth the components of pension expense (benefit)                  as                  well as changes in the plan’s projected benefit obligation and plan assets                  and the plan’s funded status and amounts recognized in the consolidated                  statements of condition based on a September 30 measurement                  date. |
|                                                                                                                                                                                                                                                                                                                                                                                                                 |     |         |       |   |    |
| ***dollars                  in thousands***                                                                                                                                                                                                                                                                                                                                                                          | **2006** |         | **2005**   |   |
| Change                  in Benefit Obligation:                                                                                                                                                                                                                                                                                                                                                                       |     |         |       |   |    |   |   |
| Benefit                  Obligation at Beginning of Year                                                                                                                                                                                                                                                                                                                                                             |     | **$**        | **18,268** |   | $       | 16,050 |   |
| Service                  Cost                                                                                                                                                                                                                                                                                                                                                                                        |     |         | **413**    |   |    | 682 |   |
| Interest                  Cost                                                                                                                                                                                                                                                                                                                                                                                       |     |         | **913**    |   |    | 924 |   |
| Actuarial                  Loss                                                                                                                                                                                                                                                                                                                                                                                      |     |         | **(128**   | **)**  |    | 1,305 |   |
| Benefits                  Paid                                                                                                                                                                                                                                                                                                                                                                                       |     |         | **(779**   | **)**  |    | (693 | ) |
| Curtailment                  Loss                                                                                                                                                                                                                                                                                                                                                                                    |     |         | **(2,977** | **)**  |    | 0 |   |
| Projected                  Benefit Obligation at End of Year                                                                                                                                                                                                                                                                                                                                                         |     | **$**        | **15,710** |   | $       | 18,268 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                 |     |         |       |   |    |   |   |
| Change                  in Plan Assets:                                                                                                                                                                                                                                                                                                                                                                              |     |         |       |   |    |   |   |
| Fair                  Value of Plan Assets at Beginning of Year                                                                                                                                                                                                                                                                                                                                                      |     | **$**        | **17,028** |   | $       | 15,404 |   |
| Actual                  Gain on Plan Assets                                                                                                                                                                                                                                                                                                                                                                          |     |         | **1,819**  |   |    | 1,765 |   |
| Employer                  Contribution                                                                                                                                                                                                                                                                                                                                                                               |     |         | **0**      |   |    | 552 |   |
| Benefits                  Paid                                                                                                                                                                                                                                                                                                                                                                                       |     |         | **(779**   | **)**  |    | (693 | ) |
| Fair                  Value of Plan Assets at End of Year                                                                                                                                                                                                                                                                                                                                                            |     | **$**        | **18,068** |   | $       | 17,028 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                 |     |    |       |   |    |
| Funded                  (Unfunded) Status at End of Year                                                                                                                                                                                                                                                                                                                                                             |     | **$**        | **2,358**  |   | $  | (1,240 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                 |     |         |       |   |    |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                 |     |         |       |   |    |   |   |
| Amounts                  recognized in accumulated other comprehensive loss, net of tax,                  consist of                  the following:                                                                                                                                                                                                                                                                 |     |         |       |   |    |   |   |

| ***dollars                  in thousands***                                                                                                                                                                                                                                                     | **2006** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|--------|
| Net                  Loss (Gain)                                                                                                                                                                                                                                                                |     | **$**  | **742** |   |
| Prior                  Service Cost                                                                                                                                                                                                                                                             |     |   | **78** |   |
|                                                                                                                                                                                                                                                                                            |     | **$**  | **820** |   |
|                                                                                                                                                                                                                                                                                            |     |   |   |   |
| The                  estimated net loss and prior service cost, net of tax, that will be                  amortized from accumulated other comprehensive loss into net periodic                  benefit cost over the next fiscal year will be $0 and $78,                  respectively. |
|                                                                                                                                                                                                                                                                                            |     |   |   |   |
| A                  reconciliation of the funded status at the end of the year to the                  amounts                  recognized in the Consolidated Statements of Condition as of December                  31                  follows:                                              |

| ***dollars                  in thousands***      | **2006** |   | **2005**  |   |
|--------------------------------------------------|----------|--------|-----------|--------|
| Funded                  (Unfunded) Status        |     | **$**  | **2,358** |   | $  | (1,240 | ) |
| Unrecognized                  Net Actuarial Loss |     |   | **0**     |   |   | 4,849 |   |
| Unrecognized                  Prior Service Cost |     |   | **0**     |   |   | 355 |   |
| Pension                  Asset at End of Year    |     | **$**  | **2,358** |   | $ | 3,964 |   |

| The                  following table presents a comparison of the accumulated benefit                  obligation and plan assets: |     |   |       |   |   |
|------------------------------------------------------------------------------------------------------------------------------------|----------|--------|------------|--------|--------|
|                                                                                                                               |     |   |       |   |   |
| ***dollars                  in thousands***                                                                                        | **2006** |   | **2005**   |   |
| Projected                  Benefit Obligation                                                                                      |     | **$**  | **15,710** |   | $      | 18,268 |   |
| Accumulated                  Benefit Obligation                                                                                    |     |   | **15,710** |   |   | 15,354 |   |
| Fair                  Value of Plan Assets                                                                                         |     |   | **18,068** |   |   | 17,028 |   |

