|         |
|---------|
|         |  |  |
| VERMONT |   | 03-0283552 |

|                               |
|-------------------------------|
|                               |  |  |
| Common Stock, $2.00 par value |   | Nasdaq Stock Market |
| (Title of class)              |   | (Exchanges registered on) |

|                                                                               |
|-------------------------------------------------------------------------------|
|                                                                               |  |
| Large accelerated filer [  ]                                             | Accelerated filer [  ] |
| Non-accelerated filer [  ] (Do not check if a smaller reporting company) | Smaller reporting company [ X ] |

|        |
|--------|
|        |  |  |  |
|   | Common Stock, $2 par value |   | 4,457,704 shares |

----

|                                                                                                      |
|------------------------------------------------------------------------------------------------------|
|                                                                                                      |  |
| Item 1. Financial Statements.                                                                        |   |
| Unaudited Consolidated Financial Statements Union Bankshares, Inc. and Subsidiary                    |   |
| Consolidated Balance Sheets                                                                          | Page 1 |
| Consolidated Statements of Income                                                                    | Page 2 |
| Consolidated Statements of Changes in Stockholders' Equity                                           | Page 3 |
| Consolidated Statements of Cash Flows                                                                | Page 4 |
| Notes to Unaudited Interim Consolidated Financial Statements                                         | Page 6 |
|                                                                                                 |   |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. | Page 20 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk.                                  | Page 46 |
| Item 4. Controls and Procedures.                                                                     | Page 46 |
|                                                                                                 |   |
| PART II OTHER INFORMATION                                                                            |   |
|                                                                                                 |   |
| Item 1. Legal Proceedings.                                                                           | Page 46 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.                                 | Page 46 |
| Item 5. Exhibits.                                                                                    | Page 46 |
|                                                                                                 |   |
| Signatures                                                                                           | Page 46 |

----

|                                                                                                                                                                                |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                |  |  |  |  |  |  |
|                                                                                                                                                                           | March 31, 2011 | December 31, 2010 |
| Assets                                                                                                                                                                         | (Dollars in thousands) |
| Cash and due from banks                                                                                                                                                        | $ | 5,154 |   | $ | 5,447 |   |
| Federal funds sold and overnight deposits                                                                                                                                      | 24,842 |   | 8,845 |   |
| Cash and cash equivalents                                                                                                                                                      | 29,996 |   | 14,292 |   |
| Interest bearing deposits in banks                                                                                                                                             | 13,065 |   | 14,041 |   |
| Investment securities available-for-sale                                                                                                                                       | 25,487 |   | 23,780 |   |
| Investment securities held-to-maturity (fair value $500 and   $502 at March 31, 2011 and December 31, 2010, respectively)                                       | 500 |   | 500 |   |
| Loans held for sale                                                                                                                                                            | 2,614 |   | 5,611 |   |
| Loans                                                                                                                                                                          | 369,087 |   | 376,272 |   |
| Allowance for loan losses                                                                                                                                                      | (3,908 | ) | (3,755 | ) |
| Net deferred loan costs                                                                                                                                                        | 203 |   | 188 |   |
| Net loans                                                                                                                                                                      | 365,382 |   | 372,705 |   |
| Accrued interest receivable                                                                                                                                                    | 1,650 |   | 1,560 |   |
| Premises and equipment, net                                                                                                                                                    | 7,896 |   | 7,842 |   |
| Other assets                                                                                                                                                                   | 13,062 |   | 12,664 |   |
| Total assets                                                                                                                                                                   | $ | 459,652 |   | $ | 452,995 |   |
| Liabilities and Stockholders’ Equity                                                                                                                                     |   |   |
| Liabilities                                                                                                                                                                    |   |   |
| Deposits                                                                                                                                                                       |   |   |
| Noninterest bearing                                                                                                                                                            | $ | 61,362 |   | $ | 64,526 |   |
| Interest bearing                                                                                                                                                               | 322,657 |   | 312,134 |   |
| Total deposits                                                                                                                                                                 | 384,019 |   | 376,660 |   |
| Borrowed funds                                                                                                                                                                 | 26,892 |   | 28,986 |   |
| Liability for defined benefit pension plan                                                                                                                                     | 2,612 |   | 2,451 |   |
| Accrued interest and other liabilities                                                                                                                                         | 4,348 |   | 3,173 |   |
| Total liabilities                                                                                                                                                              | 417,871 |   | 411,270 |   |
| Commitments and Contingencies                                                                                                                                                  |   |   |
| Stockholders’ Equity                                                                                                                                                     |   |   |
| Common stock, $2.00 par value; 7,500,000 shares authorized;  4,923,286 shares issued at March 31, 2011 and 4,921,786 shares    issued at December 31, 2010 | 9,847 |   | 9,844 |   |
| Additional-paid-in capital                                                                                                                                                     | 267 |   | 244 |   |
| Retained earnings                                                                                                                                                              | 37,537 |   | 37,623 |   |
| Treasury stock at cost; 466,082 shares at March 31, 2011  and December 31, 2010                                                                                      | (3,823 | ) | (3,823 | ) |
| Accumulated other comprehensive loss                                                                                                                                           | (2,047 | ) | (2,163 | ) |
| Total stockholders' equity                                                                                                                                                     | 41,781 |   | 41,725 |   |
| Total liabilities and stockholders' equity                                                                                                                                     | $ | 459,652 |   | $ | 452,995 |   |

----

|                                                                                          |
|------------------------------------------------------------------------------------------|
|                                                                                          |  |  |  |  |  |  |
|                                                                                     | Three Months Ended March 31, |
|                                                                                     | 2011 | 2010 |
|                                                                                     | (Dollars in thousands except per share data) |
| Interest income                                                                          |   |   |
| Interest and fees on loans                                                               | $ | 5,196 |   | $ | 5,258 |   |
| Interest on debt securities:                                                             |   |   |
| Taxable                                                                                  | 143 |   | 187 |   |
| Tax exempt                                                                               | 73 |   | 73 |   |
| Dividends                                                                                | 4 |   | — |   |
| Interest on federal funds sold and overnight deposits                                    | 6 |   | 4 |   |
| Interest on interest bearing deposits in banks                                           | 76 |   | 122 |   |
| Total interest income                                                                    | 5,498 |   | 5,644 |   |
| Interest expense                                                                         |   |   |
| Interest on deposits                                                                     | 673 |   | 773 |   |
| Interest on borrowed funds                                                               | 288 |   | 283 |   |
| Total interest expense                                                                   | 961 |   | 1,056 |   |
|     Net interest income                                              | 4,537 |   | 4,588 |   |
| Provision for loan losses                                                                | 150 |   | 90 |   |
|     Net interest income after provision for loan losses              | 4,387 |   | 4,498 |   |
| Noninterest income                                                                       |   |   |
| Trust income                                                                             | 132 |   | 109 |   |
| Service fees                                                                             | 1,006 |   | 964 |   |
| Net gains on sales of loans held for sale                                                | 168 |   | 102 |   |
| Other income                                                                             | 95 |   | 44 |   |
| Total noninterest income                                                                 | 1,401 |   | 1,219 |   |
| Noninterest expenses                                                                     |   |   |
| Salaries and wages                                                                       | 1,730 |   | 1,565 |   |
| Pension and employee benefits                                                            | 817 |   | 760 |   |
| Occupancy expense, net                                                                   | 290 |   | 255 |   |
| Equipment expense                                                                        | 296 |   | 248 |   |
| Other expenses                                                                           | 1,447 |   | 1,311 |   |
| Total noninterest expenses                                                               | 4,580 |   | 4,139 |   |
|         Income before provision for income taxes | 1,208 |   | 1,578 |   |
| Provision for income taxes                                                               | 180 |   | 359 |   |
|         Net income                               | $ | 1,028 |   | $ | 1,219 |   |
| Earnings per common share                                                                | $ | 0.23 |   | $ | 0.27 |   |
| Weighted average number of common shares outstanding                                     | 4,455,737 |   | 4,460,764 |   |
| Dividends per common share                                                               | $ | 0.25 |   | $ | 0.25 |   |
|                                                                                     |   |   |