----

*Index*

| ***Note.                  10. Employee Benefit Plans, Continued*** |     |   |       |   |     |   |   |
|--------------------------------------------------------------------|----------|--------|------------|--------|----------|--------|--------|
|                                                               |     |   |       |   |     |   |   |
| Components                  of Net Periodic Benefit Cost are:      |     |   |       |   |     |   |   |
|                                                               |     |   |       |   |     |   |   |
| ***dollars                  in thousands***                        | **2006** |   | **2005**   |   | **2004** |   |
| Service                  Cost                                      |     | **$**  | **413**    |   | $        | 682    |   | $ | 646 |   |
| Interest                  Cost                                     |     |   | **913**    |   |     | 924    |   |   | 839 |   |
| Expected                  Return on Plan Assets                    |     |   | **(1,375** | **)**  |     | (1,247 | )      |   | (1,142 | ) |
| Net                  Amortization                                  |     |   | **122**    |   |     | 215    |   |   | 200 |   |
| Curtailment                  Expense                               |     |   | **190**    |   |     | 0      |   |   | 0 |   |
|                                                               |     | **$**  | **263**    |   | $        | 574    |   | $ | 543 |   |

| The                  following weighted-average assumptions were used to determine the                  benefit                  obligation of the plan as of September 30: |     |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|--------|
|                                                                                                                                                                        |     |   |   |   |   |   |   |
|                                                                                                                                                                        | **2006** |   | **2005** |   | **2004** |   |
| Discount                  Rate                                                                                                                                              |     |   | **5.80** | **%** |   | 5.50 | % |   | 5.88 | % |
| Expected                  Return on Plan Assets                                                                                                                             |     |   | **7.50** | **%** |   | 8.00 | % |   | 8.00 | % |
| Rate                  of Compensation Increase                                                                                                                              |     |   | **N/A** | **%** |   | 3.00 | % |   | 3.00 | % |
|                                                                                                                                                                        |     |   |   |   |   |   |   |   |   |   |

| The                  following weighted-average assumptions were used to determine the                  net                  periodic benefit cost of the plan for the years ended December                  31: |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                             |   |   |   |   |   |   |   |
|                                                                                                                                                                                                             | **2006** |   | **2005** |   | **2004** |   |
| Discount                  Rate                                                                                                                                                                                   |   |   | **5.50** | **%** |   | 5.88 | % |   | 6.00 | % |
| Expected                  Return on Plan Assets                                                                                                                                                                  |   |   | **8.00** | **%** |   | 8.00 | % |   | 8.00 | % |
| Rate                  of Compensation Increase                                                                                                                                                                   |   |   | **3.00** | **%** |   | 3.00 | % |   | 3.00 | % |

| The                  plan's weighted average asset allocations at September 30, 2006                  and 2005,                  by asset category are as follows: |     |                                |      |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|-------------------------------------|-----------|--------|--------|
|                                                                                                                                                               |     |                                |      |   |   |
|                                                                                                                                                               |     | **Plan                  Assets at** |      |
|                                                                                                                                                               |     | **September                  30,**  |      |
|                                                                                                                                                               | **2006** |                                | **2005**  |   |
| Equity                  Securities                                                                                                                                 |     |                                | **59.8**  | **%**  |   | 58.8 | % |
| Debt                  Securities                                                                                                                                   |     |                                | **39.9**  | **%**  |   | 41.2 | % |
| Other                                                                                                                                                              |     |                                | **0.3**   | **%**  |   | 0.0 | % |
|                                                                                                                                                               |     |                                | **100.0** | **%**  |   | 100.0 | % |

|                  The                  following benefit payments, which reflect expected future service,                  as                  appropriate, are expected to be paid over the next five                  years |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                              |   |   |   |
| ***dollars                  in thousands ***                                                                                                                                                                            |
|                                                                                                                                                                                                                              | 2007 |   | **$** | **777** |   |
|                                                                                                                                                                                                                              | 2008 |   |   | **827** |   |
|                                                                                                                                                                                                                              | 2009 |   |   | **827** |   |
|                                                                                                                                                                                                                              | 2010 |   |   | **860** |   |
|                                                                                                                                                                                                                              | 2011 |   |   | **913** |   |
|                                                                                                                                                                                                                              | 2012-2017 |   |   | **5,588** |   |

----

*Index*

| ***Note.                    10. Employee Benefit Plans, Continued***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| **Investment                    Strategy**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| The                    plan assets are invested in the New York State Bankers Retirement                    System                    (the "System"), which was established in 1938 to provide for                    the payment                    of benefits to employees of participating banks. The System is                    overseen by                    a Board of Trustees who meet quarterly and set the investment                    policy                    guidelines. The System utilizes two investment management firms,                    (which                    will be referred to as Firm I and Firm II). Firm I is investing                    approximately 68% of the total portfolio and Firm II is investing                    approximately 32% of the portfolio. The System's investment objective                    is                    to exceed the investment benchmarks in each asset category. Each                    firm                    operates under a separate written investment policy approved                    by the Board                    of Trustees and designed to achieve an allocation approximating                    60%                    invested in Equity Securities and 40% invested in Debt Securities.                    Each                    firm reports at least quarterly to the Investment Committee and                    semi-annually to the Board. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| The                    equity portfolio consists of international securities and a diversified                    range of securities in the US equity markets. The fixed income                    portfolio                    focuses the purchase and sale of futures and options on futures                    on foreign                    currencies and foreign and domestic bonds, bond indices and short-term                    securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| **Discount                    Rate**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |
| Annually,                    the Company establishes a discount rate to determine the value                    of the                    plan's benefit obligation. The Company uses the 20-year AA Corporate                    bond                    yield as a basis for determining the discount rate for the                    plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| **Expected                    Long-Term Rate-of-Return**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
| The                    expected long-term rate-of-return on the plan assets reflects                    long-term                    earnings expectations on existing plan assets and those contributions                    expected to be received during the current plan year. In estimating                    that                    rate, appropriate consideration was given to historical returns                    earned by                    plan assets in the fund and the rates of return expected to be                    available                    for reinvestment. Average rates of return over the past 1, 3,                    5 and 10                    year periods were determined and subsequently adjusted to reflect                    current                    capital market assumptions and changes in investment                    allocations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| **Supplemental                    Retirement Income Agreement**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| In                    addition to the Company’s noncontributory defined benefit pension plan,                    there are two supplemental employee retirement plans for two                    former                    executives. The amount of the liabilities recognized in the Company’s                    consolidated statements of condition associated with these plans                    was                    $905,000 at December 31, 2006 and $934,000 at December 31, 2005.                    For the                    years ended December 31, 2006, 2005, and 2004, the Company recognized                    $63,000, $194,000 and $178,000, respectively, of expense related                    to those                    plans. The discount rate used in determining the actuarial present                    values                    of the projected benefit obligations was 5.30% at December 31,                    2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