----

|                                                                                                                                                                                                                                                                                  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                             | Common Stock |   |   |   |   |   |
|                                                                                                                                                                                                                                                                             | Shares,net oftreasury | Amount | Additionalpaid-incapital | Retainedearnings | Treasurystock | Accumulatedothercomprehensiveloss | Totalstockholders’equity |
|                                                                                                                                                                                                                                                                             | (Dollars in thousands) |
| Balances, December 31, 2010                                                                                                                                                                                                                                                      | 4,455,704 |   | $ | 9,844 |   | $ | 244 |   | $ | 37,623 |   | $ | (3,823 | ) | $ | (2,163 | ) | $ | 41,725 |   |
| Comprehensive income:                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |
| Net income                                                                                                                                                                                                                                                                       | — |   | — |   | — |   | 1,028 |   | — |   | — |   | 1,028 |   |
|     Other comprehensive income,     net of tax:                                                                                                                                                                                     |   |   |   |   |   |   |   |
|     Change in net unrealized gain     on investment securities     available-for-sale, net of     reclassification adjustment     and tax effects        | — |   | — |   | — |   | — |   | — |   | 85 |   | 85 |   |
|     Change in net unrealized loss     on unfunded defined     benefit plan liability,     net of reclassification     adjustment and tax effects         | — |   | — |   | — |   | — |   | — |   | 31 |   | 31 |   |
|         Total other comprehensive         income                                                                                                                                            |   |   |   |   |   | 116 |   |   |
| Total comprehensive income                                                                                                                                                                                                                                                       |   |   |   | — |   | — |   | — |   | 1,144 |   |
| Issuance of common stock                                                                                                                                                                                                                                                         | 1,500 |   | 3 |   | 23 |   | — |   | — |   | — |   | 26 |   |
| Cash dividends declared ($0.25 per share)                                                                                                                                                                                                                                   | — |   | — |   | — |   | (1,114 | ) | — |   | — |   | (1,114 | ) |
| Balances, March 31, 2011                                                                                                                                                                                                                                                         | 4,457,204 |   | $ | 9,847 |   | $ | 267 |   | $ | 37,537 |   | $ | (3,823 | ) | $ | (2,047 | ) | $ | 41,781 |   |
| Balances, December 31, 2009                                                                                                                                                                                                                                                      | 4,461,208 |   | $ | 9,844 |   | $ | 219 |   | $ | 36,494 |   | $ | (3,724 | ) | $ | (1,653 | ) | $ | 41,180 |   |
| Comprehensive income:                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |
| Net income                                                                                                                                                                                                                                                                       | — |   | — |   | — |   | 1,219 |   | — |   | — |   | 1,219 |   |
|     Other comprehensive income,     net of tax:                                                                                                                                                                                     |   |   |   |   |   |   |   |
|     Change in net unrealized gain     on investment securities     available-for-sale, net of     reclassification adjustment     and tax effects        | — |   | — |   | — |   | — |   | — |   | 108 |   | 108 |   |
|     Change in net unrealized loss     on unfunded defined     benefit pension plan liability,     net of reclassification     adjustment and tax effects | — |   | — |   | — |   | — |   | — |   | 28 |   | 28 |   |
|         Total other comprehensive         income                                                                                                                                            |   |   |   |   |   | 136 |   |   |
| Total comprehensive income                                                                                                                                                                                                                                                       |   |   |   |   |   |   | 1,355 |   |
| Cash dividends declared ($0.25 per share)                                                                                                                                                                                                                                   | — |   | — |   | — |   | (1,115 | ) | — |   | — |   | (1,115 | ) |
| Stock based compensation expense                                                                                                                                                                                                                                            | — |   | — |   | 6 |   | — |   | — |   | — |   | 6 |   |
| Purchase of treasury stock                                                                                                                                                                                                                                                       | (500 | ) | — |   | — |   | — |   | (9 | ) | — |   | (9 | ) |
| Balances, March 31, 2010                                                                                                                                                                                                                                                         | 4,460,708 |   | $ | 9,844 |   | $ | 225 |   | $ | 36,598 |   | $ | (3,733 | ) | $ | (1,517 | ) | $ | 41,417 |   |

----

|                                                                                   |
|-----------------------------------------------------------------------------------|
|                                                                                   |  |  |  |  |  |  |
|                                                                              | Three Months Ended March 31, |
|                                                                              | 2011 | 2010 |
|                                                                              | (Dollars in thousands) |
| Cash Flows From Operating Activities                                              |   |   |
| Net income                                                                        | $ | 1,028 |   | $ | 1,219 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |   |
| Depreciation                                                                      | 177 |   | 151 |   |
| Provision for loan losses                                                         | 150 |   | 90 |   |
| Deferred income tax provision                                                     | 98 |   | 54 |   |
| Net amortization of investment securities                                         | 14 |   | 5 |   |
| Equity in losses of limited partnerships                                          | 106 |   | 106 |   |
| Stock based compensation expense                                                  | — |   | 6 |   |
| Net increase in unamortized loan costs                                            | (15 | ) | (47 | ) |
| Proceeds from sales of loans held for sale                                        | 16,912 |   | 8,268 |   |
| Origination of loans held for sale                                                | (13,747 | ) | (6,963 | ) |
| Net gains on sales of loans held for sale                                         | (168 | ) | (102 | ) |
| Net losses on disposals of premises and equipment                                 | — |   | 5 |   |
| Write-down of impaired assets                                                     | 41 |   | 5 |   |
| Net gains on sales of other real estate owned                                     | (18 | ) | — |   |
| Increase in accrued interest receivable                                           | (90 | ) | (14 | ) |
| Decrease in other assets                                                          | 92 |   | 561 |   |
| Contribution to defined benefit pension plan                                      | — |   | (61 | ) |
| Increase in other liabilities                                                     | 431 |   | 105 |   |
| Net cash provided by operating activities                                         | 5,011 |   | 3,388 |   |
| Cash Flows From Investing Activities                                              |   |   |
| Interest bearing deposits in banks                                                |   |   |
| Proceeds from maturities and redemptions                                          | 1,969 |   | 4,473 |   |
| Purchases                                                                         | (993 | ) | (3,529 | ) |
| Investment securities available-for-sale                                          |   |   |
| Proceeds from maturities, calls and paydowns                                      | 685 |   | 1,495 |   |
| Purchases                                                                         | (2,277 | ) | (2,003 | ) |
| Net decrease (increase) in loans                                                  | 7,169 |   | (1,324 | ) |
| Recoveries of loans charged off                                                   | 19 |   | 18 |   |
| Purchases of premises and equipment                                               | (231 | ) | (493 | ) |
| Investments in limited partnerships                                               | — |   | (138 | ) |
| Proceeds from sales of other real estate owned                                    | 175 |   | — |   |
| Net cash provided by (used in) investing activities                               | 6,516 |   | (1,501 | ) |
| Cash Flows From Financing Activities                                              |   |   |   |
| Repayment of long-term debt                                                       | (247 | ) | (209 | ) |
| Net decrease in short-term borrowings outstanding                                 | (1,847 | ) | (3,440 | ) |
| Net decrease in noninterest bearing deposits                                      | (3,164 | ) | (6,339 | ) |
| Net increase in interest bearing deposits                                         | 10,523 |   | 2,655 |   |
| Issuance of common stock                                                          | 26 |   | — |   |
| Purchase of treasury stock                                                        | — |   | (9 | ) |
| Dividends paid                                                                    | (1,114 | ) | (1,115 | ) |
| Net cash provided by (used in) financing activities                               | 4,177 |   | (8,457 | ) |
| Net increase (decrease) in cash and cash equivalents                              | 15,704 |   | (6,570 | ) |
| Cash and cash equivalents                                                         |   |   |
| Beginning of period                                                               | 14,292 |   | 22,132 |   |
| End of period                                                                     | $ | 29,996 |   | $ | 15,562 |   |

----

|                                                                     |
|---------------------------------------------------------------------|
|                                                                     |  |  |  |  |  |  |
| Supplemental Disclosures of Cash Flow Information                   |   |   |
| Interest paid                                                       | $ | 864 |   | $ | 1,097 |   |
| Income taxes paid                                                   | $ | 50 |   | $ | — |   |
| Supplemental Schedule of Noncash Investing and Financing Activities |   |   |
| Other real estate acquired in settlement of loans                   | $ | — |   | $ | 452 |   |
| Other assets acquired in settlement of loans                        | $ | — |   | $ | 17 |   |

----

----

|                                       |
|---------------------------------------|
|                                       |  |  |  |  |  |  |  |  |  |  |  |  |
| March 31, 2011                   | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | FairValue |
|                                  | (Dollars in thousands) |
| Available-for-sale                    |   |   |   |   |
| Debt securities:                      |   |   |   |   |
| U.S. Government-sponsored enterprises | $ | 6,316 |   | $ | — |   | $ | (146 | ) | $ | 6,170 |   |
| Mortgage-backed                       | 4,294 |   | 69 |   | (14 | ) | 4,349 |   |
| State and political subdivisions      | 9,842 |   | 284 |   | (112 | ) | 10,014 |   |
| Corporate                             | 4,487 |   | 316 |   | — |   | 4,803 |   |
| Total debt securities                 | 24,939 |   | 669 |   | (272 | ) | 25,336 |   |
| Marketable equity securities          | 50 |   | 1 |   | (5 | ) | 46 |   |
| Mutual funds                          | 105 |   | — |   | — |   | 105 |   |
| Total                                 | $ | 25,094 |   | $ | 670 |   | $ | (277 | ) | $ | 25,487 |   |
| Held-to-maturity                      |   |   |   |   |
| U.S. Government-sponsored enterprises | $ | 500 |   | $ | — |   | $ | — |   | $ | 500 |   |

----

|                                       |
|---------------------------------------|
|                                       |  |  |  |  |  |  |  |  |  |  |  |  |
| December 31, 2010                | AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | FairValue |
|                                  | (Dollars in thousands) |
| Available-for-sale                    |   |   |   |   |
| Debt securities:                      |   |   |   |   |
| U.S. Government-sponsored enterprises | $ | 4,521 |   | $ | 1 |   | $ | (63 | ) | $ | 4,459 |   |
| Mortgage-backed                       | 4,735 |   | 87 |   | (11 | ) | 4,811 |   |
| State and political subdivisions      | 9,373 |   | 175 |   | (155 | ) | 9,393 |   |
| Corporate                             | 4,737 |   | 274 |   | (39 | ) | 4,972 |   |
| Total debt securities                 | 23,366 |   | 537 |   | (268 | ) | 23,635 |   |
| Marketable equity securities          | 50 |   | 1 |   | (6 | ) | 45 |   |
| Mutual funds                          | 100 |   | — |   | — |   | 100 |   |
| Total                                 | $ | 23,516 |   | $ | 538 |   | $ | (274 | ) | $ | 23,780 |   |
| Held-to-maturity                      |   |   |   |   |
| U.S. Government-sponsored enterprises | $ | 500 |   | $ | 2 |   | $ | — |   | $ | 502 |   |

|                            |
|----------------------------|
|                            |  |  |  |  |  |  |
|                       | AmortizedCost | FairValue |
|                       | (Dollars in thousands) |
| Available-for-sale         |   |   |
| Due in one year or less    | $ | 1,504 |   | $ | 1,539 |   |
| Due from one to five years | 5,091 |   | 5,248 |   |
| Due from five to ten years | 6,727 |   | 6,860 |   |
| Due after ten years        | 7,323 |   | 7,340 |   |
|                       | 20,645 |   | 20,987 |   |
| Mortgage-backed securities | 4,294 |   | 4,349 |   |
| Total debt securities      | $ | 24,939 |   | $ | 25,336 |   |
| Held-to-maturity           |   |   |
| Due from five to ten years | $ | 500 |   | $ | 500 |   |