| ***Note                  11. Commitments and Contingencies***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |     |                              |       |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|-----------------------------------|------------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |                              |       |   |   |
| Financial                  instruments whose contract amounts represent credit risk consist                  of the                  following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |     |                              |       |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |                              |       |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     | **December                  31,** |       |
| ***dollars                  in thousands***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | **2006** |                              | **2005**   |   |
| Commitments                  to Extend Credit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |     | **$**                             | **81,536** |   | $      | 76,783 |   |
| Standby                  Letters of Credit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |     |                              | **6,974**  |   |   | 8,880 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |                              |       |   |   |   |   |
| Commitments                  to extend credit are agreements to lend to a customer as long as                  there is                  no violation of any condition established in the contract. Commitments                  generally have fixed expiration dates or other termination clauses                  and may                  require payment of a fee. Since some of the commitments are expected                  to                  expire without being drawn upon, the total commitment amounts do                  not                  necessarily represent future cash requirements.                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |                              |       |   |   |   |   |
| Standby                  letters of credit written are conditional commitments issued by                  the Bank                  to guarantee the performance of a customer to a third party. Those                  guarantees are primarily issued to support public and private borrowing                  arrangements, including bond financing and similar transactions.                  The                  credit risk involved in issuing letters of credit is essentially                  the same                  as that involved in extending loan facilities to customers. Since                  some of                  the letters of credit are expected to expire without being drawn                  upon, the                  total commitment amounts do not necessarily represent future cash                  requirements. |

----

*Index*

| ***Note                  11. Commitments and Contingencies,                  Continued***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |
| The                  estimated fair value of the Company’s stand-by letters of credit was $18                  thousand, and $12 thousand at December 31, 2006 and December 31,                  2005,                  respectively. The estimated fair value of stand-by letters of credit                  at                  their inception is equal to the fee that is charged to the customer                  by the                  Company. Generally, the Company’s stand-by letters of credit have a term                  of one year. In determining the fair values disclosed above, the                  fees were                  reduced on a straight-line basis from the inception of each stand-by                  letter of credit to the respective dates above. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |
| The                  amount of collateral obtained, if deemed necessary, by the Bank                  upon                  extension of credit for commitments to extend credit and letters                  of                  credit, is based upon management's credit evaluation of the counter                  party.                  Collateral held varies but includes residential and commercial                  real                  estate.                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |
| In                  the ordinary course of business there are various legal proceedings                  pending against the Company. After consultation with outside counsel,                  management considers that the aggregate exposure, if any, arising                  from                  such litigation would not have a material adverse effect on the                  Company's                  consolidated financial position.                                                                                                                                                                                                                                                                                                                                                   |

| ***Note                  12. Disclosures about Fair Value of Financial                  Instruments***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| SFAS                  No. 107, "Disclosures about Fair Value of Financial Instruments,"                  requires                  disclosure of fair value information about financial instruments,                  whether                  or not recognized in the consolidated statement of condition, for                  which it                  is practicable to estimate that value. In cases where quoted market                  prices                  are not available, fair values are based on estimates using present                  value                  or other valuation techniques. Those techniques are significantly                  affected                  by the assumptions used, including the discount rate and estimates                  of                  future cash flows. In that regard, the derived fair value estimates                  cannot                  be substantiated by comparison to independent markets and in many                  cases,                  could not be realized in immediate settlement of the instruments.                  SFAS No.                  107 excludes certain financial instruments and all nonfinancial                  instruments from its disclosure requirements. Accordingly, the                  aggregate                  fair value amounts presented do not represent the underlying value                  of the                  Bank. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| The                  following methods and assumptions were used to estimate the fair                  value of                  each class of financial instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Short-Term                  Financial Instruments**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| The                  fair value of certain financial instruments is estimated to approximate                  their carrying value because the remaining term to maturity of                  the                  financial instrument is less than 90 days or the financial instrument                  reprices in 90 days or less. Such financial instruments include                  cash and                  due from banks, Federal Funds sold, accrued interest receivable                  and                  accrued interest payable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| The                  fair value of Time Deposits with Other Banks is estimated using                  discounted                  cash flow analysis based on the Company's current reinvestment                  rate for                  similar deposits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Securities**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Fair                  values of securities are based on quoted market prices or dealer                  quotes.                  If a quoted market price is not available, fair value is estimated                  using                  quoted market prices for similar securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| **Loans**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| For                  certain homogenous categories of loans, such as some residential                  mortgages, credit card receivables, and other consumer loans, fair                  value                  is estimated using the quoted market prices for securities backed                  by                  similar loans, adjusted for differences in loan characteristics.                  The fair                  value of other types of loans is estimated by discounting the future                  cash                  flows using the current rates at which similar loans would be made                  to                  borrowers with similar credit ratings and for the same remaining                  maturities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

----

*Index*

| ***Note                  12. Disclosures about Fair Value of Financial Instruments,                  Continued***                                                                                                                                                                                                                                                                                                                                                                                                                                                   |      |                              |        |                              |      |         |      |     |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|-----------------------------------|-------------|-----------------------------------|-----------|--------------|-----------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |      |                              |        |                              |      |         |      |     |   |
| **Deposits**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |      |                              |        |                              |      |         |      |     |   |
| The                  fair value of demand deposits, savings accounts, and certain NOW                  and money                  market deposits is the amount payable on demand at the reporting                  date. The                  fair value of fixed-maturity time deposits is estimated using the                  rates                  currently offered for deposits of similar remaining                  maturities.                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |      |                              |        |                              |      |         |      |     |   |
| **Borrowings**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |      |                              |        |                              |      |         |      |     |   |
| The                  fair value of repurchase agreements, short-term borrowings, and                  long-term                  borrowings is estimated using discounted cash flow analysis based                  on the                  Company's current incremental borrowing rate for similar borrowing                  arrangements.                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |      |                              |        |                              |      |         |      |     |   |
| **Off-Balance                  Sheet Instruments**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |      |                              |        |                              |      |         |      |     |   |
| The                  fair value of outstanding loan commitments and standby letters                  of credit                  are based on fees currently charged to enter into similar agreements,                  taking into account the remaining terms of the agreements, the                  counter                  parties' credit standing and discounted cash flow analysis. The                  fair value                  of these instruments approximates the value of the related fees                  and is not                  material. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |      |                              |        |                              |      |         |      |     |   |
| The                  carrying values and estimated fair values of the Company’s financial                  instruments are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                        |      |                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |      |                              |        |                              |      |         |      |     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |      |                              |        |                              |      |         |      |     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |      | **December                  31,** |        | **December                  31,** |      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |      | **2006**                          |        | **2005**                          |      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |      | **Carrying**                      |        | **Fair**                          |      | **Carrying** |      | **Fair** |   |
| *dollars                  in thousands*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | **Value** |                              | **Value**   |                              | **Value** |         | **Value** |     |
| Financial                  Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |      |                              |        |                              |      |         |      |     |   |   |   |   |   |
| Cash                  and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |      | **$**                             | **25,859**  |                              | **$**     | **25,856**   |      | $        | 18,417 |   | $ | 18,427 |   |
| Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |      |                              | **297,542** |                              |      | **296,494**  |      |     | 296,831 |   |   | 295,729 |   |
| Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |      |                              | **405,832** |                              |      | **405,708**  |      |     | 403,665 |   |   | 398,429 |   |
| Allowance                  for Loan Losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |      |                              | **(6,680**  | **)**                             |      | **(6,680**   | **)**     |     | (6,640 | ) |   | (6,640 | ) |
| Net                  Loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |      |                              | **399,152** |                              |      | **399,028**  |      |     | 397,025 |   |   | 391,789 |   |
| Accrued                  Interest Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |      |                              | **3,674**   |                              |      | **3,674**    |      |     | 3,297 |   |   | 3,297 |   |
| Financial                  Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |      |                              |        |                              |      |         |      |     |   |   |   |   |   |
| Demand                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |      | **$**                        | **71,914**  |                              | $    | **71,914**   |      | $        | 72,986 |   | $ | 72,986 |   |
| Savings,                  NOW and Money                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |      |                              |        |                              |      |         |      |     |   |   |   |   |   |
| Market                  Deposit Accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |      |                              | **243,249** |                              |      | **243,249**  |      |     | 244,484 |   |   | 244,484 |   |
| Certificates                  of Deposit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |      |                              | **289,411** |                              |      | **288,916**  |      |     | 261,863 |   |   | 261,855 |   |
| Other                  Deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |      |                              | **24,470**  |                              |      | **24,469**   |      |     | 25,625 |   |   | 25,623 |   |
| Borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |      |                              | **60,663**  |                              |      | **58,892**   |      |     | 71,829 |   |   | 70,638 |   |
| Accrued                  Interest Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |      |                              | **968**     |                              |      | **968**      |      |     | 690 |   |   | 690 |   |