----

|                                                  |
|--------------------------------------------------|
|                                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| March 31, 2011:                                  | Less Than 12 Months | Over 12 Months | Total |
|                                             | FairValue | GrossUnrealizedLoss | FairValue | GrossUnrealizedLoss | FairValue | GrossUnrealizedLoss |
|                                             | (Dollars in thousands) |
| Debt securities:                                 |   |   |   |   |   |   |
| U.S. Government-sponsored  enterprises | $ | 5,671 |   | $ | (146 | ) | $ | — |   | $ | — |   | $ | 5,671 |   | $ | (146 | ) |
| Mortgage-backed                                  | 2,072 |   | (14 | ) | — |   | — |   | 2,072 |   | (14 | ) |
| State and political subdivisions                 | 4,087 |   | (112 | ) | — |   | — |   | 4,087 |   | (112 | ) |
| Total debt securities                            | 11,830 |   | (272 | ) | — |   | — |   | 11,830 |   | (272 | ) |
| Marketable equity securities                     | — |   | — |   | 9 |   | (5 | ) | 9 |   | (5 | ) |
| Total                                            | $ | 11,830 |   | $ | (272 | ) | $ | 9 |   | $ | (5 | ) | $ | 11,839 |   | $ | (277 | ) |

|                                                   |
|---------------------------------------------------|
|                                                   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| December 31, 2010:                                | Less Than 12 Months | Over 12 Months | Total |
|                                              | FairValue | GrossUnrealizedLoss | FairValue | GrossUnrealizedLoss | FairValue | GrossUnrealizedLoss |
|                                              | (Dollars in thousands) |
| Debt securities:                                  |   |   |   |   |   |   |
| U.S. Government-sponsored   enterprises | $ | 3,937 |   | $ | (63 | ) | $ | — |   | $ | — |   | $ | 3,937 |   | $ | (63 | ) |
| Mortgage-backed                                   | 862 |   | (11 | ) | — |   | — |   | 862 |   | (11 | ) |
| State and political subdivisions                  | 4,314 |   | (155 | ) | — |   | — |   | 4,314 |   | (155 | ) |
| Corporate                                         | 202 |   | (39 | ) | — |   | — |   | 202 |   | (39 | ) |
| Total debt securities                             | 9,315 |   | (268 | ) | — |   | — |   | 9,315 |   | (268 | ) |
| Marketable equity securities                      | — |   | — |   | 8 |   | (6 | ) | 8 |   | (6 | ) |
| Total                                             | $ | 9,315 |   | $ | (268 | ) | $ | 8 |   | $ | (6 | ) | $ | 9,323 |   | $ | (274 | ) |

|         |                                                                                                |
|---------|------------------------------------------------------------------------------------------------|
| • | The length of time, and extent to which, the fair value has been less than the amortized cost; |

|         |                                                                                        |
|---------|----------------------------------------------------------------------------------------|
| • | Adverse conditions specifically related to the security, industry, or geographic area; |

|         |                                                                          |
|---------|--------------------------------------------------------------------------|
| • | The historical and implied volatility of the fair value of the security; |

|         |                                                                                                                                          |
|---------|------------------------------------------------------------------------------------------------------------------------------------------|
| • | The payment structure of the debt security and the likelihood of the issuer being able to make payments that may increase in the future; |

----

|         |                                                                                         |
|---------|-----------------------------------------------------------------------------------------|
| • | Failure of the issuer of the security to make scheduled interest or principal payments; |

|         |                                                               |
|---------|---------------------------------------------------------------|
| • | Any changes to the rating of the security by a rating agency; |

|         |                                                                                           |
|---------|-------------------------------------------------------------------------------------------|
| • | Recoveries or additional declines in fair value subsequent to the balance sheet date; and |

|         |                                                                                                                                                                                                   |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The nature of the issuer, including whether it is a private company, public entity or government-sponsored enterprise, and the existence or likelihood of any government or third party guaranty. |

|                                     |
|-------------------------------------|
|                                     |  |  |  |  |  |  |
|                                | March 31, 2011 | December 31, 2010 |
|                                | (Dollars in thousands) |
| Residential real estate             | $ | 130,705 |   | $ | 132,533 |   |
| Construction real estate            | 17,861 |   | 18,578 |   |
| Commercial real estate              | 163,473 |   | 167,056 |   |
| Commercial                          | 20,541 |   | 20,604 |   |
| Consumer                            | 5,667 |   | 6,046 |   |
| Municipal loans                     | 30,840 |   | 31,455 |   |
|     Gross loans | 369,087 |   | 376,272 |   |
| Allowance for loan losses           | (3,908 | ) | (3,755 | ) |
| Net deferred loan costs             | 203 |   | 188 |   |
|     Net loans   | $ | 365,382 |   | $ | 372,705 |   |

----

|                          |
|--------------------------|
|                          |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                     | Current | 30-89 Days | Over 90 Days and accruing | Nonaccrual | Total |
|                     | (Dollars in thousands) |
| Residential real estate  | $ | 121,886 |   | $ | 5,869 |   | $ | 324 |   | $ | 2,626 |   | $ | 130,705 |   |
| Construction real estate | 17,504 |   | 265 |   | 45 |   | 47 |   | 17,861 |   |
| Commercial real estate   | 158,619 |   | 3,712 |   | 9 |   | 1,133 |   | 163,473 |   |
| Commercial               | 19,942 |   | 423 |   | 42 |   | 134 |   | 20,541 |   |
| Consumer                 | 5,511 |   | 86 |   | 8 |   | 62 |   | 5,667 |   |
| Municipal                | 30,840 |   | — |   | — |   | — |   | 30,840 |   |
| Total                    | $ | 354,302 |   | $ | 10,355 |   | $ | 428 |   | $ | 4,002 |   | $ | 369,087 |   |

|                          |
|--------------------------|
|                          |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                     | Current | 30-89 Days | Over 90 Days and accruing | Nonaccrual | Total |
|                     | (Dollars in thousands) |
| Residential real estate  | $ | 123,573 |   | $ | 6,446 |   | $ | 587 |   | $ | 1,927 |   | $ | 132,533 |   |
| Construction real estate | 18,369 |   | 116 |   | 45 |   | 48 |   | 18,578 |   |
| Commercial real estate   | 163,524 |   | 2,729 |   | 173 |   | 630 |   | 167,056 |   |
| Commercial               | 20,295 |   | 161 |   | — |   | 148 |   | 20,604 |   |
| Consumer                 | 5,953 |   | 53 |   | 1 |   | 39 |   | 6,046 |   |
| Municipal                | 31,455 |   | — |   | — |   | — |   | 31,455 |   |
| Total                    | $ | 363,169 |   | $ | 9,505 |   | $ | 806 |   | $ | 2,792 |   | $ | 376,272 |   |

----

|                                               |
|-----------------------------------------------|
|                                               |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                          | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer, Municipal and Unallocated | Total |
|                                          | (Dollars in thousands) |
| Balance, January 1, 2011                      | $ | 1,033 |   | $ | 240 |   | $ | 2,117 |   | $ | 250 |   | $ | 115 |   | $ | 3,755 |   |
| Provision for loan losses                     | 134 |   | — |   | 19 |   | 11 |   | (14 | ) | 150 |   |
| Recoveries of amounts   charged off | 1 |   | — |   | — |   | 3 |   | 15 |   | 19 |   |
|                                          | 1,168 |   | 240 |   | 2,136 |   | 264 |   | 116 |   | 3,924 |   |
| Amounts charged off                           | 8 |   | — |   | — |   | — |   | 8 |   | 16 |   |
| Balance, March 31, 2011                       | $ | 1,160 |   | $ | 240 |   | $ | 2,136 |   | $ | 264 |   | $ | 108 |   | $ | 3,908 |   |

|                                                           |
|-----------------------------------------------------------|
|                                                           |  |  |  |
|                                                      | Total |
|                                                      | (Dollars in thousands) |
| Balance, January 1, 2010                                  | $ | 3,493 |   |
|     Provision for loan losses         | 90 |   |
|     Recoveries of amounts charged off | 18 |   |
|                                                      | 3,601 |   |
|     Amounts charged off               | (146 | ) |
| Balance, March 31, 2010                                   | $ | 3,455 |   |

----

|                                                         |
|---------------------------------------------------------|
|                                                         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                    | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer, Municipal and Unallocated | Total |
|                                                    | (Dollars in thousands) |
| Individually evaluated   for impairment  | $ | 278 |   | $ | 12 |   | $ | 336 |   | $ | 44 |   | $ | 18 |   | $ | 688 |   |
| Collectively evaluated    for impairment | 882 |   | 228 |   | 1,800 |   | 220 |   | 90 |   | 3,220 |   |
| Allocated                                               | $ | 1,160 |   | $ | 240 |   | $ | 2,136 |   | $ | 264 |   | $ | 108 |   | $ | 3,908 |   |

|                                                         |
|---------------------------------------------------------|
|                                                         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                    | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer, Municipal and Unallocated | Total |
|                                                    | (Dollars in thousands) |
| Individually evaluated   for impairment  | $ | 199 |   | $ | 12 |   | $ | 295 |   | $ | 39 |   | $ | 20 |   | $ | 565 |   |
| Collectively evaluated    for impairment | 834 |   | 228 |   | 1,822 |   | 211 |   | 95 |   | 3,190 |   |
| Allocated                                               | $ | 1,033 |   | $ | 240 |   | $ | 2,117 |   | $ | 250 |   | $ | 115 |   | $ | 3,755 |   |

|                                                         |
|---------------------------------------------------------|
|                                                         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                    | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Total |
|                                                    | (Dollars in thousands) |
| Individually evaluated   for impairment  | $ | 2,324 |   | $ | 47 |   | $ | 4,942 |   | $ | 171 |   | $ | 31 |   | $ | — |   | $ | 7,515 |   |
| Collectively evaluated    for impairment | 128,381 |   | 17,814 |   | 158,531 |   | 20,370 |   | 5,636 |   | 30,840 |   | 361,572 |   |
| Total                                                   | $ | 130,705 |   | $ | 17,861 |   | $ | 163,473 |   | $ | 20,541 |   | $ | 5,667 |   | $ | 30,840 |   | $ | 369,087 |   |

|                                                         |
|---------------------------------------------------------|
|                                                         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                    | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Total |
|                                                    | (Dollars in thousands) |
| Individually evaluated   for impairment  | $ | 1,789 |   | $ | 48 |   | $ | 5,224 |   | $ | 146 |   | $ | 30 |   | $ | — |   | $ | 7,237 |   |
| Collectively evaluated    for impairment | 130,744 |   | 18,530 |   | 161,832 |   | 20,458 |   | 6,016 |   | 31,455 |   | 369,035 |   |
| Total                                                   | $ | 132,533 |   | $ | 18,578 |   | $ | 167,056 |   | $ | 20,604 |   | $ | 6,046 |   | $ | 31,455 |   | $ | 376,272 |   |

----

|                      |
|----------------------|
|                      |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                 | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Total |
|                 | (Dollars in thousands) |
| Pass                 | $ | 126,121 |   | $ | 17,307 |   | $ | 139,523 |   | $ | 19,212 |   | $ | 5,590 |   | $ | 30,840 |   | $ | 338,593 |   |
| Satisfactory/Monitor | 2,260 |   | 507 |   | 19,008 |   | 1,158 |   | 46 |   | — |   | 22,979 |   |
| Monitor              | 224 |   | — |   | 1,491 |   | — |   | — |   | — |   | 1,715 |   |
| Substandard          | 2,100 |   | 47 |   | 3,451 |   | 171 |   | 31 |   | — |   | 5,800 |   |
| Total                | $ | 130,705 |   | $ | 17,861 |   | $ | 163,473 |   | $ | 20,541 |   | $ | 5,667 |   | $ | 30,840 |   | $ | 369,087 |   |

|                      |
|----------------------|
|                      |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                 | Residential Real Estate | Construction Real Estate | Commercial Real Estate | Commercial | Consumer | Municipal | Total |
|                 | (Dollars in thousands) |
| Pass                 | $ | 128,646 |   | $ | 17,999 |   | $ | 142,530 |   | $ | 19,640 |   | $ | 5,991 |   | $ | 31,455 |   | $ | 346,261 |   |
| Satisfactory/Monitor | 2,098 |   | 531 |   | 19,302 |   | 818 |   | 25 |   | — |   | 22,774 |   |
| Monitor              | 267 |   | — |   | 1,873 |   | — |   | — |   | — |   | 2,140 |   |
| Substandard          | 1,522 |   | 48 |   | 3,351 |   | 146 |   | 30 |   | — |   | 5,097 |   |
| Total                | $ | 132,533 |   | $ | 18,578 |   | $ | 167,056 |   | $ | 20,604 |   | $ | 6,046 |   | $ | 31,455 |   | $ | 376,272 |   |

----

|                             |
|-----------------------------|
|                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                        | March 31, 2011 | Three months ended March 31, 2011 |
|                        | Recorded Investment | Principal Balance | Related Allowance | Average   Recorded Investment | Interest        Income Recognized |
|                        | (Dollars in thousands) |
| With an allowance recorded: |   |   |   |   |   |
| Residential real estate     | $ | 296 |   | $ | 296 |   | $ | 37 |   |   |   |
| Commercial real estate      | 263 |   | 263 |   | 56 |   |   |   |
|                        | 559 |   | 559 |   | 93 |   |   |   |
| With no allowance recorded: |   |   |   |   |   |
| Commercial real estate      | 2,042 |   | 2,042 |   | — |   |   |   |
|                        |   |   |   |   |   |
| Total:                      |   |   |   |   |   |
| Residential real estate     | 296 |   | 296 |   | 37 |   | 298 |   | — |   |
| Commercial real estate      | 2,305 |   | 2,305 |   | 56 |   | 2,255 |   | 21 |   |
| Total                       | $ | 2,601 |   | $ | 2,601 |   | $ | 93 |   | $ | 2,553 |   | $ | 21 |   |

|                             |
|-----------------------------|
|                             |  |  |  |  |  |  |  |  |  |  |  |
|                        | December 31, 2010 |   |   |
|                        | Recorded Investment | Principal Balance | Related Allowance |   |   |
|                        | (Dollars in thousands) |   |   |
| With an allowance recorded: |   |   |   |   |   |
| Residential real estate     | $ | 301 |   | $ | 301 |   | $ | 43 |   |   |   |
| Commercial real estate      | 1,970 |   | 1,970 |   | 40 |   |   |   |
|                        | 2,271 |   | 2,271 |   | 83 |   |   |   |
| With no allowance recorded: |   |   |   |   |   |
| Commercial real estate      | 236 |   | 236 |   | — |   |   |   |
|                        |   |   |   |   |   |
| Total:                      |   |   |   |   |   |
| Residential real estate     | 301 |   | 301 |   | 43 |   |   |   |
| Commercial real estate      | 2,206 |   | 2,206 |   | 40 |   |   |   |
| Total                       | $ | 2,507 |   | $ | 2,507 |   | $ | 83 |   |   |   |

----

|                                               |
|-----------------------------------------------|
|                                               |  |  |  |  |  |  |
|                                          | Three Months EndedMarch 31, |
|                                          | 2011 | 2010 |
|                                          | (Dollars in thousands) |
| Service cost                                  | $ | 170 |   | $ | 153 |   |
| Interest cost on projected benefit obligation | 209 |   | 196 |   |
| Expected return on plan assets                | (219 | ) | (187 | ) |
| Amortization of prior service cost            | 2 |   | 2 |   |
| Amortization of net loss                      | 46 |   | 44 |   |
| Net periodic benefit cost                     | $ | 208 |   | $ | 208 |   |

|                                                                 |
|-----------------------------------------------------------------|
|                                                                 |  |  |  |  |  |  |
|                                                            | March 31, 2011 | December 31, 2010 |
|                                                            | (Dollars in thousands) |
| Net unrealized gain on investment securities available-for-sale | $ | 259 |   | $ | 174 |   |
| Defined benefit pension plan:                                   |   |   |
| Net unrealized actuarial loss                                   | (2,296 | ) | (2,327 | ) |
| Net unrealized prior service cost                               | (10 | ) | (10 | ) |
| Total                                                           | $ | (2,047 | ) | $ | (2,163 | ) |

|                                                                                                                                                                                                            |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                            |  |  |  |  |  |  |
|                                                                                                                                                                                                       | Three Months EndedMarch 31, |
|                                                                                                                                                                                                       | 2011 | 2010 |
|                                                                                                                                                                                                       | (Dollars in thousands) |
| Net income                                                                                                                                                                                                 | $ | 1,028 |   | $ | 1,219 |   |
| Investment securities available-for-sale:                                                                                                                                                                  |   |   |
|         Net unrealized holding gains on investment         securities available-for-sale, net of tax                  | 85 |   | 108 |   |
| Defined benefit pension plan:                                                                                                                                                                              |   |   |
|         Reclassification adjustment for amortization of net         actuarial loss realized in net income, net of tax | 31 |   | 26 |   |
|         Reclassification adjustment for amortization of prior         service cost realized in net income, net of tax | — |   | 2 |   |
| Total                                                                                                                                                                                                      | 31 |   | 28 |   |
| Total other comprehensive income                                                                                                                                                                           | 116 |   | 136 |   |
| Total comprehensive income                                                                                                                                                                                 | $ | 1,144 |   | $ | 1,355 |   |

----

|         |                                                                                                                 |
|---------|-----------------------------------------------------------------------------------------------------------------|
| • | Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, |

|         |                                                                                                                    |
|---------|--------------------------------------------------------------------------------------------------------------------|
| • | Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not |

|         |                                                                                                                      |
|---------|----------------------------------------------------------------------------------------------------------------------|
| • | Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement |

----

|                                          |
|------------------------------------------|
|                                          |  |  |  |  |  |  |  |  |  |  |  |  |
|                                     | Fair Value Measurements |
|                                     | FairValue | Quoted Pricesin ActiveMarkets forIdenticalAssets(Level 1) | SignificantOtherObservableInputs(Level 2) | SignificantUnobservableInputs(Level 3) |
|                                     | (Dollars in thousands) |
| March 31, 2011:                          |   |   |   |   |
| Investment securities available-for-sale |   |   |   |   |
| Debt securities:                         |   |   |   |   |
| U.S. Government-sponsored enterprises    | $ | 6,170 |   | $ | — |   | $ | 6,170 |   | $ | — |   |
| Mortgage-backed                          | 4,349 |   | — |   | 4,349 |   | — |   |
| State and political subdivisions         | 10,014 |   | — |   | 10,014 |   | — |   |
| Corporate                                | 4,803 |   | 4,294 |   | 509 |   | — |   |
| Total debt securities                    | 25,336 |   | 4,294 |   | 21,042 |   | — |   |
| Marketable equity securities             | 46 |   | 46 |   | — |   | — |   |
| Mutual funds                             | 105 |   | 105 |   | — |   | — |   |
| Total                                    | $ | 25,487 |   | $ | 4,445 |   | $ | 21,042 |   | $ | — |   |
|                                     |   |   |   |   |
| December 31, 2010:                       |   |   |   |   |
| Investment securities available-for-sale |   |   |   |   |
| Debt securities:                         |   |   |   |   |
| U.S. Government-sponsored enterprises    | $ | 4,459 |   | $ | — |   | $ | 4,459 |   | — |   |
| Mortgage-backed                          | 4,811 |   | — |   | 4,811 |   | — |   |
| State and political subdivisions         | 9,393 |   | — |   | 9,393 |   | — |   |
| Corporate                                | 4,972 |   | 2,105 |   | 2,867 |   | — |   |
| Total debt securities                    | 23,635 |   | 2,105 |   | 21,530 |   | — |   |
| Marketable equity securities             | 45 |   | 45 |   | — |   | — |   |
| Mutual funds                             | 100 |   | 100 |   | — |   | — |   |
| Total                                    | $ | 23,780 |   | $ | 2,250 |   | $ | 21,530 |   | $ | — |   |

----

----

|                                    |
|------------------------------------|
|                                    |  |  |  |  |  |  |  |  |  |  |  |  |
|                               | March 31, 2011 | December 31, 2010 |
|                               | CarryingAmount | EstimatedFair Value | CarryingAmount | EstimatedFair Value |
| Financial assets                   | (Dollars in thousands) |
| Cash and cash equivalents          | $ | 29,996 |   | $ | 29,996 |   | $ | 14,292 |   | $ | 14,292 |   |
| Interest bearing deposits in banks | 13,065 |   | 13,292 |   | 14,041 |   | 14,292 |   |
| Investment securities              | 25,987 |   | 25,987 |   | 24,280 |   | 24,282 |   |
| Loans and loans held for sale, net | 367,996 |   | 360,129 |   | 378,316 |   | 373,718 |   |
| Accrued interest receivable        | 1,650 |   | 1,650 |   | 1,560 |   | 1,560 |   |
| FHLB of Boston stock               | 1,922 |   | 1,922 |   | 1,922 |   | 1,922 |   |
| Financial liabilities              |   |   |   |   |
| Deposits                           | $ | 384,019 |   | $ | 383,853 |   | $ | 376,660 |   | $ | 376,729 |   |
| Borrowed funds                     | 26,892 |   | 29,600 |   | 28,986 |   | 30,780 |   |
| Accrued interest payable           | 483 |   | 483 |   | 389 |   | 389 |   |

----

|         |                                                                                                                               |
|---------|-------------------------------------------------------------------------------------------------------------------------------|
| • | loans and investments may be called or prepaid prior to their contractual maturity or become other than temporarily impaired; |

|         |                                                                                                                                                                                                                                                                                       |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | future cash requirements might be higher than anticipated due to loan commitments or unused lines of credit being drawn upon or depositors withdrawing their funds at higher volumes or in different time frames than anticipated based on historical patterns and contractual terms; |

|         |                                                                                                                                                                                                                       |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | assumptions made regarding interest rate movement and sensitivity could vary substantially if actual experience differs from historical experience, which could adversely affect the Company's results of operations; |

|         |                                                                                                                                                                                                        |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | further expansion of fair value accounting as proposed by the Financial Accounting Standards Board (FASB) which could result in, among other things, volatility in reported asset values and earnings; |

|         |                                                                                                                                                                                                                                                  |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | uncontrollable increases in the cost of doing business, such as increased costs of Federal Deposit Insurance Corporation (FDIC) insurance or higher taxes, assessments, compliance or audit expense imposed by regulatory or legislative bodies; |

|         |                                                                                                                                                                                                       |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | regulatory limitations placed on income producing methods including the limiting of debit and credit card interchange fees, limiting the assessment of overdraft fees and restricting of asset sales; |

|         |                                                                                                                                                                                                                             |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | the failure of actuarial, investment, work force, salary and other assumptions underlying the establishment of reserves for future pension costs or changes in legislative or regulatory requirements affecting such costs; |

|         |                                                                      |
|---------|----------------------------------------------------------------------|
| • | further disruptions in U.S. and global financial and credit markets; |

|         |                                                                                                                                                                                                     |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | ability of financial institutions to offer interest bearing transaction accounts to all customers as of July 21, 2011 and the resulting competitive impacts and the impact on the cost of deposits; |

|         |                                                                                                                                                                                                    |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | further modification of FDIC deposit insurance providing unlimited insurance coverage for two years beginning January 1, 2011 for any noninterest bearing transaction accounts and IOLTA accounts; |

|         |                                                                                                                                                                                |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | changes to the Company's and/ or the financial market operations resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act or the Act); |

|         |                                                                                                                                                                                           |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | adverse changes in the local real estate market, which negatively impact collateral values and the Company's ability to recoup loan losses through disposition of real estate collateral; |

|         |                                                                                    |
|---------|------------------------------------------------------------------------------------|
| • | changes in monetary, regulatory or tax policy that could affect consumer behavior; |

|         |                                                                                                                                 |
|---------|---------------------------------------------------------------------------------------------------------------------------------|
| • | continuing economic instability, including high unemployment rates, higher taxation and resolution of entitlement programs; and |

|         |                                                                                                                          |
|---------|--------------------------------------------------------------------------------------------------------------------------|
| • | changes in state foreclosure policies or procedures, which may result in delays in lien enforcement and additional cost. |

----

|         |                                                                                                                                                                                                                                                                                                                                       |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The second quarter 2011 change in the FDIC insurance assessment base from total deposits to net assets will reduce the Company's future assessment costs and put community banks, which generally rely more heavily on deposits as a funding source, on a more level playing field with national and regional financial institutions. |

|         |                                                                                                                                                                                                                                                                                                         |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The decision in February 2011 to waive the 90 day recourse period upon the sale of SBA loans to the secondary market makes that a more attractive alternative for community banks and the continuing development of loan programs for small business customers is always a benefit to a community bank. |

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The FASB, citing outreach activities in which "almost all" constituents believe that amortized cost is significantly more relevant for purposes of measuring most loans, agreed to consider amortized cost as a primary attribute (in addition to fair value) for measuring financial instruments.  Therefore loans and debt securities that are held as part of the "customer financing activities of a bank" may continue to be recorded at amortized cost, which will reduce future volatity in a company's financial statements while providing their readers with the most current information. |

|         |                                                                                                                                                                                                                                         |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | Starting July 21, 2011, banks will be permitted to pay interest on business checking accounts.  Although it may increase a banks' overall cost of funds, this change will allow them to compete with nonbanks for these customer funds. |

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The growing recognition by the banking regulators that a one size fits all approach to regulations may not be in the industry's best interest or be adequate to address the attendent risks in each company's business model may bring some regulatory relief to community banks, as evidenced by the new Basel III capital standards and recent risk monitoring and mitigation guidance issued earlier in 2011 by the Office of Thrift Supervision. |

|         |                                                                                                                                                                                                                              |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The recognition in the Obama administration's recent report to Congress, "Reforming America's Housing Finance Market" that smaller lenders and community banks serve their communities more effectively than larger lenders. |

|         |                                                                                                                                                                                                                                                                                                                 |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The proposed Federal Reserve and FDIC rulemaking implementing the credit risk retention requirements of section 941 of the Dodd-Frank Act, which would generally require private securitizers to retain not less than 5% of the credit risk of the assets collateralizing any asset-backed securities issuance. |

|         |                                                                                                                                                                                                                                     |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The Federal Home Loan Bank (FHLB) of Boston, of which Union is a member, has resumed quarterly dividend payments, with a modest dividend paid in both the first and second quarters of 2011 after two years of no dividend payment. |

----

|         |                                                                                                                                                                                                                                                                 |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The increased information reporting requirements and the requirement to provide health insurance vouchers to low income employees who may be participating in government sponsored insurance programs under the 2010 Health-Care Reform Act have been repealed. |

|         |                                                                                                                                                                                                                                                                                                         |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The Dodd-Frank Act represents the biggest re-write of financial regulation in decades and bankers are faced with an estimated 5,000 pages of new or expanded regulations as a result of the bill which will take several years to implement with the full impact on the banking industry not yet known. |

|         |                                                                                                                                                                                                                                                                                             |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | By March 15, 2012, all existing ATM's must meet the new Americans with Disabilities Act accessibility standards which will require the replacement of deployed nonconforming ATM's over the next twelve months.  A review of the Company's existing machines is currently being undertaken. |

|         |                                                                                                                                                                                                                                                         |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The establishment of the new Consumer Financial Protection Bureau created by the Dodd-Frank Act may lead to conflicting regulatory guidance for community banks and increase regulatory costs and burdens but to date no new rules have been published. |

|         |                                                                                                                                                                                                                                                                  |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | State and national health care reform initiatives may increase employer costs to provide employer sponsored group health care plans to eligible employees.  The Vermont legislature is moving towards a single payer, all inclusive model for Vermont residents. |