----

*Index*

| ***Note                  13. Regulatory Matters***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |        |       |                                          |             |                              |      |   |       |       |       |     |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|------------|-----------------------------------------------|------------------|----------------------------------------|-----------|--------|------------|------------|------------|----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |       |                                          |             |                              |      |   |       |       |       |     |   |
| The                  Company and the subsidiary bank are subject to various regulatory                  capital                  requirements administered by the Federal banking agencies. Failure                  to meet                  minimum capital requirements can initiate certain mandatory, and                  possibly                  additional discretionary, actions by regulators that, if undertaken,                  could                  have a direct material effect on the Company’s consolidated financial                  statements. Under capital adequacy guidelines and the regulatory                  framework                  for prompt corrective action, the subsidiary bank must meet specific                  capital guidelines that involve quantitative measures of assets,                  liabilities, and certain off-balance sheet items as calculated                  under                  regulatory accounting practices. The Company’s and subsidiary bank’s                  capital amounts and classifications are also subject to qualitative                  judgments by the regulators about components, risk weightings,                  and other                  factors.   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |       |                                          |             |                              |      |   |       |       |       |     |   |
| Quantitative                  measures established by regulation to ensure capital adequacy require                  the                  maintenance of minimum amounts and ratios (set forth in the table                  below)                  of total and Tier 1 capital (as defined in the regulations) to                  risk-weighted assets (as defined), and of Tier 1 capital (as defined)                  to                  average assets (as defined). Management believes the Company and                  subsidiary bank meet all capital adequacy requirements to which                  they are                  subject.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |       |                                          |             |                              |      |   |       |       |       |     |   |
| The                  most recent notification from the Office of the Comptroller of                  the                  Currency categorized the subsidiary bank as well capitalized under                  the                  regulatory framework for prompt corrective action. To be categorized                  as                  well capitalized the Company and subsidiary bank must maintain                  minimum                  total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios                  as set                  forth in the following table. There have been no conditions or                  events                  since that notification that management believes have changed the                  subsidiary institution’s category.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |       |                                          |             |                              |      |   |       |       |       |     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |       |                                          |             |                              |      |   |       |       |       |     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |       |                                          |             |  **For                  Capital** |      |   |       |       |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       | **Actual:** |       |  **Adequacy                  Purposes:** |             | **Well                  Capitalized:** |      |
| ***dollars                  in thousands***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | **Amount** |        | **Ratio**  |                                          |  **Amount** |                                   | **Ratio** |   | **Amount** |       | **Ratio**  |     |
| **As                  of December 31, 2006**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |       |        |       |                                          |             |                                   |      |   |       |       |       |     |   |   |   |   |   |   |   |
| Total                  Capital to Risk-Weighted Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |       |        |       |                                          |             |                                   |      |   |       |       |       |     |   |   |   |   |   |   |   |
| The                  Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |       | **$**       | **67,826** |                                          |             | **13.50**                              | **%**     | **$**  | **40,186** | ** ** | ** ** | **8.00** | **%**  |   | **N/A** |   |   | **N/A** |   |
| Subsidiary                  Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       | **$**       | **66,309** |                                          |             | **13.20**                              | **%**     | **$**  | **40,179** | ** ** | ** ** | **8.00** | **%**  | **$** | **50,223** |   |   | **10.00** | **%** |
| Tier                  1 Capital to Risk-Weighted Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       |        |       |                                          |             |                                   |      |   |       |       |       |     |   |   |   |   |   |   |   |
| The                  Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |       | **$**       | **61,542** |                                          |             | **12.25**                              | **%**     | **$**  | **20,093** |       |       | **4.00** | **%**  |   | **N/A** |   |   | **N/A** |   |
| Subsidiary                  Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       | **$**       | **60,026** |                                          |             | **11.95**                              | **%**     | **$**  | **20,089** |       |       | **4.00** | **%**  | **$** | **30,134** |   |   | **6.00** | **%** |
| Tier                  1 Capital to Average Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |        |       |                                          |             |                                   |      |   |       |       |       |     |   |   |   |   |   |   |   |
| The                  Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |       | **$**       | **61,542** |                                          |             | **8.11**                               | **%**     | **$**  | **30,367** |       |       | **4.00** | **%**  |   | **N/A** |   |   | **N/A** |   |
| Subsidiary                  Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       | **$**       | **60,026** |                                          |             | **7.92**                               | **%**     | **$**  | **30,330** |       |       | **4.00** | **%**  | **$** | **37,913** |   |   | **5.00** | **%** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |       |                                          |             |                                   |      |   |       |       |       |     |   |   |   |   |   |   |   |
| As                  of December 31, 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       |        |       |                                          |             |                                   |      |   |       |       |       |     |   |   |   |   |   |   |   |
| Total                  Capital to Risk-Weighted Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |       |        |       |                                          |             |                                   |      |   |       |       |       |     |   |   |   |   |   |   |   |
| The                  Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |       | $           | 71,198     |                                          |             | 14.37                                  | %         | $      | 39,626     |       |       | 8.00     | %      |   | N/A |   |   | N/A |   |
| Subsidiary                  Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       | $           | 68,365     |                                          |             | 13.83                                  | %         | $      | 39,546     |       |       | 8.00     | %      | $ | 49,432 |   |   | 10.00 | % |
| Tier                  1 Capital to Risk-Weighted Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       |        |       |                                          |             |                                   |      |   |       |       |       |     |   |   |   |   |   |   |   |
| The                  Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |       | $           | 65,000     |                                          |             | 13.12                                  | %         | $      | 19,813     |       |       | 4.00     | %      |   | N/A |   |   | N/A |   |
| Subsidiary                  Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       | $           | 62,180     |                                          |             | 12.58                                  | %         | $      | 19,773     |       |       | 4.00     | %      | $ | 29,659 |   |   | 6.00 | % |
| Tier                  1 Capital to Average Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |        |       |                                          |             |                                   |      |   |       |       |       |     |   |   |   |   |   |   |   |
| The                  Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |       | $           | 65,000     |                                          |             | 8.71                                   | %         | $      | 29,846     |       |       | 4.00     | %      |   | N/A |   |   | N/A |   |
| Subsidiary                  Bank                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |       | $           | 62,180     |                                          |             | 8.35                                   | %         | $      | 29,798     |       |       | 4.00     | %      | $ | 37,247 |   |   | 5.00 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       |        |       |                                          |             |                                   |      |   |       |       |       |     |   |   |   |   |   |   |   |
| Banking                  regulations limit the amount of dividends that may be paid to                  shareholders. Generally, dividends are limited to retained net                  profits for                  the current year and two preceding years. At December 31, 2006,                  dividends                  totaling $3,824,000 could have been paid without prior regulatory                  approval.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