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The Dodd-Frank Act included a provision (the Durbin amendment) which required the Federal Reserve to set rates for debit card transaction interchange fees by April 21, 2011, to become effective July 21, 2011.  The rates have been set but there has been quite a bit of debate surrounding the proposed rates and it is Management's current understanding that the implementation date may be delayed. (There were more than 41 billion debit card transactions worldwide in 2010 up 28% from the previous year.) Even though banks with assets of $10 billion or less are exempt from this provision, in reality the rate set will likely become the new norm.  This price control measure will benefit the merchants at the expense of the banks and ultimately the consumers, as the rates being proposed are substantially below the cost of processing a transaction, which creates an unsustainable structure as currently proposed. |

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | Among the new regulations imposed by the Dodd-Frank Act are new residential mortgage provisions that mandate more extensive disclosures, require lenders to offer terms that reasonably reflect the consumers' ability to repay a loan, prohibit mandatory arbitration provisions, add new customer protections for high-cost mortgages and set escrow account and appraisal standards.  The relevant regulations promulgated to date regarding these provisions have been implemented by Union. |

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | The Basel III Capital Framework published in December 2010 will increase minimum capital levels and add a new capital conservation buffer over the next nine years.  Union Bankshares' ratios are well over those new minimums plus the buffer at March 31, 2011.  Basel III will also implement a leverage ratio starting in 2013, a liquidity coverage ratio in 2015 and a net stable funding ratio in 2018 but these ratios have yet to be defined. |

|         |                                                                                                                                                                                    |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | There are still numerous provisions of the Dodd-Frank Act that originally had an effective date of July 21, 2011  for which final regulations or guidance has not yet been issued. |

----

----

----

|                                                             |
|-------------------------------------------------------------|
|                                                             |  |  |  |  |  |  |
|                                                        | Three Months Ended March 31, |
|                                                        | 2011 | 2010 |
| Return on average assets (ROA) (1)                          | 0.91 | % | 1.12 | % |
| Return on average equity (ROE) (1)                          | 9.94 | % | 11.89 | % |
| Net interest margin (1)(2)                                  | 4.43 | % | 4.65 | % |
| Efficiency ratio (3)                                        | 75.54 | % | 69.97 | % |
| Net interest spread (4)                                     | 4.21 | % | 4.41 | % |
| Loan to deposit ratio                                       | 96.79 | % | 97.93 | % |
| Net loan charge-offs to average loans not held for sale (1) | — |   | 0.15 | % |
| Allowance for loan losses to loans not held for sale        | 1.06 | % | 0.99 | % |
| Nonperforming assets to total assets (5)                    | 1.27 | % | 1.12 | % |
| Equity to assets                                            | 9.09 | % | 9.41 | % |
| Total capital to risk weighted assets                       | 15.43 | % | 15.34 | % |
| Book value per share                                        | $ | 9.37 |   | $ | 9.28 |   |
| Earnings per share                                          | $ | 0.23 |   | $ | 0.27 |   |
| Dividends paid per share                                    | $ | 0.25 |   | $ | 0.25 |   |
| Dividend payout ratio (6)                                   | 108.7 | % | 92.59 | % |

|     |             |
|-----|-------------|
| (1) | Annualized. |

|     |                                                                                                              |
|-----|--------------------------------------------------------------------------------------------------------------|
| (2) | The ratio of tax equivalent net interest income to average earning assets. See page 27 for more information. |

|     |                                                                                                                                                                                                                                                                                              |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | The ratio of noninterest expense ($4.6 million in 2011 and $4.1 million in 2010) to tax equivalent net interest income ($4.7 million in both 2011 and 2010) and noninterest income ($1.4 million in 2011 and $1.2 million in 2010) excluding securities gains (of $0 in both 2011 and 2010). |

|     |                                                                                                                                                                     |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | The difference between the average rate earned on earning assets and the average rate paid on  interest bearing liabilities. See page 27 for more information. |

|     |                                                                                                                                                          |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) | Nonperforming assets are loans or investment securities that are in nonaccrual or 90 or more days past due as well as other real estate or assets owned. |

|     |                                                                                          |
|-----|------------------------------------------------------------------------------------------|
| (6) | Cash dividends declared and paid per share divided by consolidated net income per share. |

----

|                                                  |
|--------------------------------------------------|
|                                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                             | Three Months Ended March 31, |
|                                             | 2011 | 2010 |
|                                             | AverageBalance | InterestEarned/Paid | AverageYield/Rate | AverageBalance | InterestEarned/Paid | AverageYield/Rate |
|                                             | (Dollars in thousands) |
| Average Assets:                                  |   |   |   |   |   |   |
| Federal funds sold and overnight deposits        | $ | 14,329 |   | $ | 6 |   | 0.16 | % | $ | 10,829 |   | $ | 4 |   | 0.14 | % |
| Interest bearing deposits in banks               | 13,320 |   | 76 |   | 2.31 | % | 20,918 |   | 122 |   | 2.36 | % |
| Investment securities (1), (2)                   | 23,916 |   | 219 |   | 4.17 | % | 23,815 |   | 260 |   | 4.88 | % |
| Loans, net (1), (3)                              | 373,654 |   | 5,196 |   | 5.74 | % | 352,283 |   | 5,258 |   | 6.14 | % |
| FHLB of Boston stock (4)                         | 1,922 |   | 1 |   | 0.30 | % | 1,922 |   | — |   | — |   |
| Total interest earning assets (1)                | 427,141 |   | 5,498 |   | 5.34 | % | 409,767 |   | 5,644 |   | 5.69 | % |
| Cash and due from banks                          | 5,427 |   |   |   | 5,241 |   |   |   |
| Premises and equipment                           | 7,824 |   |   |   | 7,917 |   |   |   |
| Other assets                                     | 12,232 |   |   |   | 13,045 |   |   |   |
| Total assets                                     | $ | 452,624 |   |   |   | $ | 435,970 |   |   |   |
| Average Liabilities and Stockholders' Equity:    |   |   |   |   |   |   |
| NOW accounts                                     | $ | 61,521 |   | $ | 30 |   | 0.20 | % | $ | 59,031 |   | $ | 33 |   | 0.22 | % |
| Savings/money market accounts                    | 124,870 |   | 144 |   | 0.47 | % | 114,139 |   | 152 |   | 0.54 | % |
| Time deposits                                    | 129,639 |   | 499 |   | 1.56 | % | 131,283 |   | 588 |   | 1.82 | % |
| Borrowed funds                                   | 28,451 |   | 288 |   | 4.05 | % | 29,764 |   | 283 |   | 3.80 | % |
| Total interest bearing liabilities               | 344,481 |   | 961 |   | 1.13 | % | 334,217 |   | 1,056 |   | 1.28 | % |
| Noninterest bearing deposits                     | 60,747 |   |   |   | 54,577 |   |   |   |
| Other liabilities                                | 6,034 |   |   |   | 6,170 |   |   |   |
| Total liabilities                                | 411,262 |   |   |   | 394,964 |   |   |   |
| Stockholders' equity                             | 41,362 |   |   |   | 41,006 |   |   |   |
| Total liabilities and stockholders’ equity | $ | 452,624 |   |   |   | $ | 435,970 |   |   |   |
| Net interest income                              |   | $ | 4,537 |   |   |   | $ | 4,588 |   |   |
| Net interest spread (1)                          |   |   | 4.21 | % |   |   | 4.41 | % |
| Net interest margin (1)                          |   |   | 4.43 | % |   |   | 4.65 | % |

|     |                                                                                     |
|-----|-------------------------------------------------------------------------------------|
| (1) | Average yields reported on a tax equivalent basis using a marginal tax rate of 34%. |

|     |                                                                                                                                        |
|-----|----------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Average balances of investment securities are calculated on the amortized cost basis and include nonaccrual securities, if applicable. |

|     |                                                                                                                             |
|-----|-----------------------------------------------------------------------------------------------------------------------------|
| (3) | Includes loans held for sale as well as nonaccrual loans and unamortized costs and is net of the allowance for loan losses. |

|     |                                                                                                                                                                  |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4) | Dividends on the Federal Home Loan Bank (FHLB) of Boston stock were suspended effective the fourth quarter of 2008 and resumed during the first quarter of 2011. |

----

|                                     |
|-------------------------------------|
|                                     |  |  |  |  |  |  |
|                                | For The Three MonthsEnded March 31, |
|                                | 2011 | 2010 |
|                                | (Dollars in thousands) |
| Net interest income as presented    | $ | 4,537 |   | $ | 4,588 |   |
| Effect of tax-exempt interest       |   |   |
| Investment securities               | 31 |   | 31 |   |
| Loans                               | 94 |   | 77 |   |
| Net interest income, tax equivalent | $ | 4,662 |   | $ | 4,696 |   |

|         |                                                                |
|---------|----------------------------------------------------------------|
| • | changes in volume (change in volume multiplied by prior rate); |

|         |                                                                  |
|---------|------------------------------------------------------------------|
| • | changes in rate (change in rate multiplied by prior volume); and |

|         |                                  |
|---------|----------------------------------|
| • | total change in rate and volume. |

|                                           |
|-------------------------------------------|
|                                           |  |  |  |  |  |  |
|                                      | Three Months Ended March 31, 2011Compared toThree Months Ended March 31, 2010Increase/(Decrease) Due to Change In |
|                                      | Volume | Rate | Net |
|                                      | (Dollars in thousands) |
| Interest earning assets:                  |   |   |   |
| Federal funds sold and overnight deposits | 1 |   | 1 |   | 2 |   |
| Interest bearing deposits in banks        | (43 | ) | (3 | ) | (46 | ) |
| Investment securities                     | 1 |   | (42 | ) | (41 | ) |
| Loans, net                                | 305 |   | (367 | ) | (62 | ) |
| FHLB of Boston stock                      | — |   | 1 |   | 1 |   |
| Total interest earning assets             | 264 |   | (410 | ) | (146 | ) |
| Interest bearing liabilities:             |   |   |   |
| NOW accounts                              | 1 |   | (4 | ) | (3 | ) |
| Savings/money market accounts             | 13 |   | (21 | ) | (8 | ) |
| Time deposits                             | (7 | ) | (82 | ) | (89 | ) |
| Borrowed funds                            | (12 | ) | 17 |   | 5 |   |
| Total interest bearing liabilities        | (5 | ) | (90 | ) | (95 | ) |
| Net change in net interest income         | 269 |   | (320 | ) | (51 | ) |

----

----

|                                           |
|-------------------------------------------|
|                                           |  |  |  |  |  |  |  |  |  |  |
|                                      | For The Three Months Ended March 31, |
|                                      | 2011 | 2010 | $ Variance | % Variance |
|                                      | (Dollars in thousands) |
| Trust income                              | $ | 132 |   | $ | 109 |   | $ | 23 |   | 21.1 |
| Service fees                              | 1,006 |   | 964 |   | 42 |   | 4.4 |
| Net gains on sales of loans held for sale | 168 |   | 102 |   | 66 |   | 64.7 |
| Other income                              | 95 |   | 44 |   | 51 |   | 115.9 |
| Total noninterest income                  | $ | 1,401 |   | $ | 1,219 |   | $ | 182 |   | 14.9 |

|                                                    |
|----------------------------------------------------|
|                                                    |  |  |  |  |  |  |  |  |  |  |  |
|                                               | For The Three Months Ended March 31, |
|                                               | 2011 | 2010 | $ Variance | % Variance |
|                                               | (Dollars in thousands) |
| Salaries and wages                                 | $ | 1,730 |   | $ | 1,565 |   | $ | 165 |   | 10.5 |   |
| Pension and employee benefits                      | 817 |   | 760 |   | 57 |   | 7.5 |   |
| Occupancy expense, net                             | 290 |   | 255 |   | 35 |   | 13.7 |   |
| Equipment expense                                  | 296 |   | 248 |   | 48 |   | 19.4 |   |
| Expenses of OREO and other assets owned, net       | 68 |   | 90 |   | (22 | ) | (24.4 | ) |
| FDIC insurance assessment                          | 125 |   | 133 |   | (8 | ) | (6.0 | ) |
| Equity in losses of affordable housing investments | 106 |   | 106 |   | — |   | — |   |
| Other expenses                                     | 1,148 |   | 982 |   | 166 |   | 16.9 |   |
| Total noninterest expense                          | $ | 4,580 |   | $ | 4,139 |   | $ | 441 |   | 10.7 |   |

----

----

|                                   |
|-----------------------------------|
|                                   |  |  |  |  |  |  |  |  |
|                              | March 31, 2011 | December 31, 2010 |
| Loan Type                         | Amount | Percent | Amount | Percent |
|                              | (Dollars in thousands) |
| Residential real estate           | $ | 130,705 |   | 35.2 | $ | 132,533 |   | 34.7 |
| Construction real estate          | 17,861 |   | 4.8 | 18,578 |   | 4.9 |
| Commercial real estate            | 163,473 |   | 44.0 | 167,056 |   | 43.7 |
| Commercial                        | 20,541 |   | 5.5 | 20,604 |   | 5.4 |
| Consumer                          | 5,667 |   | 1.5 | 6,046 |   | 1.6 |
| Tax exempt loans                  | 30,840 |   | 8.3 | 31,455 |   | 8.2 |
| Loans held for sale               | 2,614 |   | 0.7 | 5,611 |   | 1.5 |
| Total loans                       | 371,701 |   | 100.0 | 381,883 |   | 100.0 |
| Add/(Deduct):                     |   |   |   |   |
| Allowance for loan losses         | (3,908 | ) |   | (3,755 | ) |   |
| Unamortized net loan costs        | 203 |   |   | 188 |   |   |
| Net loans and loans held for sale | $ | 367,996 |   |   | $ | 378,316 |   |   |

----

----

|                                                                      |
|----------------------------------------------------------------------|
|                                                                      |  |  |  |  |  |  |  |  |  |
|                                                                 | March 31, 2011 | December 31, 2010 | March 31, 2010 |
|                                                                 | (Dollars in thousands) |
| Nonaccrual loans                                                     | $ | 4,002 |   | $ | 2,792 |   | $ | 2,933 |   |
| Accruing loans 90+ days delinquent                                   | 428 |   | 806 |   | 647 |   |
| Total nonperforming loans                                            | 4,430 |   | 3,598 |   | 3,580 |   |
| OREO                                                                 | 1,410 |   | 1,609 |   | 1,338 |   |
| Total nonperforming assets                                           | $ | 5,840 |   | $ | 5,207 |   | $ | 4,918 |   |
| Allowance for loan losses to loans not held for sale                 | 1.06 | % | 1.00 | % | 0.99 | % |
| Allowance for loan losses to nonperforming loans                     | 88.22 | % | 104.36 | % | 96.51 | % |
| Nonperforming loans to total loans                                   | 1.19 | % | 0.94 | % | 1.00 | % |
| Nonperforming assets to total assets                                 | 1.27 | % | 1.15 | % | 1.12 | % |
| Delinquent loans (30 days to nonaccruing) to total loans        | 3.98 | % | 3.43 | % | 3.03 | % |
| Net charge-offs (annualized) to average loans not held for sale | N/A |   | 0.07 | % | 0.15 | % |
| Loan loss provision to net charge-offs, year-to-date                 | N/A |   | 201.42 | % | 70.31 | % |

----

----

|                                |
|--------------------------------|
|                                |  |  |  |  |  |  |
|                           | Three Months Ended,March 31, |
|                           | 2011 | 2010 |
|                           | (Dollars in thousands) |
| Balance at beginning of period | $ | 3,755 |   | $ | 3,493 |   |
| Charge-offs:                   |   |   |
| Real Estate:                   |   |   |
| Residential                    | (8 | ) | (102 | ) |
| Commercial                     | — |   | (38 | ) |
| Consumer and other             | (8 | ) | (6 | ) |
| Total charge-offs              | (16 | ) | (146 | ) |
| Recoveries:                    |   |   |
| Real Estate:                   |   |   |
| Residential                    | 1 |   | 7 |   |
| Commercial                     | 3 |   | 1 |   |
| Consumer and other             | 15 |   | 10 |   |
| Total recoveries               | 19 |   | 18 |   |
| Net recoveries (charge-offs)   | 3 |   | (128 | ) |
| Provision for loan losses      | 150 |   | 90 |   |
| Balance at end of period       | $ | 3,908 |   | $ | 3,455 |   |

----

|                                                                                                        |
|--------------------------------------------------------------------------------------------------------|
|                                                                                                        |  |  |  |  |  |  |  |  |
|                                                                                                   | March 31, 2011 | December 31, 2010 |
|                                                                                                   | Amount | Percent | Amount | Percent |
|                                                                                                   | (Dollars in thousands) |
| Real Estate                                                                                            |   |   |   |   |
| Residential                                                                                            | $ | 1,160 |   | 35.4 | $ | 1,033 |   | 35.2 |
| Commercial                                                                                             | 2,136 |   | 47.2 | 2,117 |   | 47.3 |
| Construction                                                                                           | 240 |   | 4.8 | 240 |   | 4.9 |
| Other Loans                                                                                            |   |   |   |   |
| Commercial                                                                                             | 264 |   | 5.6 | 250 |   | 5.5 |
|     Consumer, municipal, other       and unallocated | 108 |   | 7.0 | 115 |   | 7.1 |
| Total                                                                                                  | $ | 3,908 |   | 100.0 | $ | 3,755 |   | 100.0 |

----

|                              |
|------------------------------|
|                              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                         | Three months ended March 31, 2011 | Year ended December 31, 2010 |
|                         | AverageAmount | Percentof TotalDeposits | AverageRate | AverageAmount | Percentof TotalDeposits | AverageRate |
|                         | (Dollars in thousands) |
| Nontime deposits:            |   |   |   |   |   |   |
| Noninterest bearing deposits | $ | 60,747 |   | 16.1 |   | — |   | $ | 55,829 |   | 15.1 |   | — |   |
| NOW accounts                 | 61,521 |   | 16.4 |   | 0.20 | % | 62,094 |   | 16.8 |   | 0.22 | % |
| Money Market accounts        | 76,193 |   | 20.2 |   | 0.59 | % | 73,484 |   | 19.9 |   | 0.66 | % |
| Savings accounts             | 48,677 |   | 12.9 |   | 0.28 | % | 46,985 |   | 12.8 |   | 0.30 | % |
| Total nontime deposits       | 247,138 |   | 65.6 |   | 0.29 | % | 238,392 |   | 64.6 |   | 0.32 | % |
| Time deposits:               |   |   |   |   |   |   |
| Less than $100,000           | 69,363 |   | 18.4 |   | 1.51 | % | 71,205 |   | 19.3 |   | 1.67 | % |
| $100,000 and over            | 60,276 |   | 16.0 |   | 1.62 | % | 59,179 |   | 16.1 |   | 1.73 | % |
| Total time deposits          | 129,639 |   | 34.4 |   | 1.56 | % | 130,384 |   | 35.4 |   | 1.70 | % |
| Total deposits               | $ | 376,777 |   | 100.0 |   | 0.72 | % | $ | 368,776 |   | 100.0 |   | 0.81 | % |