----

*Index*

| ***Note                  14. Other Comprehensive Income***                                                                                        |     |                                         |     |   |     |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|----------|----------------------------------------------|----------|--------|----------|--------|--------|
|                                                                                                                                              |     |                                         |     |   |     |   |   |
| The                  following is a summary of changes in other comprehensive income                  for the                  periods presented: |     |                                         |     |   |     |   |   |
|                                                                                                                                              |     |                                         |     |   |     |   |   |
|                                                                                                                                              |     | **Year                  Ended December 31,** |     |
| ***dollars                  in thousands***                                                                                                       | **2006** |                                         | **2005** |   | **2004** |   |
| Unrealized                  Holding Gains (Losses) Arising During the Period Net of                  Tax                                          |     |                                         |     |   |     |   |   |   |   |   |
| (Pre-tax                  Amount of $297,000, ($4,226,000), and ($564,000))                                                                       |     | **$**                                        | **181**  |   | $   | (2,579 | )      | $ | (344 | ) |
| Reclassification                  Adjustment for Gains Realized in Net Income                                                                     |     |                                         |     |   |     |   |   |   |   |   |
| During                  the Period, Net of Tax (Pre-tax Amount of ($326,000),                                                                     |     |                                         |     |   |     |   |   |   |   |   |
| ($370,0000),                  and ($871,000))                                                                                                     |     |                                         | **(199** | **)**  |     | (226   | )      |   | (532 | ) |
| Other                  Comprehensive Loss, Net of Tax of ($11,000), ($1,791,000)                                                                  |     |                                         |     |   |     |   |   |   |   |   |
| and                  ($559,000)                                                                                                                   |     | **$**                                   | **(18**  | **)**  | $   | (2,805 | )      | $  | (876 | ) |
|                                                                                                                                              |     |                                         |     |   |     |   |   |   |   |   |

| ***Note                  15. Parent Company Only Financial Statements***                                                                                                                                                                                                                                                                                                                                                                                                                     |     |                              |       |   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|-----------------------------------|------------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |     |                              |       |   |   |
| Presented                  below are the condensed statements of condition December 31, 2006,                  and                  2005 and statements of income and cash flows for each of the years                  in the                  three-year period ended December 31, 2006, for the Parent Company.                  These                  financial statements should be read in conjunction with the consolidated                  financial statements and notes thereto. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |     |                              |       |   |   |
| **Condensed                  Statements of Condition**                                                                                                                                                                                                                                                                                                                                                                                                                                       |     |                              |       |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |     | **December                  31,** |       |
| ***dollars                  in thousands***                                                                                                                                                                                                                                                                                                                                                                                                                                                  | **2006** |                              | **2005**   |   |
| **Assets**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |     |                              |       |   |   |   |   |
| Cash                  and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                   |     | **$**                             | **588**    |   | $      | 1,593 |   |
| Securities                  Available for Sale, at Estimated Fair Value                                                                                                                                                                                                                                                                                                                                                                                                                      |     |                              | **916**    |   |   | 1,229 |   |
| Investment                  in Subsidiary, Equity Basis                                                                                                                                                                                                                                                                                                                                                                                                                                      |     |                              | **61,759** |   |   | 64,897 |   |
| Other                  Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     |                              | **1,632**  |   |   | 1,547 |   |
| Total                  Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                |     | **$**                             | **64,895** |   | $      | 69,266 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |     |                              |       |   |   |   |   |
| **Liabilities                  and Shareholders’ Equity**                                                                                                                                                                                                                                                                                                                                                                                                                              |     |                              |       |   |   |   |   |
| Total                  Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                           |     | **$**                             | **1,563**  |   | $      | 1,549 |   |
| Shareholders’                  Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                  |     |                              | **63,332** |   |   | 67,717 |   |
| Total                  Liabilities and Shareholders’ Equity                                                                                                                                                                                                                                                                                                                                                                                                                            |     | **$**                             | **64,895** |   | $      | 69,266 |   |

| **Condensed                  Statements of Income**             |     |                              |       |   |     |   |   |
|-----------------------------------------------------------------|----------|-----------------------------------|------------|--------|----------|--------|--------|
|                                                            |     | **December                  31,** |       |
| ***dollars                  in thousands***                     | **2006** |                              | **2005**   |   | **2004** |   |
| Dividends                  from Subsidiary                      |     | **$**                             | **9,756**  |   | $        | 5,305  |   | $ | 5,306 |   |
| Interest                  and Other Dividend Income             |     |                              | **75**     |   |     | 89     |   |   | 47 |   |
| Net                  Gain on Sale of Securities                 |     |                              | **165**    |   |     | 0      |   |   | 95 |   |
|                                                            |     |                              | **9,996**  |   |     | 5,394  |   |   | 5,448 |   |
|                                                            |     |                              |       |   |     |   |   |   |   |   |
| Operating                  Expense                              |     |                              | **682**    |   |     | 606    |   |   | 301 |   |
|                                                            |     |                              |       |   |     |   |   |   |   |   |
| Income                  Before Income Tax Benefit and Equity    |     |                              |       |   |     |   |   |   |   |   |
| in                  Undistributed Income of Subsidiary          |     |                              | **9,314**  |   |     | 4,788  |   |   | 5,147 |   |
|                                                            |     |                              |       |   |     |   |   |   |   |   |
| Income                  Tax Benefit                             |     |                              | **(171**   | **)**  |     | (190   | )      |   | (81 | ) |
| Equity                  in Undistributed Income of Subsidiaries |     |                              | **(2,333** | **)**  |     | 2,766  |   |   | 3,390 |   |
| Net                  Income                                     |     | **$**                             | **7,152**  |   | $        | 7,744  |   | $ | 8,618 |   |

----

*Index*

| ***Note                  15. Parent Company Only Financial Statements,                  Continued***                                                                                                                                                  |     |                                         |        |   |     |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|----------------------------------------------|-------------|--------|----------|--------|--------|
|                                                                                                                                                                                                                                                  |     |                                         |        |   |     |   |   |
| **Condensed                  Statements of Cash Flows**                                                                                                                                                                                               |     |                                         |        |   |     |   |   |
|                                                                                                                                                                                                                                                  |     | **Year                  Ended December 31,** |        |
| ***dollars                  in thousands***                                                                                                                                                                                                           | **2006** |                                         | **2005**    |   | **2004** |   |
| **Cash                  Flows from Operating Activities:**                                                                                                                                                                                            |     |                                         |        |   |     |   |   |   |   |   |
| Net                  Income                                                                                                                                                                                                                           |     | **$**                                        | **7,152**   |   | $        | 7,744  |   | $ | 8,618 |   |
| Adjustments                  to Reconcile Net Income to Cash                                                                                                                                                                                          |     |                                         |        |   |     |   |   |   |   |   |
| Provided                  by Operating Activities:                                                                                                                                                                                                    |     |                                         |        |   |     |   |   |   |   |   |
| Investment                  Security Gains                                                                                                                                                                                                            |     |                                         | **(165**    | **)**  |     | 0      |   |   | (95 | ) |
| (Increase)                  Decrease in Other Assets                                                                                                                                                                                                  |     |                                         | **(3**      | **)**  |     | 16     |   |   | (16 | ) |
| (Decrease)                  Increase in Other Liabilities                                                                                                                                                                                             |     |                                         | **(47**     | **)**  |     | (32    | )      |   | 91 |   |
| Equity                  in Undistributed Income of Subsidiaries                                                                                                                                                                                       |     |                                         | **2,333**   |   |     | (2,766 | )      |   | (3,390 | ) |
| Net                  Cash Provided by Operating Activities                                                                                                                                                                                            |     |                                         | **9,270**   |   |     | 4,962  |   |   | 5,208 |   |
| **Cash                  Flows from Investing Activities:**                                                                                                                                                                                            |     |                                         |        |   |     |   |   |   |   |   |
| Proceeds                  from Sales of Available-for-Sale Securities                                                                                                                                                                                 |     |                                         | **472**     |   |     | 0      |   |   | 195 |   |
| Purchase                  of Available-for-Sale Securities                                                                                                                                                                                            |     |                                         | **(50**     | **)**  |     | (625   | )      |   | 0 |   |
| Net                  Cash Provided by (Used by) Investing Activities                                                                                                                                                                                  |     |                                         | **422**     |   |     | (625   | )      |   | 195 |   |
| **Cash                  Flows from Financing Activities:**                                                                                                                                                                                            |     |                                         |        |   |     |   |   |   |   |   |
| Purchase                  of Treasury Stock                                                                                                                                                                                                           |     |                                         | **(6,569**  | **)**  |     | (581   | )      |   | (182 | ) |
| Cash                  Dividends                                                                                                                                                                                                                       |     |                                         | **(4,128**  | **)**  |     | (4,246 | )      |   | (4,259 | ) |
| Net                  Cash Used in Financing Activities                                                                                                                                                                                                |     |                                         | **(10,697** | **)**  |     | (4,827 | )      |   | (4,441 | ) |
| Net                  (Decrease) Increase in Cash Equivalents                                                                                                                                                                                          |     |                                         | **(1,005**  | **)**  |     | (490   | )      |   | 962 |   |
| Cash                  and Cash Equivalents at Beginning of Year                                                                                                                                                                                       |     |                                         | **1,593**   |   |     | 2,083  |   |   | 1,121 |   |
| Cash                  and Cash Equivalents at End of Year                                                                                                                                                                                             |     | **$**                                        | **588**     |   | $        | 1,593  |   | $ | 2,083 |   |
|                                                                                                                                                                                                                                                  |     |                                         |        |   |     |   |   |   |   |   |
| A                  statement of changes in shareholders' equity has not been presented                  since                  it is the same as the consolidated statement of changes in shareholders'                  equity previously presented. |     |
|                                                                                                                                                                                                                                                  |     |                                         |        |   |     |   |   |   |   |   |

***Note      16. Federal Reserve Bank Requirement***

----

*Index*

**ITEM      9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING      AND FINANCIAL DISCLOSURE**

**ITEM      9A: CONTROLS AND PROCEDURES**

**Management’s      Report on Internal Control Over Financial Reporting**

*Internal      Control - Integrated Framework*
*Internal      Control - Integrated Framework*

----

*Index*

**Report      of Independent Registered Public Accounting Firm**

*Management’s      Report on Internal Control Over Financial Reporting*
*Internal      Control-Integrated framework*

*Internal      Control-Integrated Framework *
*Internal      Control-Integrated Framework*

|   |   |
|--------|--------|

----

*Index*

**ITEM      9B: OTHER INFORMATION**

**PART      III**

**ITEM      10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE      GOVERNANCE**

**ITEM      11: EXECUTIVE COMPENSATION**

**ITEM      12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND      MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

----

*Index*

**ITEM      13: **
**CERTAINRELATIONSHIPS      AND RELATED TRANSACTIONS, AND DIRECTOR      INDEPENDENCE**

**ITEM      14: PRINCIPAL ACCOUNTING FEES AND      SERVICES**

*Audit      and Non-Audit Fees,*
*Pre-Approval      Policies and Procedures”*

**PART      IV**

**ITEM      15: EXHIBITS AND FINANCIAL STATEMENT      SCHEDULES**
** **

----

*Index*

**SIGNATURES**

|   |                              |   | **THE                    WILBER CORPORATION** |
|--------|-----------------------------------|--------|-----------------------------------------------|
|   |                              |   |                                          |   |
|   |                              |   |                                          |   |
| Date:  | March                    12, 2007 |   | By:                                           | /s/                    Douglas C. Gulotty |
|   |                              |   |                                          | Douglas                    C. Gulotty |
|   |                              |   |                                          | President                    and Chief Executive                    Officer |

| Signatures                                |   | Title                                                             |   | Date                            |
|-------------------------------------------|--------|-------------------------------------------------------------------|--------|---------------------------------|
|                                      |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  Douglas C. Gulotty   |   | President                  and Chief Executive Officer            |   | March                  12, 2007 |
| Douglas                  C. Gulotty       |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  Joseph E. Sutaris    |   | Secretary,                  Treasurer and Chief Financial Officer |   | March                  12, 2007 |
| Joseph                  E. Sutaris        |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  Brian R. Wright      |   | Director,                  Chairman                               |   | March                  12, 2007 |
| Brian                  R. Wright          |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  Alfred S. Whittet    |   | Director,                  Vice Chairman                          |   | March                  12, 2007 |
| Alfred                  S. Whittet        |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  Mary C. Albrecht     |   | Director                                                          |   | March                  12, 2007 |
| Mary                  C. Albrecht         |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  Olon T. Archer       |   | Director                                                          |   | March                  12, 2007 |
| Olon                  T. Archer           |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  Thomas J. Davis      |   | Director                                                          |   | March                  12, 2007 |
| Thomas                  J. Davis          |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  Joseph P. Mirabito   |   | Director                                                          |   | March                  12, 2007 |
| Joseph                  P. Mirabito       |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  James L. Seward      |   | Director                                                          |   | March                  12, 2007 |
| James                  L. Seward          |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  Geoffrey A. Smith    |   | Director                                                          |   | March                  12, 2007 |
| Geoffrey                  A. Smith        |   |                                                              |   |                            |
|                                      |   |                                                              |   |                            |
| /s/                  David F. Wilber, III |   | Director                                                          |   | March                  12, 2007 |
| David                  F. Wilber, III     |   |                                                              |   |                            |

----

*Index*

| **No.** | **Document**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.1     | Restated                  Certificate of Incorporation of The Wilber Corporation (incorporated                  by                  reference as Exhibit A of the Company’s Definitive Proxy Statement -                  Schedule 14A (File No. 001-31896) filed with the Securities and                  Exchange                  Commission on March 24, 2005)                                                                                                                                  |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.2     | Bylaws                  of The Wilber Corporation as Amended and Restated (incorporated                  by                  reference to Exhibit 3.2 of the Company’s Form 8-K Current Report (File                  No. 001-31896) filed with the Securities and Exchange Commission                  on                  January 27, 2005)                                                                                                                                                       |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.1    | Deferred                  Compensation Agreement as Amended between Wilber National Bank                  and Alfred                  S. Whittet (incorporated by reference to Exhibit 10.1 of the Company’s                  Form 8-K Current Report (File No. 001-31896) filed with the Securities                  and                  Exchange Commission on January 6, 2006)                                                                                                                  |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.2    | Summary                  Plan Description for the Amended and Restated Wilber National Bank                  Split-Dollar Life Insurance Plan (incorporated by reference to                  Exhibit                  10.2 of the Company’s Form 10/A Registration Statement (No. 001-31896)                  filed with the Securities and Exchange Commission on January 30,                  2004)                                                                                               |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.3    | Amendment                  to the Wilber National Bank Split-Dollar Life Insurance Plan Agreement                  and                  Split-Dollar Policy Endorsement between Wilber National Bank and                  Alfred S.                  Whittet (incorporated by reference to Exhibit 10.3 of the Company’s Form                  10/A Registration Statement (No. 001-31896) filed with the Securities                  and                  Exchange Commission on January 30, 2004) |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.8    | Retention                  Bonus Agreement as Amended between Wilber National Bank and Douglas                  C.                  Gulotty (incorporated by reference to Exhibit 10.8 of the Company’s Form                  8-K Current Report (File No. 001-31896) filed with the Securities                  and                  Exchange Commission on January 6, 2006)                                                                                                                       |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.9    | Retention                  Bonus Agreement as Amended between Wilber National Bank and Joseph                  E.                  Sutaris (incorporated by reference to Exhibit 10.8 of the Company’s Form                  8-K Current Report (File No. 001-31896) filed with the Securities                  and                  Exchange Commission on January 6, 2006)                                                                                                                        |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.11   | Employment                  Agreement between Wilber National Bank and Douglas C. Gulotty                  (incorporated by reference to Exhibit 10.11 of the Company’s Form 8-K                  Current Report (File No. 001-31896) filed with the Securities and                  Exchange                  Commission on January 6, 2006)                                                                                                                                                       |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 10.12   | Employment                  Agreement between Wilber National Bank and Joseph E. Sutaris (incorporated                  by reference to Exhibit 10.12 of the Company’s Form 8-K Current Report                  (File No. 001-31896) filed with the Securities and Exchange Commission                  on                  January 6, 2006)                                                                                                                                                        |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 13      | Annual                  Report to Shareholders (included in this annual report on Form                  10-K)                                                                                                                                                                                                                                                                                                                                                                                             |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 14      | Code                  of Ethics as Amended incorporated by reference to Exhibit 14 of                  the                  Company’s Annual Report on Form 10-K, and available on the Company's                  website (http://www.wilberbank.com)                  under the link 'About Us.'                                                                                                                                                                                                   |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 21      | Subsidiaries                  of the Registrant                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 31.1    | Certification                  of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley                  Act                                                                                                                                                                                                                                                                                                                                                                              |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 31.2    | Certification                  of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley                  Act                                                                                                                                                                                                                                                                                                                                                                              |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 32.1    | Certification                  of Chief Executive Officer Pursuant to 18 U.S.C. 1350                                                                                                                                                                                                                                                                                                                                                                                                                      |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 32.2    | Certification                  of Chief Financial Officer Pursuant to 18 U.S.C.                  1350                                                                                                                                                                                                                                                                                                                                                                                                     |