----

|                 |
|-----------------|
|                 |  |  |  |  |  |  |
|            | March 31, 2011 | December 31, 2010 |
|            | (Dollars in thousands) |
| Within 3 months | $ | 24,406 |   | $ | 6,732 |   |
| 3 to 6 months   | 11,205 |   | 28,441 |   |
| 6 to 12 months  | 12,095 |   | 16,751 |   |
| Over 12 months  | 10,540 |   | 10,986 |   |
|            | $ | 58,246 |   | $ | 62,910 |   |

----

|                     |
|---------------------|
|                     |  |  |  |  |  |  |  |  |
|                | March 31, 2011 |
|                | Projected | Actual | PercentageDifference |
|                | (Dollars in thousands) |
| Net Interest Income | $ | 4,791 |   | $ | 4,537 |   | (5.3 | ) |
| Net Income          | $ | 1,091 |   | $ | 1,028 |   | (5.8 | ) |
| Return on Assets    | 1.02 | % | 0.91 | % | (10.8 | ) |
| Return on Equity    | 10.74 | % | 9.94 | % | (7.4 | ) |

----

|                                                             |
|-------------------------------------------------------------|
|                                                             |  |  |  |  |  |  |
|                                                        | March 31, 2011 | December 31, 2010 |
|                                                        | (Dollars in thousands) |
| Commitments to originate loans                              | $ | 14,818 |   | $ | 15,654 |   |
| Unused lines of credit                                      | 48,627 |   | 44,720 |   |
| Standby letters of credit                                   | 1,689 |   | 1,494 |   |
| Credit card arrangements                                    | 837 |   | 838 |   |
| FHLB of Boston MPF credit enhancement obligation, net       | 86 |   | 86 |   |
| Commitment to purchase investment securities                | 6,500 |   | — |   |
| Commitment to purchase FDIC insured certificates of deposit | 647 |   | — |   |
| Total                                                       | $ | 73,204 |   | $ | 62,792 |   |

----

|         |                                                                                                                                                                                                                                                |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | adjustable-rate loans, investment securities, variable-rate time deposits, FHLB of Boston advances and other secured borrowings are included in the period when they are first scheduled to adjust and not in the period in which they mature; |

|         |                                                                                                                                                                                                                                        |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | fixed-rate mortgage-related securities and residential loans reflect estimated prepayments, which were estimated based on analyses of broker estimates, the results of a prepayment model utilized by the Company, and empirical data; |

|         |                                                                                                                           |
|---------|---------------------------------------------------------------------------------------------------------------------------|
| • | other nonmortgage related fixed-rate loans reflect scheduled contractual amortization, with no estimated prepayments; and |

|         |                                                                                                                                                                                                                                                                |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| • | NOW, money markets and savings deposits, which do not have contractual maturities, reflect estimated levels of attrition, which are based on detailed studies by the Company of the sensitivity of each such category of deposit to changes in interest rates. |

----

|                                                                                                                  |
|------------------------------------------------------------------------------------------------------------------|
|                                                                                                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                                                             | Cumulative repriced within |
|                                                                                                             | 3 Monthsor Less | 4 to 12Months | 1 to 3Years | 3 to 5Years | Over 5Years | Total |
|                                                                                                             | (Dollars in thousands, by repricing date) |
| Interest sensitive assets:                                                                                       |   |   |   |   |   |   |
| Overnight deposits                                                                                               | $ | 24,842 |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 24,842 |   |
| Interest bearing deposits in banks                                                                               | 1,593 |   | 4,568 |   | 5,706 |   | 1,198 |   | — |   | 13,065 |   |
| Investment securities (1)(3)                                                                                     | 2,515 |   | 3,809 |   | 5,728 |   | 2,588 |   | 11,196 |   | 25,836 |   |
| FHLB Stock                                                                                                       | — |   | — |   | — |   | — |   | 1,922 |   | 1,922 |   |
| Loans and loans held for sale (2)(3)                                                                             | 139,931 |   | 47,527 |   | 64,745 |   | 59,576 |   | 60,125 |   | 371,904 |   |
| Total interest sensitive assets                                                                                  | $ | 168,881 |   | $ | 55,904 |   | $ | 76,179 |   | $ | 63,362 |   | $ | 73,243 |   | $ | 437,569 |   |
| Interest sensitive liabilities:                                                                                  |   |   |   |   |   |   |
| Time deposits                                                                                                    | $ | 39,129 |   | $ | 52,932 |   | $ | 30,261 |   | $ | 5,199 |   | $ | — |   | $ | 127,521 |   |
| Money markets                                                                                                    | 28,300 |   | — |   | — |   | — |   | 51,839 |   | 80,139 |   |
| Regular savings                                                                                                  | 10,228 |   | — |   | — |   | — |   | 41,701 |   | 51,929 |   |
| NOW accounts                                                                                                     | 22,415 |   | — |   | — |   | — |   | 40,653 |   | 63,068 |   |
| Borrowed funds                                                                                                   | 397 |   | 2,368 |   | 7,425 |   | 5,260 |   | 11,442 |   | 26,892 |   |
| Total interest sensitive liabilities                                                                             | $ | 100,469 |   | $ | 55,300 |   | $ | 37,686 |   | $ | 10,459 |   | $ | 145,635 |   | $ | 349,549 |   |
| Net interest rate sensitivity gap                                                                                | $ | 68,412 |   | $ | 604 |   | $ | 38,493 |   | $ | 52,903 |   | $ | (72,392 | ) | $ | 88,020 |   |
| Cumulative net interest rate sensitivity gap                                                                     | $ | 68,412 |   | $ | 69,016 |   | $ | 107,509 |   | $ | 160,412 |   | $ | 88,020 |   |   |
| Cumulative net interest rate sensitivity gap as   a percentage of total assets                         | 14.9 | % | 15.0 | % | 23.4 | % | 34.9 | % | 19.1 | % |   |
| Cumulative net interest rate sensitivity gap as   a percentage of total interest sensitive assets      | 15.6 | % | 15.8 | % | 24.6 | % | 36.7 | % | 20.1 | % |   |
| Cumulative net interest rate sensitivity gap as   a percentage of total interest sensitive liabilities | 19.6 | % | 19.7 | % | 30.8 | % | 45.9 | % | 25.2 | % |   |

|     |                                                                                                                                                                                             |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Investment securities exclude marketable equity securities and mutual funds with a fair value of $46 thousand and $105 thousand, respectively, that may be sold by the Company at any time. |

|     |                                                                          |
|-----|--------------------------------------------------------------------------|
| (2) | Balances shown include deferred unamortized loan costs of $203 thousand. |

|     |                                                                      |
|-----|----------------------------------------------------------------------|
| (3) | Estimated repayment assumptions considered in Asset/Liability model. |

----

|                                           |
|-------------------------------------------|
|                                           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Interest Rate Sensitivity Analysis Matrix |
| 12 Months Ending                          | Prime Rate | Net Interest Income | Change % | Net Income | Return on Assets | Return on Equity |
|                                      | (Dollars in thousands) |
| March 2012                                | 6.25 | % | $ | 25,480 |   | 23.7 |   | $ | 9,768 |   | 2.27 | % | 21.67 | % |
|                                      | 3.25 | % | 20,593 |   | 0.0 |   | 6,304 |   | 1.41 | % | 14.22 | % |
|                                      | 2.25 | % | 19,142 |   | (7.0 | ) | 5,269 |   | 1.13 | % | 11.65 | % |

----

----

|                                        |
|----------------------------------------|
|                                        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                   | Actual | MinimumFor CapitalRequirements | MinimumTo Be WellCapitalized UnderPrompt CorrectiveAction Provisions |
|                                   | Amount | Ratio | Amount | Ratio | Amount | Ratio |
|                                   | (Dollars in thousands) |
| Total capital to risk weighted assets  |   |   |   |   |   |   |
| Union                                  | $ | 47,398 |   | 15.41 | % | $ | 24,606 |   | 8.0 | % | $ | 30,758 |   | 10.0 | % |
| Company                                | 47,626 |   | 15.43 | % | 24,693 |   | 8.0 | % | N/A |   | N/A |   |
| Tier I capital to risk weighted assets |   |   |   |   |   |   |
| Union                                  | $ | 43,551 |   | 14.16 | % | $ | 12,303 |   | 4.0 | % | $ | 18,454 |   | 6.0 | % |
| Company                                | 43,768 |   | 14.18 | % | 12,346 |   | 4.0 | % | N/A |   | N/A |   |
| Tier I capital to average assets       |   |   |   |   |   |   |
| Union                                  | $ | 43,551 |   | 9.67 | % | $ | 18,015 |   | 4.0 | % | $ | 22,519 |   | 5.0 | % |
| Company                                | 43,768 |   | 9.70 | % | 18,049 |   | 4.0 | % | N/A |   | N/A |   |

----

|        |
|--------|
|        |  |  |
|   |   |
| 31.1   |   | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2   |   | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1   |   | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2   |   | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

|              |
|--------------|
|              |  |  |
|         |   |   |
| May 16, 2011 |   | Union Bankshares, Inc. |
|         |   |   |
|         |   | /s/ Kenneth D. Gibbons |
|         |   | Kenneth D. Gibbons |
|         |   | Director, President and Chief Executive Officer |
|         |   |   |
| May 16, 2011 |   | /s/ Marsha A. Mongeon |
|         |   | Marsha A. Mongeon |
|         |   | Chief Financial Officer and Treasurer |
|         |   | (Principal Financial Officer) |

|        |
|--------|
|        |  |  |
|   |   |
| 31.1   |   | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |   |
| 31.2   |   | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |   |
| 32.1   |   | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|   |   |
| 32.2   |   | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |