**=======================================**

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      D. C. 20549**

**FORM      10-Q**

**____________________________________**

|  [X] | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE                ACT OF 1934 for the quarterly period ended **September 30,                2006** |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| [                ] | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE  SECURITIES                EXCHANGE ACT OF 1934 |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| **Commission                File No. 000-50426** |
|--------------------------------------------------|

|                                                                                      |
|--------------------------------------------------------------------------------------|
| (Exact                Name of Registrant as Specified in its                Charter) |

| Pennsylvania                                                                  |                                                | 38-3681905 |
|-------------------------------------------------------------------------------|-----------------------------------------------------|------------|
| (State                or Other Jurisdiction of Incorporation or Organization) | (I.R.S.                Employer Identification No.) |

| **90                Highland Avenue, Bethlehem, PA**   |   | **18017**                 |
|--------------------------------------------------------|--------|---------------------------|
| (Address                of Principal Executive Office) |   | (Zip                Code) |

**610-861-5000**

| YES [X]    NO                [  ] |   |
|-----------------------------------------------------------------|--------|

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

| YES [                   ]    NO                  [X] |   |
|------------------------------------------------------------------------------------|--------|

----

**KNBT      BANCORP, INC. AND SUBSIDIARIES**

**INDEX**

|                                                          |                                |
|---------------------------------------------------------------|-------------------------------------|
|  **PART                      I - FINANCIAL INFORMATION** |  Page                     |
|                                                          |  Item                      1.  |  Financial                      Statements |  1 |
|                                                          |                                |   |  Consolidated                      Balance Sheets |  1 |
|                                                          |                                |   |  Consolidated                      Statements of Income |  2 |
|                                                          |                                |   |  Consolidated                      Statement of Changes in Shareholders’                      Equity |  3 |
|                                                          |                                |   |  Consolidated                      Statements of Cash Flows |  4 |
|                                                          |                                |   |  Notes                      to Interim Consolidated Financial                      Statements |  5 |
|                                                          |  Item                      2.  |  Management’s                      Discussion and Analysis of Financial Condition                      and Results of Operations |  17 |
|                                                          |  Item                      3.  |  Quantitative                      and Qualitative Disclosures about Market                      Risk |  31 |
|                                                          |  Item                      4.  |  Controls                      and Procedures |  31 |
|  **PART                      II - OTHER INFORMATION**    |                                |
|                                                          |  Item                      1.  |  Legal                      Proceedings |  31 |
|                                                          |  Item                      1A. |  Risk                      Factors |  31 |
|                                                          |  Item                      2.  |  Unregistered                      Sales of Equity Securities and Use of                      Proceeds |  32 |
|                                                          |  Item                      3.  |  Defaults                      Upon Senior Securities |  32 |
|                                                          |  Item                      4.  |  Submission                      of Matters to a Vote of Security                      Holders |  32 |
|                                                          |  Item                      5.  |  Other                      Information |  32 |
|                                                          |  Item                      6.  |  Exhibits |  32 |
|  **Signatures**                                          |  33                            |

----

**PART      I.**

| **Item                1.** | **Financial                Statements** |
|----------------------------|-----------------------------------------|

**KNBT      BANCORP, INC. AND SUBSIDIARIES**

**CONSOLIDATED      BALANCE SHEETS**

|                                                                                                                                               |   | September                  30, |      | December                  31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-----------|-------------------------------|--------|
| *(dollars                  in thousands, except per share data)*                                                                                   |   | 2006                           |      | 2005                          |   |
|                                                                                                                                               |   | (unaudited)                    |      |                          |   |
| ASSETS                                                                                                                                             |   |                           |      |                          |   |
| Cash                  and due from banks                                                                                                           |   | $                              | 51,152    |                          | $      | 47,989 |   |
| Interest-bearing                  deposits with banks                                                                                              |   |                           | 1,791     |                          |   | 58,270 |   |
| Federal                  funds sold                                                                                                                |   |                           | 32,000    |                          |   | - |   |
|                     Cash and cash equivalents                                                                                            |   |                           | 84,943    |                          |   | 106,259 |   |
| Investment                  securities available-for-sale                                                                                          |   |                           | 878,486   |                          |   | 1,119,273 |   |
| Investment                  securities held to maturity                                                                                            |   |                           |      |                          |   |   |   |
|                     (Fair value of $34,228 at September 30, 2006 and $47,074 at December                  31,                  2005)     |   |                           | 34,741    |                          |   | 47,368 |   |
| Federal                  Home Loan Bank of Pittsburgh stock                                                                                        |   |                           | 33,366    |                          |   | 40,239 |   |
| Mortgage                  loans held-for-sale                                                                                                      |   |                           | 2,264     |                          |   | 556 |   |
| Loans                                                                                                                                              |   |                           | 1,590,652 |                          |   | 1,481,728 |   |
|                     Less: Allowance for loan losses                                                                                      |   |                           | (16,630   | )                             |   | (15,964 | ) |
|                      Net loans                                                                                                      |   |                           | 1,574,022 |                          |   | 1,465,764 |   |
| Bank                  owned life insurance                                                                                                         |   |                           | 77,477    |                          |   | 75,087 |   |
| Premises                  and equipment, net                                                                                                       |   |                           | 50,126    |                          |   | 47,104 |   |
| Accrued                  interest receivable                                                                                                       |   |                           | 10,512    |                          |   | 11,252 |   |
| Goodwill                                                                                                                                           |   |                           | 107,608   |                          |   | 101,496 |   |
| Other                  intangible assets, net                                                                                                      |   |                           | 29,004    |                          |   | 30,840 |   |
| Other                  assets                                                                                                                      |   |                           | 44,214    |                          |   | 36,572 |   |
|                      TOTAL ASSETS                                                                                                   |   | $                              | 2,926,763 |                          | $      | 3,081,810 |   |
|                                                                                                                                               |   |                           |      |                          |   |   |   |
| LIABILITIES                                                                                                                                        |   |                           |      |                          |   |   |   |
| Non-interest-bearing                  deposits                                                                                                     |   | $                              | 197,612   |                          | $      | 194,549 |   |
| Interest-bearing                  deposits                                                                                                         |   |                           | 1,691,024 |                          |   | 1,657,702 |   |
|     Total                  deposits                                                                                            |   |                           | 1,888,636 |                          |   | 1,852,251 |   |
| Securities                  sold under agreements to repurchase                                                                                    |   |                           | 46,513    |                          |   | 76,932 |   |
| Advances                  from the Federal Home Loan Bank                                                                                          |   |                           | 568,861   |                          |   | 705,125 |   |
| Subordinated                  debt                                                                                                                 |   |                           | 38,525    |                          |   | 38,872 |   |
| Accrued                  interest payable                                                                                                          |   |                           | 13,390    |                          |   | 9,659 |   |
| Other                  liabilities                                                                                                                 |   |                           | 21,123    |                          |   | 22,419 |   |
|                      TOTAL LIABILITIES                                                                                              |   |                           | 2,577,048 |                          |   | 2,705,258 |   |
|                                                                                                                                               |   |                           |      |                          |   |   |   |
| SHAREHOLDERS'                  EQUITY                                                                                                              |   |                           |      |                          |   |   |   |
| Preferred                  stock, $0.01 par value. 20,000,000 shares authorized, none issued                                                       |   |                           | -         |                          |   | - |   |
| Common                  stock, $0.01 par value. 100,000,000 shares authorized; 33,947,676                  and                                     |   |                           |      |                          |   |   |   |
|                     33,925,529 shares issued at September 30, 2006 and December 31,                  2005,                  respectively |   |                           | 330       |                          |   | 330 |   |
| Additional                  paid-in capital                                                                                                        |   |                           | 337,523   |                          |   | 342,144 |   |
| Retained                  earnings                                                                                                                 |   |                           | 138,363   |                          |   | 127,471 |   |
| Treasury                  stock, at cost; 6,274,842 and 3,861,000 shares at                                                                        |   |                           |      |                          |   |   |   |
|                     September 30, 2006 and December 31, 2005, respectively                                                               |   |                           | (101,079  | )                             |   | (61,999 | ) |
| Unallocated                  common stock held                                                                                                     |   |                           |      |                          |   |   |   |
|                     by Employee Stock Ownership Plan                                                                                     |   |                           | (13,759   | )                             |   | (14,366 | ) |
| Unearned                  common stock held                                                                                                        |   |                           |      |                          |   |   |   |
|                     by Management Recognition and Retention Plan                                                                         |   |                           | -         |                          |   | (7,130 | ) |
| Accumulated                  other comprehensive loss, net                                                                                         |   |                           | (11,663   | )                             |   | (9,898 | ) |
|     TOTAL                  SHAREHOLDERS' EQUITY                                                                                |   |                           | 349,715   |                          |   | 376,552 |   |
|                                                                                                                                               |   |                           |      |                          |   |   |   |
|     TOTAL                  LIABILITIES AND SHAREHOLDERS' EQUITY                                                                |   | $                              | 2,926,763 |                          | $      | 3,081,810 |   |
|                                                                                                                                               |   |                           |      |                          |   |   |   |
| See                  accompanying notes to consolidated financial statements.                                                                      |   |                           |      |                          |   |   |   |
|                                                                                                                                               |   |                           |      |                          |   |   |   |

----

**KNBT      BANCORP, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF INCOME **

|                                                                                                                        |   | Three                  Months Ended September 30, |   | Nine                  Months Ended September 30, |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|--------|--------------------------------------------------|--------|
| *(dollars                  in thousands, except per share data)*                                                            |   | 2006                                              |   | 2005                                             |   | 2006 |   | 2005 |   |
|                                                                                                                        |   | (unaudited)                                       |   |                                             |   |   |   |   |   |
| INTEREST                  INCOME                                                                                            |   |                                              |   |                                             |   |   |   |   |   |
|                       Loans, including fees                                                             |   | $                                                 | 25,256 |                                             | $      | 22,036 |   | $ | 71,348 |   | $ | 55,089 |   |
|                       Investment securities                                                             |   |                                              | 12,136 |                                             |   | 14,071 |   |   | 38,506 |   |   | 38,707 |   |
|                       Other interest                                                                    |   |                                              | 377    |                                             |   | 338 |   |   | 848 |   |   | 1,226 |   |
|                            Total interest income                               |   |                                              | 37,769 |                                             |   | 36,445 |   |   | 110,702 |   |   | 95,022 |   |
|                                                                                                                        |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
| INTEREST                  EXPENSE                                                                                           |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
|                       Deposits                                                                          |   |                                              | 12,573 |                                             |   | 7,730 |   |   | 33,111 |   |   | 19,178 |   |
|                       Securities sold under agreements to repurchase                                    |   |                                              | 462    |                                             |   | 579 |   |   | 1,491 |   |   | 938 |   |
|                       Advances from the FHLB                                                            |   |                                              | 6,028  |                                             |   | 7,303 |   |   | 18,809 |   |   | 19,209 |   |
|                       Subordinated debt                                                                 |   |                                              | 731    |                                             |   | 671 |   |   | 2,059 |   |   | 1,336 |   |
|                            Total interest expense                              |   |                                              | 19,794 |                                             |   | 16,283 |   |   | 55,470 |   |   | 40,661 |   |
|                                                                                                                        |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
| NET                  INTEREST INCOME                                                                                        |   |                                              | 17,975 |                                             |   | 20,162 |   |   | 55,232 |   |   | 54,361 |   |
|                       Provision for loan losses                                                         |   |                                              | 365    |                                             |   | 660 |   |   | 2,315 |   |   | 1,928 |   |
|                            Net interest income after provision for loan losses |   |                                              | 17,610 |                                             |   | 19,502 |   |   | 52,917 |   |   | 52,433 |   |
|                                                                                                                        |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
| NON-INTEREST                  INCOME                                                                                        |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
|                       Trust revenue                                                                     |   |                                              | 1,214  |                                             |   | 608 |   |   | 3,608 |   |   | 1,427 |   |
|                       Brokerage services revenue                                                        |   |                                              | 847    |                                             |   | 592 |   |   | 2,675 |   |   | 1,707 |   |
|                       Benefit services revenue                                                          |   |                                              | 1,374  |                                             |   | 1,257 |   |   | 4,303 |   |   | 2,773 |   |
|                       Insurance services revenue                                                        |   |                                              | 772    |                                             |   | 690 |   |   | 2,162 |   |   | 1,006 |   |
|                       Deposit service charges                                                           |   |                                              | 1,566  |                                             |   | 1,519 |   |   | 4,447 |   |   | 3,945 |   |
|                       Lending fees                                                                      |   |                                              | 322    |                                             |   | 416 |   |   | 847 |   |   | 819 |   |
|                       Check card/ATM card fees                                                          |   |                                              | 890    |                                             |   | 752 |   |   | 2,535 |   |   | 1,980 |   |
|                       Bank owned life insurance                                                         |   |                                              | 835    |                                             |   | 782 |   |   | 2,390 |   |   | 2,146 |   |
|                       Net gains on sales of investment securities                                       |   |                                              | 1,440  |                                             |   | 270 |   |   | 3,175 |   |   | 726 |   |
|                       Net gains on sales of residential mortgage loans                                  |   |                                              | 178    |                                             |   | 152 |   |   | 233 |   |   | 634 |   |
|                       Net gains (losses) on sale of assets                                              |   |                                              | 2      |                                             |   | - |   |   | 2 |   |   | (72 | ) |
|                       Net gains (losses) on sale of other real estate owned                             |   |                                              | 29     |                                             |   | - |   |   | 26 |   |   | (14 | ) |
|                       Net gains on extinguishment of debt                                               |   |                                              | -      |                                             |   | - |   |   | 1,179 |   |   | - |   |
|                       Other non-interest operating income                                               |   |                                              | 704    |                                             |   | 725 |   |   | 2,120 |   |   | 1,684 |   |
|                            Total non-interest income                           |   |                                              | 10,173 |                                             |   | 7,763 |   |   | 29,702 |   |   | 18,761 |   |
|                                                                                                                        |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
| NON-INTEREST                  EXPENSE                                                                                       |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
|                       Compensation and employee benefits                                                |   |                                              | 11,265 |                                             |   | 9,997 |   |   | 33,086 |   |   | 27,324 |   |
|                       Net occupancy and equipment                                                       |   |                                              | 3,171  |                                             |   | 2,911 |   |   | 9,399 |   |   | 7,500 |   |
|                       Professional fees                                                                 |   |                                              | 796    |                                             |   | 747 |   |   | 2,451 |   |   | 1,930 |   |
|                       Advertising                                                                       |   |                                              | 205    |                                             |   | 423 |   |   | 1,079 |   |   | 893 |   |
|                       Data processing                                                                   |   |                                              | 682    |                                             |   | 697 |   |   | 1,948 |   |   | 1,612 |   |
|                       Telecommunication                                                                 |   |                                              | 297    |                                             |   | 490 |   |   | 1,004 |   |   | 911 |   |
|                       Office supplies and postage                                                       |   |                                              | 404    |                                             |   | 575 |   |   | 1,575 |   |   | 1,551 |   |
|                       Amortization of mortgage servicing rights                                         |   |                                              | 94     |                                             |   | 126 |   |   | 281 |   |   | 324 |   |
|                       Amortization of intangible assets                                                 |   |                                              | 927    |                                             |   | 903 |   |   | 2,744 |   |   | 2,232 |   |
|                       Other operating expense                                                           |   |                                              | 1,362  |                                             |   | 1,509 |   |   | 4,550 |   |   | 4,496 |   |
|                            Total non-interest expense                          |   |                                              | 19,203 |                                             |   | 18,378 |   |   | 58,117 |   |   | 48,773 |   |
|                                                                                                                        |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
| Income                  before income taxes                                                                                 |   |                                              | 8,580  |                                             |   | 8,887 |   |   | 24,502 |   |   | 22,421 |   |
| Income                  taxes                                                                                               |   |                                              | 2,669  |                                             |   | 3,581 |   |   | 7,205 |   |   | 7,047 |   |
|                       NET INCOME                                                                        |   | $                                                 | 5,911  |                                             | $      | 5,306 |   | $ | 17,297 |   | $ | 15,374 |   |
|                                                                                                                        |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
| PER                  SHARE DATA                                                                                             |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
|                       Net income - basic                                                                |   | $                                                 | 0.22   |                                             | $      | 0.18 |   | $ | 0.63 |   | $ | 0.53 |   |
|                       Net income - diluted                                                              |   | $                                                 | 0.22   |                                             | $      | 0.18 |   | $ | 0.63 |   | $ | 0.52 |   |
|                       Cash dividends per common share                                                   |   | $                                                 | 0.08   |                                             | $      | 0.06 |   | $ | 0.23 |   | $ | 0.17 |   |
|                                                                                                                        |
| See                  accompanying notes to consolidated financial statements.                                               |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |
|                                                                                                                        |   |                                              |   |                                             |   |   |   |   |   |   |   |   |   |

----

**KNBT      BANCORP, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY**

| Nine                  Months Ended September 30, 2006 and 2005                               |                                          |
|----------------------------------------------------------------------------------------------|-----------------------------------------------|
| (unaudited)                                                                                  |
|                                                                                         |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *(dollars                  in thousands, except per share data)*                             |                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                         | CommonStockNumber                    ofShares |   | TreasuryStockNumber                    ofShares |   | CommonStockValue |   | AdditionalPaid                    InCapital |   | RetainedEarnings |   | UnallocatedEmployee                      StockOwnershipPlan                  Shares |   | UnearnedCommon                          StockHeld by the                        ManagementRecognition andRetention Plan |   | AccumulatedOtherComprehensiveLoss |   | TreasuryStock |   | TotalShareholders'Equity |   |
| Balance                  January 1, 2006                                                     | 33,080,609                                    |   |   | (3,861,000 | ) | $ | 330 |   | $ | 342,144 |   | $ | 127,471 |   |   | ($14,366 | ) |   | ($7,130 | ) |   | ($9,898 | ) |   | ($61,999 | ) | $ | 376,552 |   |
| Comprehensive                  income                                                        |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Net income                                               |                                          |   |   |   |   |   |   |   |   |   |   |   | 17,297 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 17,297 |   |
|                      Other comprehensive loss net of taxes                    |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          and reclassification adjustments |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,765 | ) |   |   |   |   | (1,765 | ) |
| Total                  comprehensive income                                                  |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 15,532 |   |
| Reclass                  of unearned compensation upon                                       |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      adoption of SFAS 123(R)                                  |                                          |   |   |   |   |   |   |   |   | (7,130 | ) |   |   |   |   |   |   |   | 7,130 |   |   |   |   |   |   |   |   |   |   |
| Cash                  dividends paid                                                         |                                          |   |   |   |   |   |   |   |   |   |   |   | (6,405 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   | (6,405 | ) |
| Unallocated                  Employee Stock Ownership Plan shares                            | 35,701                                        |   |   |   |   |   |   |   |   | (56 | ) |   |   |   |   | 607 |   |   |   |   |   |   |   |   |   |   |   | 551 |   |
| Common                  stock issued upon exercise of stock options                          | 22,147                                        |   |   |   |   |   |   |   |   | 125 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 125 |   |
| Purchases                  of treasury stock                                                 |                                          |   |   | (2,413,842 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (39,080 | ) |   | (39,080 | ) |
| Share-based                  compensation expense                                            |                                          |   |   |   |   |   |   |   |   | 839 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 839 |   |
| Amortization                  of compensation related to                                     |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Management Recognition and Retention Plan                |                                          |   |   |   |   |   |   |   |   | 1,601 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,601 |   |
|                                                                                         |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at September 30, 2006                                               | 33,138,457                                    |   |   | (6,274,842 | ) | $ | 330 |   | $ | 337,523 |   | $ | 138,363 |   |   | ($13,759 | ) |   | - |   |   | ($11,663 | ) |   | ($101,079 | ) | $ | 349,715 |   |
|                                                                                         |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  January 1, 2005                                                     | 29,764,319                                    |   |   | (650,000 | ) | $ | 297 |   | $ | 296,403 |   | $ | 113,748 |   |   | ($15,176 | ) |   | ($9,107 | ) | $ | 2,368 |   |   | ($11,179 | ) | $ | 377,354 |   |
| Comprehensive                  income                                                        |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Net income                                               |                                          |   |   |   |   |   |   |   |   |   |   |   | 15,374 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 15,374 |   |
|                      Other comprehensive loss net of taxes                    |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          and reclassification adjustments |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (8,217 | ) |   |   |   |   | (8,217 | ) |
| Total                  comprehensive income                                                  |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 7,157 |   |
| Cash                  dividends paid                                                         |                                          |   |   |   |   |   |   |   |   |   |   |   | (5,018 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   | (5,018 | ) |
| Unallocated                  Employee Stock Ownership Plan shares                            | 35,701                                        |   |   |   |   |   |   |   |   | (65 | ) |   |   |   |   | 607 |   |   |   |   |   |   |   |   |   |   |   | 542 |   |
| Shares                  issued upon exercise of stock options                                | 24,302                                        |   |   |   |   |   |   |   |   | 123 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 123 |   |
| Acquisition                  of Northeast Pennsylvania Financial Corp.                       | 3,226,731                                     |   |   |   |   |   | 33 |   |   | 45,432 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 45,465 |   |
| Purchases                  of treasury stock                                                 |                                          |   |   | (2,635,600 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (41,250 | ) |   | (41,250 | ) |
| Amortization                  of compensation of advisory directors options                  |                                          |   |   |   |   |   |   |   |   | 15 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 15 |   |
| Management                  Recognition and Retention Plan share awards                      |                                          |   |   |   |   |   |   |   |   | 151 |   |   |   |   |   |   |   |   | (151 | ) |   |   |   |   |   |   |   | - |   |
| Amortization                  of compensation related to                                     |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Management Recognition and Retention Plan                |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,594 |   |   |   |   |   |   |   |   | 1,594 |   |
|                                                                                         |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                  at September 30, 2005                                               | 33,051,053                                    |   |   | (3,285,600 | ) | $ | 330 |   | $ | 342,059 |   | $ | 124,104 |   |   | ($14,569 | ) |   | ($7,664 | ) |   | ($5,849 | ) |   | ($52,429 | ) | $ | 385,982 |   |
|                                                                                         |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**KNBT      BANCORP, INC. AND SUBSIDIARIES**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS **
** **

|                                                                                                                                              |   | Nine                  Months Ended September 30, |     |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|----------|
| *(dollars                  in thousands)*                                                                                                         |   | 2006                                             |     | 2005 |   |
|                                                                                                                                              |   | (unaudited)                                      |     |   |   |
| OPERATING                  ACTIVITIES                                                                                                             |   |                                             |     |   |   |
|                      Net income                                                                                                    |   | $                                                | 17,297   |   | $ | 15,374 |   |
|                      Adjustments to reconcile net income to net cash                                                               |   |                                             |     |   |   |   |   |
|                      provided by operating activities:                                                                             |   |                                             |     |   |   |   |   |
|                          Provision for loan losses                                                             |   |                                             | 2,315    |   |   | 1,928 |   |
|                          Depreciation and amortization                                                         |   |                                             | 6,791    |   |   | 6,334 |   |
|                          Deferred income tax charge                                                            |   |                                             | -        |   |   | 1,100 |   |
|                          Compensation expense stock option plan                                                |   |                                             | 839      |   |   | 15 |   |
|                          Management Recognition and Retention Plan expense                                     |   |                                             | 1,601    |   |   | 1,594 |   |
|                          ESOP expense                                                                          |   |                                             | 551      |   |   | 542 |   |
|                          Amortization and accretion of securities premiums and discounts,                  net |   |                                             | (273     | ) |   | 879 |   |
|                          (Gain) loss on sale of other real estate owned                                        |   |                                             | (26      | ) |   | 14 |   |
|                          Net gain on sale of investment securities                                             |   |                                             | (3,175   | ) |   | (726 | ) |
|                          (Gain) loss on sale of other assets                                                   |   |                                             | (2       | ) |   | 72 |   |
|                          Gain on sales of mortgage loans                                                       |   |                                             | (233     | ) |   | (634 | ) |
|                          Gain on extinguishment of debt                                                        |   |                                             | (1,179   | ) |   | - |   |
|                          Mortgage loans originated for sale                                                    |   |                                             | (24,960  | ) |   | (45,806 | ) |
|                          Mortgage loan sales                                                                   |   |                                             | 23,485   |   |   | 45,964 |   |
|                      Changes in assets and liabilities:                                                                            |   |                                             |     |   |   |   |   |
|                          Increase in bank owned life insurance                                                 |   |                                             | (2,390   | ) |   | (2,146 | ) |
|                          Decrease in accrued interest receivable                                               |   |                                             | 740      |   |   | 1,097 |   |
|                          Increase in other assets                                                              |   |                                             | (7,075   | ) |   | (2,868 | ) |
|                          Increase in other liabilities and accrued interest payable                            |   |                                             | 2,919    |   |   | 11,052 |   |
|                              Net cash provided by operating activities                     |   |                                             | 17,225   |   |   | 33,785 |   |
| INVESTING                  ACTIVITIES                                                                                                             |   |                                             |     |   |   |   |   |
|                      Proceeds from calls and maturities of securities available-for-sale                                           |   |                                             | 163,655  |   |   | 153,143 |   |
|                      Proceeds from calls and maturities of securities held-to                  maturity                            |   |                                             | 7,993    |   |   | 8,186 |   |
|                      Proceeds from sales of securities available-for-sale                                                          |   |                                             | 111,128  |   |   | 96,136 |   |
|                      Proceeds from sales of securities held-to-maturity                                                            |   |                                             | 5,488    |   |   | - |   |
|                      Purchase of securities available-for-sale                                                                     |   |                                             | (37,077  | ) |   | (81,606 | ) |
|                      Purchase of securities held to maturity                                                                       |   |                                             | (750     | ) |   | (296 | ) |
|                      Purchase of Federal Home Loan Bank of Pittsburgh stock                                                        |   |                                             | (1,436   | ) |   | (786 | ) |
|                      Redemption of Federal Home Loan Bank of Pittsburgh stock                                                      |   |                                             | 8,309    |   |   | 5,872 |   |
|                      Net increase in loans                                                                                         |   |                                             | (108,924 | ) |   | (77,370 | ) |
|                      Cash paid for acquisitions                                                                                    |   |                                             | (8,034   | ) |   | (65,452 | ) |
|                      Cash and cash equivalents obtained through acquisitions                                                       |   |                                             | 1,249    |   |   | 54,696 |   |
|                      Purchase of premises and equipment                                                                            |   |                                             | (7,140   | ) |   | (847 | ) |
|                      Proceeds from the sale of other assets                                                                        |   |                                             | 1,033    |   |   | 1,413 |   |
|                      Proceeds from the sale of other real estate owned                                                             |   |                                             | 274      |   |   | 202 |   |
|                          Net cash provided by investing activities                                             |   |                                             | 135,768  |   |   | 93,291 |   |
| FINANCING                  ACTIVITIES                                                                                                             |   |                                             |     |   |   |   |   |
|                      Net increase in deposits                                                                                      |   |                                             | 36,385   |   |   | 7,475 |   |
|                      Net increase in repurchase agreements                                                                         |   |                                             | 9,124    |   |   | 2,837 |   |
|                      Payment on extinguishment of debt, net                                                                        |   |                                             | (49,595  | ) |   | - |   |
|                      Proceeds from long-term debt                                                                                  |   |                                             | 92,000   |   |   | 78,500 |   |
|                      Payments on long-term debt                                                                                    |   |                                             | (216,863 | ) |   | (150,259 | ) |
|                      Purchase of treasury stock                                                                                    |   |                                             | (39,080  | ) |   | (41,250 | ) |
|                      Proceeds from the exercise of stock options                                                                   |   |                                             | 125      |   |   | 123 |   |
|                      Cash dividends paid                                                                                           |   |                                             | (6,405   | ) |   | (5,018 | ) |
|                          Net cash used in financing activities                                                 |   |                                             | (174,309 | ) |   | (107,592 | ) |
|                      (Decrease) increase in cash and cash equivalents                                                              |   |                                             | (21,316  | ) |   | 19,484 |   |
|                          Cash and cash equivalents at January 1,                                               |   |                                             | 106,259  |   |   | 86,220 |   |
|                      Cash and cash equivalents at September 30,                                                                    |   | $                                                | 84,943   |   | $ | 105,704 |   |
|                                                                                                                                              |   |                                             |     |   |   |   |   |
| Supplemental                  disclosure of cash flow information                                                                                 |   |                                             |     |   |   |   |   |
|                      Cash paid during the period for                                                                               |   |                                             |     |   |   |   |   |
|                          Income taxes                                                                          |   | $                                                | 5,199    |   | $ | 3,900 |   |
|                          Interest on deposits, advances and other borrowed money                               |   | $                                                | 51,739   |   | $ | 39,971 |   |
| Supplemental                  disclosure of non-cash activities                                                                                   |   |                                             |     |   |   |   |   |
|                          Reclassification of loans receivable to other real estate                  owned      |   | $                                                | 335      |   | $ | 241 |   |
|                                                                                                                                              |   |                                             |     |   |   |   |   |
| See                  accompanying notes to consolidated financial statements.                                                                     |   |                                             |     |   |   |   |   |

----

**KNBT      BANCORP, INC. AND SUBSIDIARIES**

**NOTES      TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS **

**NOTE      A - PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION**

**NOTE      B - ACQUISITIONS**

**The      Trust Company of Lehigh Valley**

----

**Northeast      Pennsylvania Financial Corp.**

**Caruso      Benefits Group, Inc.**

----

**NOTE      C - EARNINGS PER SHARE**

|                                                                                            |   | For                  the Three Months Ended September 30,         |                                                                    |
|-------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|-------------------------------------------------------------------------|
|                                                                                            |   |  2006                                                        |                                                                    |  2005 |   |
|                                                                                            |   | Net                                                               |                                                                    | Average |   |   |   | Net |   | Average |   |   |   |
|                                                                                            |   | Income                                                            |                                                                    | Shares |   | Per                  Share |   | Income |   | Shares |   | Per                  Share |   |
|                                                                                            |   | (numerator)                                                       |                                                                    | (denominator) |   | Amount |   | (numerator) |   | (denominator) |   | Amount |   |
|                                                                                            |   | (dollars                  in thousands, except per share amounts) |                                                                    |
| Basic                  earnings per share                                                       |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Income available to common shareholders                     |   | $                                                                 | 5,911                                                                   |   |   | 26,355,973 |   | $ | 0.22 |   | $ | 5,306 |   |   | 29,681,764 |   | $ | 0.18 |   |
| Effect                  of dilutive securities                                                  |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Stock options                                               |   |                                                              |                                                                    |   |   | 141,185 |   |   | - |   |   |   |   |   | 209,955 |   |   | - |   |
|                      Management Recognition and Retention Plan                   |   |                                                              |                                                                    |   |   | 43,502 |   |   | - |   |   |   |   |   | 163,158 |   |   | - |   |
|                          Total effect of dilutive securities |   |                                                              |                                                                    |   |   | 184,687 |   |   |   |   |   |   |   |   | 373,113 |   |   | - |   |
| Diluted                  earnings per share                                                     |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Income available to common shareholders                     |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      plus assumed exercise of options                            |   | $                                                                 | 5,911                                                                   |   |   | 26,540,660 |   | $ | 0.22 |   | $ | 5,306 |   |   | 30,054,877 |   | $ | 0.18 |   |
|                                                                                            |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                                                              | For                  the Nine Months Ended September 30,      |   |
|                                                                                            |   |                                                              |  2006                                                         |   |   |  2005  |   |
|                                                                                            |   |                                                              | Net                                                                |   |   | Average |   |   |   |   |   | Net |   |   | Average |   |   |   |   |
|                                                                                            |   |                                                              | Income                                                             |   |   | Shares |   |   | Per                  Share |   |   | Income |   |   | Shares |   |   | Per                  Share |   |
|                                                                                            |   |                                                              | (numerator)                                                        |   |   | (denominator) |   |   | Amount |   |   | (numerator) |   |   | (denominator) |   |   | Amount |   |
|                                                                                            |   |                                                              | (dollars                  in thousands, except per share amounts)  |   |
| Basic                  earnings per share                                                       |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Income available to common shareholders                     |   | $                                                                 | 17,297                                                                  |   |   | 27,254,749 |   | $ | 0.63 |   | $ | 15,374 |   |   | 29,094,049 |   | $ | 0.53 |   |
| Effect                  of dilutive securities                                                  |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Stock options                                               |   |                                                              |                                                                    |   |   | 147,060 |   |   | - |   |   |   |   |   | 205,820 |   |   | - |   |
|                      Management Recognition and Retention Plan                   |   |                                                              |                                                                    |   |   | 48,206 |   |   | - |   |   |   |   |   | 145,982 |   |   | - |   |
|                          Total effect of dilutive securities |   |                                                              |                                                                    |   |   | 195,266 |   |   |   |   |   |   |   |   | 351,802 |   |   | (0.01 | ) |
| Diluted                  earnings per share                                                     |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Income available to common shareholders                     |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      plus assumed exercise of options                            |   | $                                                                 | 17,297                                                                  |   |   | 27,450,015 |   | $ | 0.63 |   | $ | 15,374 |   |   | 29,445,851 |   | $ | 0.52 |   |
|                                                                                            |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                                                              |                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**NOTE      D - INVESTMENT SECURITIES**

|                                                                           |   | At                  September 30, 2006 (unaudited) |    |
|--------------------------------------------------------------------------------|--------|----------------------------------------------------|---------|
|                                                                           |   |                                               |    | Gross |   | Gross |   |   |   |
|                                                                           |   | Amortized                                          |    | Unrealized |   | Unrealized |   | Fair |   |
|                                                                           |   | Cost                                               |    | Gains |   | Losses |   | Value |   |
|                                                                           |   |  (in                  thousands)              |    |
| Held                  to maturity:                                             |   |                                               |    |   |   |   |   |   |   |
|                     U.S. Government and agencies                     |   | $                                                  | 198     |   | $ | - |   | $ | - |   | $ | 198 |   |
|                     Obligations of states and political subdivisions |   |                                               | -       |   |   | - |   |   | - |   |   | - |   |
|                     Mortgage-backed securities                       |   |                                               |    |   |   |   |   |   |   |   |   |   |   |
|                        FNMA                           |   |                                               | 16,393  |   |   | - |   |   | (273 | ) |   | 16,120 |   |
|                        CMOs                           |   |                                               | 18,150  |   |   |   |   |   | (240 | ) |   | 17,910 |   |
|                     Total mortgage-backed securities                 |   |                                               | 34,543  |   |   | - |   |   | (513 | ) |   | 34,030 |   |
| Total                  held to maturity                                        |   |                                               | 34,741  |   |   | - |   |   | (513 | ) |   | 34,228 |   |
|                                                                           |   |                                               |    |   |   |   |   |   |   |   |   |   |   |
| Available                  for sale:                                           |   |                                               |    |   |   |   |   |   |   |   |   |   |   |
|                     U.S. Government and agencies                     |   |                                               | 110,148 |   |   | 22 |   |   | (1,068 | ) |   | 109,102 |   |
|                     Obligations of states and political subdivisions |   |                                               | -       |   |   | - |   |   | - |   |   | - |   |
|                     Asset-managed funds                              |   |                                               | 5,247   |   |   |   |   |   | (157 | ) |   | 5,090 |   |
|                     Mortgage-backed securities                       |   |                                               |    |   |   |   |   |   |   |   |   |   |   |
|                        GNMA                           |   |                                               | 1,767   |   |   | 26 |   |   | - |   |   | 1,793 |   |
|                        FHLMC                          |   |                                               | 130,687 |   |   | 36 |   |   | (2,717 | ) |   | 128,006 |   |
|                        FNMA                           |   |                                               | 339,040 |   |   | 107 |   |   | (7,910 | ) |   | 331,237 |   |
|                        CMOs                           |   |                                               | 238,888 |   |   | 78 |   |   | (6,618 | ) |   | 232,348 |   |
|                     Total mortgage-backed securities                 |   |                                               | 710,382 |   |   | 247 |   |   | (17,245 | ) |   | 693,384 |   |
|                     Corporate and other debt securities              |   |                                               | 68,497  |   |   | 360 |   |   | (86 | ) |   | 68,771 |   |
|                     Equity securities                                |   |                                               | 2,155   |   |   | 49 |   |   | (65 | ) |   | 2,139 |   |
| Total                  available for sale                                      |   |                                               | 896,429 |   |   | 678 |   |   | (18,621 | ) |   | 878,486 |   |
|                                                                           |   |                                               |    |   |   |   |   |   |   |   |   |   |   |
| Total                  investment securities                                   |   | $                                                  | 931,170 |   | $ | 678 |   | $ | (19,134 | ) | $ | 912,714 |   |
|                                                                           |   |                                               |    |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |                                               |    |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                 |   | At                  December 31, 2005 |      |
|--------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|
|                                                                                 |   |                                  |      | Gross |   | Gross |   |   |   |
|                                                                                 |   | Amortized                             |      | Unrealized |   | Unrealized |   | Fair |   |
|                                                                                 |   | Cost                                  |      | Gains |   | Losses |   | Value |   |
|                                                                                 |   |  (in                  thousands) |      |
| Held                  to maturity:                                                   |   |                                  |      |   |   |   |   |   |   |
|                      U.S. Government and agencies                     |   | $                                     | 472       |   | $ | - |   | $ | - |   | $ | 472 |   |
|                      Obligations of states and political subdivisions |   |                                  | 5,497     |   |   | 210 |   |   | - |   |   | 5,707 |   |
|                      Mortgaged-backed securities                      |   |                                  |      |   |   |   |   |   |   |   |   |   |   |
|                          FNMA                     |   |                                  | 20,603    |   |   | - |   |   | (287 | ) |   | 20,316 |   |
|                          CMOs                     |   |                                  | 20,796    |   |   | - |   |   | (217 | ) |   | 20,579 |   |
|                      Total mortgage-backed securities                 |   |                                  | 41,399    |   |   | - |   |   | (504 | ) |   | 40,895 |   |
| Total                  held to maturity                                              |   |                                  | 47,368    |   |   | 210 |   |   | (504 | ) |   | 47,074 |   |
|                                                                                 |   |                                  |      |   |   |   |   |   |   |   |   |   |   |
| Available                  for sale:                                                 |   |                                  |      |   |   |   |   |   |   |   |   |   |   |
|                      U.S. Government and agencies                     |   |                                  | 158,819   |   |   | 203 |   |   | (1,614 | ) |   | 157,408 |   |
|                      Obligations of states and political subdivisions |   |                                  | 63,181    |   |   | 2,015 |   |   | (31 | ) |   | 65,165 |   |
|                      Asset-managed funds                              |   |                                  | 4,904     |   |   | - |   |   | (157 | ) |   | 4,747 |   |
|                      Mortgaged-backed securities                      |   |                                  |      |   |   |   |   |   |   |   |   |   |   |
|                          GNMA                     |   |                                  | 2,365     |   |   | 28 |   |   | (1 | ) |   | 2,392 |   |
|                          FHLMC                    |   |                                  | 139,425   |   |   | 64 |   |   | (2,628 | ) |   | 136,861 |   |
|                          FNMA                     |   |                                  | 402,354   |   |   | 357 |   |   | (7,349 | ) |   | 395,362 |   |
|                          CMOs                     |   |                                  | 275,713   |   |   | 41 |   |   | (6,955 | ) |   | 268,799 |   |
|                      Total mortgaged-backed securities                |   |                                  | 819,857   |   |   | 490 |   |   | (16,933 | ) |   | 803,414 |   |
|                      Corporate and other debt securities              |   |                                  | 73,605    |   |   | 452 |   |   | (76 | ) |   | 73,981 |   |
|                      Equity securities                                |   |                                  | 13,904    |   |   | 805 |   |   | (151 | ) |   | 14,558 |   |
| Total                  available for sale                                            |   |                                  | 1,134,270 |   |   | 3,965 |   |   | (18,962 | ) |   | 1,119,273 |   |
|                                                                                 |   |                                  |      |   |   |   |   |   |   |   |   |   |   |
| Total                  investment securities                                         |   | $                                     | 1,181,638 |   | $ | 4,175 |   | $ | (19,466 | ) | $ | 1,166,347 |   |
|                                                                                 |   |                                  |      |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |                                  |      |   |   |   |   |   |   |   |   |   |   |

**NOTE      E - STOCK BASED COMPENSATION**

----

|                                     |   | For                  the Nine Months |                       |
|------------------------------------------|--------|--------------------------------------|----------------------------|
|                                     |   | Ended                  September 30, |                       |
|                                     |   | 2006                                 |                       | 2005 |   |
|                                     |   |                                 |                       |   |   |
| Expected                  dividend yield |   |                                 | 2.50                       | % |   | 2.00 | % |
| Expected                  volatility     |   |                                 | 22.63                      | % |   | 25.00 | % |
| Risk-free                  interest rate |   |                                 | 4.34                       | % |   | 3.97 | % |
| Expected                  option life    |   |                                 | 6.5                  years |   |   | 7.7                  years |   |
| Fair                  value of option    |   | $                                    | 3.84                       |   | $ | 4.41 |   |
|                                     |   |                                 |                       |   |   |   |   |

|                                                                            |   |  Three                  months ended                       |   | Nine                  months ended  |   |
|---------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|--------|-------------------------------------|--------|
|                                                                            |   |  September                  30, 2005                       |   | September                  30, 2005 |   |
|                                                                            |   |                                                       |   |                                |   |
|                                                                            |   |  (in                  thousands, except per share amounts) |   |
| Net                  income                                                     |   |                                                       |   |                                |   |
|                      As reported                                 |   | $                                                               | 5,306  |                                | $      | 15,374 |   |
| Add:                  stock-based employee compensation expense                 |   |                                                            |   |                                |   |   |   |
|                      included in reported net income, net        |   |                                                            |   |                                |   |   |   |
|                      of related tax effects                      |   |                                                            | 6      |                                |   | 18 |   |
| Less:                  stock-based compensation cost determined                 |   |                                                            |   |                                |   |   |   |
|                      under fair value method for all awards, net |   |                                                            |   |                                |   |   |   |
|                      of related tax effects                      |   |                                                            | 168    |                                |   | 495 |   |
|     Pro-forma                                               |   | $                                                               | 5,144  |                                | $      | 14,897 |   |
|                                                                            |   |                                                            |   |                                |   |   |   |
| Earnings                  per share (diluted)                                   |   |                                                            |   |                                |   |   |   |
|                      As reported                                 |   | $                                                               | 0.18   |                                | $      | 0.52 |   |
|                      Pro-forma                                   |   | $                                                               | 0.17   |                                | $      | 0.51 |   |
|                                                                            |   |                                                            |   |                                |   |   |   |
| Earnings                  per share (basic)                                     |   |                                                            |   |                                |   |   |   |
|                      As reported                                 |   | $                                                               | 0.18   |                                | $      | 0.53 |   |
|                      Pro-forma                                   |   | $                                                               | 0.17   |                                | $      | 0.51 |   |
|                                                                            |   |                                                            |   |                                |   |   |   |
|                                                                            |   |                                                            |   |                                |   |   |   |

----

|                                              |   | For                  the Nine Months Ended September 30, 2006 |      |
|---------------------------------------------------|--------|---------------------------------------------------------------|-----------|
|                                              |   |                                                          |      |   |   | Weighted                  Average |   | Aggregate |   |
|                                              |   |                                                          |      | Weighted                  Average |   | Remaining                  Contractual |   | Intrinsic |   |
|                                              |   | Shares                                                        |      | Exercise                  Price |   | Term                  (in years) |   | Value |   |
| Outstanding                  as of 1/1/2006       |   |                                                          | 1,796,338 |   | $ | 13.58 |   |   |   |   |   |   |   |
| Issued                                            |   |                                                          | 217,400   |   |   | 16.51 |   |   |   |   |   |   |   |
| Exercised                                         |   |                                                          | (22,147   | ) |   | 5.68 |   |   |   |   |   |   |   |
| Forfeited                                         |   |                                                          | (5,000    | ) |   | 16.37 |   |   |   |   |   |   |   |
| Expired                                           |   |                                                          | -         |   |   | - |   |   |   |   |   |   |   |
| Outstanding                  as of 9/30/2006      |   |                                                          | 1,986,591 |   | $ | 13.98 |   |   | 7.31 |   | $ | 4,171,841 |   |
|                                              |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |
| Options                  exercisable at 9/30/2006 |   |                                                          | 834,171   |   | $ | 10.66 |   |   | 6.29 |   | $ | 4,521,207 |   |
|                                              |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |
|                                              |   |                                                          |      |   |   |   |   |   |   |   |   |   |   |

|                             |   | For                  the Nine Months Ended September 30, 2006 |
|----------------------------------|--------|---------------------------------------------------------------|
|                             |   | Options                  Outstanding                          |   |   |   |   |   | Options                  Exercisable |   |   |   |
|                             |   |                                                          |   | Weighted                  Average |   |   |   |   |   |   |   |
|                             |   | Stock                                                         |   | Remaining |   | Weighted |   | Stock                  Options |   | Weighted |   |
| Range                  of        |   | Options                                                       |   | Contractual |   | Average |   | Exercisable |   | Average |   |
| Exercise                  Prices |   | Outstanding                                                   |   | Life                  in Years |   | Exercise                  Price |   |   |   | Exercise                  Price |   |
| $3.73                  - $4.35   |   |                                                          | 52,278 |   |   | 4.56 |   | $ | 4.21 |   |   | 52,278 |   | $ | 4.21 |   |
| $4.36                  - $6.37   |   |                                                          | 327,508 |   |   | 5.09 |   | $ | 5.65 |   |   | 327,508 |   | $ | 5.65 |   |
| $6.38                  - $8.36   |   |                                                          | 66,005 |   |   | 5.36 |   | $ | 6.70 |   |   | 66,005 |   | $ | 6.70 |   |
| $11.35                  - $16.56 |   |                                                          | 1,540,800 |   |   | 7.96 |   | $ | 16.40 |   |   | 388,380 |   | $ | 16.42 |   |
|                             |   |                                                          | 1,986,591 |   |   |   |   |   |   |   |   | 834,171 |   |   |   |   |
|                             |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**NOTE        F - LOANS**

|                                                                                        |   | September                    30,  |      | December                    31, |   |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|---------------------------------|--------|
|                                                                                        |   | 2006                              |      | 2005                            |   |
|                                                                                        |   | (unaudited)                       |      |                            |   |
|                                                                                        |   | (in                    thousands) |      |
| Real                    estate                                                              |   |                              |      |                            |   |
|                         Residential                                     |   | $                                 | 484,951   |                            | $      | 454,393 |   |
|                         Construction                                    |   |                              | 56,657    |                            |   | 71,631 |   |
|                         Commercial                                      |   |                              | 360,949   |                            |   | 336,480 |   |
|                              Total real estate |   |                              | 902,557   |                            |   | 862,504 |   |
| Consumer                    loans                                                           |   |                              | 529,076   |                            |   | 491,615 |   |
| Commercial                    (non-real estate)                                             |   |                              | 159,499   |                            |   | 126,122 |   |
| States                    and political subdivisions                                        |   |                              | 688       |                            |   | 2,017 |   |
|                              Total gross loans |   |                              | 1,591,820 |                            |   | 1,482,258 |   |
|                                                                                        |   |                              |      |                            |   |   |   |
| Mortgage                    loans held-for-sale                                             |   |                              | (2,264    | )                               |   | (556 | ) |
| Deferred                    fees                                                            |   |                              | 1,096     |                            |   | 26 |   |
|                              Total loans       |   |                              | 1,590,652 |                            |   | 1,481,728 |   |
| Allowance                    for loan losses                                                |   |                              | (16,630   | )                               |   | (15,964 | ) |
|                              Total net loans   |   | $                                 | 1,574,022 |                            | $      | 1,465,764 |   |
|                                                                                        |   |                              |      |                            |   |   |   |
|                                                                                        |   |                              |      |                            |   |   |   |

|                                                                             |   | Nine                    months ended      |   | Twelve                    months ended |   |
|----------------------------------------------------------------------------------|--------|-------------------------------------------|--------|----------------------------------------|--------|
|                                                                             |   | September                    30, 2006     |   | December                    31, 2005   |   |
|                                                                             |   | (unaudited)                               |   |                                   |   |
|                                                                             |   | (dollars                    in thousands) |   |
|                                                                             |   |                                      |   |                                   |   |
| Non-accrual                    loans                                             |   | $                                         | 5,467  |                                   | $      | 6,839 |   |
| Accruing                    loans 90 days or more past due                       |   |                                      | 775    |                                   |   | 2,167 |   |
|                        Total non-performing loans                 |   |                                      | 6,242  |                                   |   | 9,006 |   |
|                                                                             |   |                                      |   |                                   |   |   |   |
| Other                    real estate owned                                       |   |                                      | 205    |                                   |   | 162 |   |
|                        Total non-performing assets                |   | $                                         | 6,447  |                                   | $      | 9,168 |   |
|                                                                             |   |                                      |   |                                   |   |   |   |
| Total                    non-performing loans as a percentage of loans, net      |   |                                      | 0.40   | %                                      |   | 0.61 | % |
| Total                    non-performing loans as a percentage of total assets    |   |                                      | 0.21   | %                                      |   | 0.29 | % |
| Total                    non-performing assets as a percentage of total assets   |   |                                      | 0.22   | %                                      |   | 0.30 | % |
| Allowance                    for loan loss at period end to non-performing loans |   |                                      | 266.42 | %                                      |   | 177.26 | % |
|                                                                             |   |                                      |   |                                   |   |   |   |
| Interest                    on non-accrual loans which would have been           |   |                                      |   |                                   |   |   |   |
|                        recorded at the original rate              |   | $                                         | (458   | )                                      | $      | (301 | ) |
|                                                                             |   |                                      |   |                                   |   |   |   |
| Interest                    on non-accrual loans that was reflected in income    |   |                                      | 40     |                                   |   | - |   |
|                        Net decrease in interest income            |   | $                                         | (418   | )                                      | $      | (301 | ) |
|                                                                             |   |                                      |   |                                   |   |   |   |
|                                                                             |   |                                      |   |                                   |   |   |   |

----

|                                                                       |   | For                    the Three Months |   | For                    the Nine Months |   |
|----------------------------------------------------------------------------|--------|-----------------------------------------|--------|----------------------------------------|--------|
|                                                                       |   | Ended                    September 30,  |   | Ended                    September 30, |   |
|                                                                       |   | 2006                                    |   | 2005                                   |   | 2006 |   | 2005 |   |
|                                                                       |   | (unaudited)                             |
|                                                                       |   | (in                    thousands)       |
|                                                                       |   |                                    |   |                                   |   |   |   |   |   |
| Allowance                    for loan losses, beginning of period          |   | $                                       | 16,600 |                                   | $      | 15,760 |   | $ | 15,964 |   | $ | 15,742 |   |
| Provision                    for loan losses                               |   |                                    | 365    |                                   |   | 660 |   |   | 2,315 |   |   | 1,928 |   |
| Charge-offs:                                                               |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
|                         One-to-four family residential |   |                                    | (13    | )                                      |   | (15 | ) |   | (59 | ) |   | (60 | ) |
|                         Commercial business            |   |                                    | (8     | )                                      |   | (6 | ) |   | (310 | ) |   | (10 | ) |
|                         Consumer                       |   |                                    | (392   | )                                      |   | (708 | ) |   | (1,634 | ) |   | (2,080 | ) |
| Total                    charge offs                                       |   |                                    | (413   | )                                      |   | (729 | ) |   | (2,003 | ) |   | (2,150 | ) |
| Recoveries                    on loans previously charged off:             |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
|                         One-to-four family residential |   |                                    | 18     |                                   |   | 1 |   |   | 39 |   |   | 9 |   |
|                         Commercial business            |   |                                    | 9      |                                   |   | 5 |   |   | 158 |   |   | 66 |   |
|                         Consumer                       |   |                                    | 51     |                                   |   | 57 |   |   | 157 |   |   | 159 |   |
| Total                    recoveries                                        |   |                                    | 78     |                                   |   | 63 |   |   | 354 |   |   | 234 |   |
| Net                    loans charged-off                                   |   |                                    | (335   | )                                      |   | (666 | ) |   | (1,649 | ) |   | (1,916 | ) |
|                                                                       |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
| Allowance                    for loan losses, at period end                |   | $                                       | 16,630 |                                   | $      | 15,754 |   | $ | 16,630 |   | $ | 15,754 |   |
|                                                                       |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |                                    |   |                                   |   |   |   |   |   |   |   |   |   |

**NOTE        G - RETIREMENT PLANS**

| *1.  * | *Defined                Benefit Plans* |
|------------------|----------------------------------------|

----

| *2.  * | *Directors’                Deferred Plan* |
|------------------|-------------------------------------------------|

|                                                     |   | September                    30,  |   |
|----------------------------------------------------------|--------|-----------------------------------|--------|
|                                                     |   | 2006                              |   | 2005 |   |
|                                                     |   | (in                    thousands) |   |
|                                                     |   |                              |   |   |   |
| Service                    cost                          |   | $                                 | -      |   | $ | - |   |
| Interest                    cost                         |   |                              | 17     |   |   | 21 |   |
| Net                    amortization and                  |   |                              |   |   |   |   |   |
| deferral                    of prior service costs       |   |                              | -      |   |   | - |   |
| Amortization                    of unrecognized net loss |   |                              | 1      |   |   | - |   |
|                                                     |   |                              |   |   |   |   |   |
| Net                    periodic benefit cost             |   | $                                 | 18     |   | $ | 21 |   |
|                                                     |   |                              |   |   |   |   |   |
|                                                     |   |                              |   |   |   |   |   |

**NOTE        H - NEW ACCOUNTING PRONOUNCEMENTS**

----

**NOTE        I - EXTINGUISHMENT OF DEBT**

**NOTE        J - TREASURY STOCK**

----

**NOTE        K - SALE OF BRANCHES**

**NOTE        L - RECLASSIFICATIONS**

----

| **Item                  2.** | **Management's                  Discussion and Analysis of** **Financial                  Condition and** **Results                  of Operations** |
|------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Forward        - Looking Statements**

|   | • |   | Economic                  and competitive conditions which could affect the volume of loan                  originations, deposit flows and real estate values;  |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | The                  levels of non-interest income and expense and the amount of loan                  losses; |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------|

|   | • |   | Competitive                  pressure among depository institutions increases                  significantly; |
|--------|---------|--------|---------------------------------------------------------------------------------------------------------------|

|   | • |   | Changes                  in the interest rate environment may further reduce interest                  margins; |
|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------|

|   | • |   | General                  economic conditions, either nationally or in the markets in which                  KNBT is                  doing business, are less favorable than                  expected; |
|--------|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Acquisitions                  may result in large one-time charges to income, may not produce                  revenue                  enhancements or cost savings at levels or within time frames originally                  anticipated and may result in unforeseen integration                  difficulties; |
|--------|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Legislation                  or changes in regulatory requirements adversely affect the business                  in                  which KNBT is engaged; and |
|--------|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • |   | Other                  factors discussed in the documents filed by KNBT with the Securities                  and                  Exchange Commission ("SEC") from time to                  time. |
|--------|---------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Available        Information**

**Critical        Accounting Policies, Judgments and Estimates**

----

----

**Comparison        of Financial Condition as of September 30, 2006 and December 31,        2005**

**Assets.        **

**Non-Performing        Assets. **

**Allowance        for Loan Losses. **

----

**               Liabilities. **

**Shareholders’        Equity. **

----

|                                                                |   | At                    September 30, 2006  |                                          |
|---------------------------------------------------------------------|--------|-------------------------------------------|-----------------------------------------------|
|                                                                |   | Actual                                    |                                          | RequiredFor                    CapitalAdequacy                    Purposes |   | To                    Be Well CapitalizedUnder                    Prompt CorrectiveAction                    Provisions |   |
|                                                                |   | Amount                                    |                                          | Ratio |   | Amount |   | Ratio |   | Amount |   | Ratio |   |
| Total                    Capital                                    |   | (dollars                    in thousands) |                                          |
|                        (To risk-weighted assets)     |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |
|                        Company (consolidated)        |   | $                                         | 281,448                                       |   |   | 14.54 | % | $ | 154,825 |   |   | 8.00 | % |   | N/A |   |   | N/A |   |
|                        Bank                          |   | $                                         | 250,781                                       |   |   | 12.99 | % | $ | 154,443 |   |   | 8.00 | % | $ | 193,054 |   |   | 10.00 | % |
| Tier                    I Capital                                   |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        (To risk-weighted assets)     |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Company (consolidated)        |   | $                                         | 264,818                                       |   |   | 13.68 | % | $ | 77,413 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
|                        Bank                          |   | $                                         | 234,151                                       |   |   | 12.13 | % | $ | 77,222 |   |   | 4.00 | % | $ | 115,833 |   |   | 6.00 | % |
| Tier                    I Capital                                   |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        (To average assets, leverage) |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Company (consolidated)        |   | $                                         | 264,818                                       |   |   | 9.35 | % | $ | 113,254 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
|                        Bank                          |   | $                                         | 234,151                                       |   |   | 8.18 | % | $ | 114,513 |   |   | 4.00 | % | $ | 143,142 |   |   | 5.00 | % |
|                                                                |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                      | At                    December 31, 2005  |   |
|                                                                |   |                                      | Actual                                        |   |   |   | RequiredFor                    CapitalAdequacy                    Purposes |   |   | To                    Be Well CapitalizedUnder                    Prompt CorrectiveAction                    Provisions |   |
|                                                                |   |                                      | Amount                                        |   |   | Ratio |   |   | Amount |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| Total                    Capital                                    |   |                                      | (dollars                    in thousands)     |   |
|                        (To risk-weighted assets)     |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Company (consolidated)        |   | $                                         | 312,692                                       |   |   | 16.95 | % | $ | 147,621 |   |   | 8.00 | % |   | N/A |   |   | N/A |   |
|                        Bank                          |   | $                                         | 281,866                                       |   |   | 15.16 | % | $ | 148,727 |   |   | 8.00 | % | $ | 185,908 |   |   | 10.00 | % |
| Tier                    I Capital                                   |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        (To risk-weighted assets)     |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Company (consolidated)        |   | $                                         | 296,543                                       |   |   | 16.07 | % | $ | 73,811 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
|                        Bank                          |   | $                                         | 265,902                                       |   |   | 14.30 | % | $ | 74,363 |   |   | 4.00 | % | $ | 111,545 |   |   | 6.00 | % |
| Tier                    I Capital                                   |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        (To average assets, leverage) |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Company (consolidated)        |   | $                                         | 296,543                                       |   |   | 8.16 | % | $ | 145,394 |   |   | 4.00 | % |   | N/A |   |   | N/A |   |
|                        Bank                          |   | $                                         | 265,902                                       |   |   | 8.80 | % | $ | 120,895 |   |   | 4.00 | % | $ | 151,119 |   |   | 5.00 | % |
|                                                                |   |                                      |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**Liquidity.        **

----

**“GAP”        Analysis. **

|                                                                                                                                                                                                                                                                                                                                    |   | At                    September 30, 2006  |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                    |   |                                      |    | More                    than |   | More                    than |   | More                    than |   | More                    than |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                    |   | 3                    Months               |    | 3                    Months |   | 6                    Months |   | 1                    Year |   | 3                    Years |   | More                    than |   |   |   |
|                                                                                                                                                                                                                                                                                                                                    |   | or                    Less                |    | to                    6 Months |   | to                    1 Year |   | to                    3 Years |   | to                    5 Years |   | 5                    Years |   | Total |   |
|                                                                                                                                                                                                                                                                                                                                    |   | (dollars                    in thousands) |    |
| Interest-earning                    assets (1):                                                                                                                                                                                                                                                                                         |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                    at other institutions                                                                                                                                                                                                                                                                                       |   | $                                         | 33,791  |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | - |   | $ | 33,791 |   |
| Loans                    receivable (2)                                                                                                                                                                                                                                                                                                 |   |                                      | 285,628 |   |   | 90,727 |   |   | 174,624 |   |   | 444,244 |   |   | 259,507 |   |   | 338,186 |   |   | 1,592,916 |   |
| Investment                    securities, debt                                                                                                                                                                                                                                                                                          |   |                                      | 117,423 |   |   | 35,940 |   |   | 124,733 |   |   | 322,446 |   |   | 182,661 |   |   | 127,895 |   |   | 911,098 |   |
| Investment                    securities, equity                                                                                                                                                                                                                                                                                        |   |                                      | -       |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 35,495 |   |   | 35,495 |   |
|  Total                    interest-earning assets                                                                                                                                                                                                                                                                                  |   | $                                         | 436,842 |   | $ | 126,667 |   | $ | 299,357 |   | $ | 766,690 |   | $ | 442,168 |   | $ | 501,576 |   | $ | 2,573,300 |   |
| Cumulative                    total interest-                                                                                                                                                                                                                                                                                           |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| earning                    assets                                                                                                                                                                                                                                                                                                       |   | $                                         | 436,842 |   | $ | 563,509 |   | $ | 862,866 |   | $ | 1,629,556 |   | $ | 2,071,724 |   | $ | 2,573,300 |   | $ | 2,573,300 |   |
| Interest-bearing                                                                                                                                                                                                                                                                                                                        |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| liabilities:                                                                                                                                                                                                                                                                                                                       |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                    deposits                                                                                                                                                                                                                                                                                                     |   | $                                         | 677     |   | $ | 9,179 |   | $ | 9,179 |   | $ | 12,239 |   | $ | 15,299 |   | $ | 183,584 |   | $ | 230,157 |   |
| Interest-bearing                    checking deposits                                                                                                                                                                                                                                                                                   |   |                                      | -       |   |   | 13,967 |   |   | 9,311 |   |   | 9,311 |   |   | 4,656 |   |   | 195,530 |   |   | 232,775 |   |
| Money                    market deposits                                                                                                                                                                                                                                                                                                |   |                                      | 45,220  |   |   | 54,264 |   |   | 36,176 |   |   | 60,293 |   |   | 30,146 |   |   | 226,097 |   |   | 452,196 |   |
| Certificates                    of deposit                                                                                                                                                                                                                                                                                              |   |                                      | 194,960 |   |   | 197,488 |   |   | 201,905 |   |   | 148,675 |   |   | 31,189 |   |   | 1,679 |   |   | 775,896 |   |
| FHLB                    advances and other                                                                                                                                                                                                                                                                                         |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  borrowings                                                                                                                                                                                                                                                                                                                        |   |                                      | 151,394 |   |   | 67,330 |   |   | 95,756 |   |   | 190,358 |   |   | 69,501 |   |   | 79,560 |   |   | 653,899 |   |
|  Total                    interest-bearing liabilities                                                                                                                                                                                                                                                                             |   | $                                         | 392,251 |   | $ | 342,228 |   | $ | 352,327 |   | $ | 420,876 |   | $ | 150,791 |   | $ | 686,450 |   | $ | 2,344,923 |   |
| Cumulative                    total interest-                                                                                                                                                                                                                                                                                           |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| bearing                    liabilities                                                                                                                                                                                                                                                                                                  |   | $                                         | 392,251 |   | $ | 734,479 |   | $ | 1,086,806 |   | $ | 1,507,682 |   | $ | 1,658,473 |   | $ | 2,344,923 |   | $ | 2,344,923 |   |
| Interest-earning                    assets                                                                                                                                                                                                                                                                                              |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| less                    interest-bearing liabilities                                                                                                                                                                                                                                                                                    |   | $                                         | 44,591  |   | $ | (215,561 | ) | $ | (52,970 | ) | $ | 345,814 |   | $ | 291,377 |   | $ | (184,874 | ) | $ | 228,377 |   |
| Cumulative                    interest-rate                                                                                                                                                                                                                                                                                             |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| sensitivity                    gap (3)                                                                                                                                                                                                                                                                                                  |   | $                                         | 44,591  |   | $ | (170,970 | ) | $ | (223,940 | ) | $ | 121,874 |   | $ | 413,251 |   | $ | 228,377 |   |   |   |   |
| Cumulative                    interest-rate gap as a                                                                                                                                                                                                                                                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| percentage                    of total assets at                                                                                                                                                                                                                                                                                   |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| September                    30, 2006                                                                                                                                                                                                                                                                                                   |   |                                      | 1.52    | % |   | (5.84 | )% |   | (7.65 | )% |   | 4.16 | % |   | 14.12 | % |   | 7.80 | % |   |   |   |
| Cumulative                    interest-earning assets                                                                                                                                                                                                                                                                                   |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| as                    a percentage of                                                                                                                                                                                                                                                                                              |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| cumulative                    interest-bearing                                                                                                                                                                                                                                                                                     |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| liabilities                    at September 30, 2006                                                                                                                                                                                                                                                                                    |   |                                      | 111.37  | % |   | 76.72 | % |   | 79.39 | % |   | 108.08 | % |   | 124.92 | % |   | 109.74 | % |   |   |   |
|                                                                                                                                                                                                                                                                                                                                    |   |
| (1)                    Interest-earning assets are included in the period in which the                    balances                    are expected to be redeployed and/or repriced as a                    result of anticipated prepayments, scheduled rate adjustment                    or                    contractual maturity. |
| (2)                    For purposes of the gap analysis, loans receivable includes non-performing                    loans, gross of the allowance for loan losses, undisbursed                    loan funds, deferred loan fees and mortgage loans held for                    sale.                                                  |
| (3)                    Interest-rate sensitivity gap represents the net difference between                    interest-earning assets and interest-bearing liabilities.                                                                                                                                                                 |   |                                      |    |   |
|                                                                                                                                                                                                                                                                                                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                    |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**Comparison        of Operating Results for the three and nine months ended September 30, 2006        and        2005**

**General.**

**Net        Interest Income.**

----

**Interest        Income. **

----

**               Interest Expense. **

**Average        Balances, Net Interest Income, and Yields Earned and Rates        Paid.**

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | For                    the Three Months Ended September 30, |      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | 2006                                                        |      | 2005 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      | Interest |   | Average |   |   |   | Interest |   | Average |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Average                                                     |      | Income/ |   | Yield/ |   | Average |   | Income/ |   | Yield/ |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | Balance                                                     |      | Expense |   | Rate |   | Balance |   | Expense |   | Rate |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | (dollars                    in thousands)                   |      |
| Interest-earning                    assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         Interest-bearing balances with banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                                                           | 6,294     |   | $ | 80 |   |   | 5.08 | %   | $ | 44,014 |   | $ | 338 |   |   | 3.07 | % |
|                         Federal Funds sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                        | 22,529    |   |   | 297 |   |   | 5.27 | % |   | - |   |   | - |   |   | - |   |
|                         Investment securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              Taxable (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                        | 1,010,334 |   |   | 12,099 |   |   | 4.79 | % |   | 1,218,070 |   |   | 13,122 |   |   | 4.31 | % |
|                              Non-taxable (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                        | 3,043     |   |   | 57 |   |   | 7.49 | % |   | 84,650 |   |   | 1,438 |   |   | 6.80 | % |
|                         Loans receivable (2) (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        | 1,579,827 |   |   | 25,429 |   |   | 6.44 | % |   | 1,450,103 |   |   | 22,152 |   |   | 6.11 | % |
|                         Allowance for loan losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                        | (16,617   | ) |   |   |   |   |   |   |   | (15,879 | ) |   |   |   |   |   |   |
|                         Net loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                        | 1,563,210 |   |   | 25,429 |   |   | 6.51 | % |   | 1,434,224 |   |   | 22,152 |   |   | 6.18 | % |
|                              Total interest-earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                        | 2,605,410 |   |   | 37,962 |   |   | 5.83 | % |   | 2,780,958 |   |   | 37,050 |   |   | 5.33 | % |
|                         Non-interest-earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                        | 359,340   |   |   | - |   |   |   |   |   | 318,721 |   |   | - |   |   |   |   |
|                              Total assets, interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | $                                                           | 2,964,750 |   |   | 37,962 |   |   |   |   | $ | 3,099,679 |   |   | 37,050 |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                    liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         Demand deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                                           | 236,346   |   |   | 424 |   |   | 0.72 | % | $ | 233,442 |   |   | 179 |   |   | 0.31 | % |
|                         Money market deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                        | 448,266   |   |   | 3,852 |   |   | 3.44 | % |   | 297,635 |   |   | 1,469 |   |   | 1.97 | % |
|                         Savings deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                        | 239,887   |   |   | 279 |   |   | 0.47 | % |   | 289,644 |   |   | 296 |   |   | 0.41 | % |
|                         Certificates of deposit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                        | 779,620   |   |   | 8,018 |   |   | 4.11 | % |   | 751,791 |   |   | 5,786 |   |   | 3.08 | % |
|                              Total interest-bearing deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                        | 1,704,119 |   |   | 12,573 |   |   | 2.95 | % |   | 1,572,512 |   |   | 7,730 |   |   | 1.97 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                    sold under agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         to repurchase                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                        | 45,450    |   |   | 462 |   |   | 4.07 | % |   | 70,143 |   |   | 579 |   |   | 3.30 | % |
| FHLB                    advances                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                        | 602,068   |   |   | 6,028 |   |   | 4.00 | % |   | 783,036 |   |   | 7,303 |   |   | 3.73 | % |
| Other                    debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                        | 38,585    |   |   | 731 |   |   | 7.58 | % |   | 39,056 |   |   | 671 |   |   | 6.87 | % |
|                         Total interest-bearing liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                        | 2,390,222 |   |   | 19,794 |   |   | 3.31 | % |   | 2,464,747 |   |   | 16,283 |   |   | 2.64 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing                    liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         Non-interest-bearing deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                        | 195,523   |   |   | - |   |   | - |   |   | 182,745 |   |   | - |   |   | - |   |
|                         Other liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                        | 34,625    |   |   | - |   |   | - |   |   | 51,680 |   |   | - |   |   | - |   |
|                         Total liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                        | 2,620,370 |   |   | 19,794 |   |   |   |   |   | 2,699,172 |   |   | 16,283 |   |   |   |   |
| Shareholders'                    equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                        | 344,380   |   |   | - |   |   | - |   |   | 400,508 |   |   | - |   |   | - |   |
|                         Total liabilities and shareholders'                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         equity, interest expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                                           | 2,964,750 |   |   | 19,794 |   |   |   |   | $ | 3,099,680 |   |   | 16,283 |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    interest income on tax equivalent basis (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                        |      |   |   | 18,168 |   |   |   |   |   |   |   |   | 20,767 |   |   |   |   |
| Net                    interest spread on                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         tax-equivalent basis (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      |   |   |   |   |   | 2.52 | % |   |   |   |   |   |   |   | 2.69 | % |
| Net                    interest margin                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         tax-equivalent basis (5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      |   |   |   |   |   | 2.79 | % |   |   |   |   |   |   |   | 2.99 | % |
| Tax-exempt                    adjustment (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                        |      |   |   | (193 | ) |   | (0.03 | )% |   |   |   |   | (605 | ) |   | (0.09 | )% |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    interest income and margin (4) (5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                        |      |   | $ | 17,975 |   |   | 2.76 | % |   |   |   | $ | 20,162 |   |   | 2.90 | % |
| Average                    interest-earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         to average interest-bearing liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      |   |   |   |   |   | 109.00 | % |   |   |   |   |   |   |   | 112.83 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |
| (1)                    Includes Federal Home Loan Bank stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (2)                    The indicated interest income and average yields are presented                    on a                    tax-equivalent basis. The taxable equivalent adjustments                    included the effect of increasing interest income over the GAAP                    basis and                    were $193,000 and $605,000 for the three months                    ended September 30, 2006 and 2005, respectively. The effective                    tax rate                    used for the taxable equivalent adjustment was 35%.                             |   |
| (3)                    Loan fees (expenses) of $(51,258) and $57,000 for the three months                    ended                    September 30, 2006 and 2005, respectively, are included                    in interest income. Average loan balances include non-accruing                    loans                    of                    $5.8                    million and $5.9 million and average                    loans held-for-sale of $29,000 and $1.4 million for the three                    months ended                    September 30, 2006 and 2005, respectively. |   |
| (4)                    Net interest spread is the arithmatic difference between yield                    on                    interest-earning assets, adjusted to a tax equivalent basis,and                    the rate paid on interest-bearing liabilities. On a GAAP basis,                    the                    Company's net interest spread was 2.49% and 2.60% for the three                    months                    ended September 30, 2006 and 2005.                                                                                                                   |
| (5)                      Net interest margin is computed on a GAAP basis by dividing                      net interest                      income by average interest-earning assets.                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                        |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | For                    the Nine Months Ended September 30, |      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 2006                                                       |      | 2005 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                       |      | Interest |   | Average |   |   |   | Interest |   | Average |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Average                                                    |      | Income/ |   | Yield/ |   | Average |   | Income/ |   | Yield/ |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Balance                                                    |      | Expense |   | Rate |   | Balance |   | Expense |   | Rate |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | (dollars                    in thousands)                  |      |
| Interest-earning                    assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         Interest-bearing balances with banks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                                                          | 14,355    |   | $ | 453 |   |   | 4.21 | % | $ | 61,343 |   | $ | 1,226 |   |   | 2.66 | % |
|                         Federal Funds sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                       | 10,325    |   |   | 395 |   |   | 5.10 | % |   | - |   |   | - |   |   | - |   |
|                         Investment securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              Taxable (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                       | 1,056,499 |   |   | 37,132 |   |   | 4.69 | % |   | 1,113,172 |   |   | 35,434 |   |   | 4.24 | % |
|                              Non-taxable (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                       | 39,031    |   |   | 2,113 |   |   | 7.22 | % |   | 100,582 |   |   | 4,958 |   |   | 6.57 | % |
| Loans                    receivable (2) (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                       | 1,527,986 |   |   | 71,868 |   |   | 6.27 | % |   | 1,231,986 |   |   | 55,293 |   |   | 5.98 | % |
| Allowance                    for loan losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                       | (16,203   | ) |   |   |   |   |   |   |   | (13,093 | ) |   |   |   |   |   |   |
| Net                    loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                       | 1,511,783 |   |   | 71,868 |   |   | 6.34 | % |   | 1,218,893 |   |   | 55,293 |   |   | 6.05 | % |
|                         Total interest-earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                       | 2,631,993 |   |   | 111,961 |   |   | 5.67 | % |   | 2,493,990 |   |   | 96,911 |   |   | 5.18 | % |
| Non-interest-earning                    assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                       | 354,195   |   |   | - |   |   |   |   |   | 263,649 |   |   | - |   |   |   |   |
|                         Total assets, interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $                                                          | 2,986,188 |   |   | 111,961 |   |   |   |   | $ | 2,757,639 |   |   | 96,911 |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                    liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         Demand deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                                          | 233,168   |   |   | 1,028 |   |   | 0.59 | % | $ | 205,892 |   |   | 347 |   |   | 0.22 | % |
|                         Money market deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                                       | 400,194   |   |   | 9,246 |   |   | 3.08 | % |   | 274,025 |   |   | 3,376 |   |   | 1.64 | % |
|                         Savings deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                       | 252,744   |   |   | 857 |   |   | 0.45 | % |   | 250,933 |   |   | 811 |   |   | 0.43 | % |
|                         Certificates of deposit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                       | 777,460   |   |   | 21,980 |   |   | 3.77 | % |   | 658,312 |   |   | 14,644 |   |   | 2.97 | % |
|                              Total interest-bearing deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                       | 1,663,566 |   |   | 33,111 |   |   | 2.65 | % |   | 1,389,162 |   |   | 19,178 |   |   | 1.84 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                    sold under agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         to repurchase                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                       | 53,806    |   |   | 1,491 |   |   | 3.69 | % |   | 44,423 |   |   | 938 |   |   | 2.82 | % |
| FHLB                    advances                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                       | 647,205   |   |   | 18,809 |   |   | 3.87 | % |   | 741,781 |   |   | 19,209 |   |   | 3.45 | % |
| Other                    debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                       | 38,709    |   |   | 2,059 |   |   | 7.09 | % |   | 27,142 |   |   | 1,336 |   |   | 6.56 | % |
|                         Total interest-bearing liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                                       | 2,403,286 |   |   | 55,470 |   |   | 3.08 | % |   | 2,202,508 |   |   | 40,661 |   |   | 2.46 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing                    liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         Non-interest-bearing deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                       | 192,464   |   |   | - |   |   | - |   |   | 152,337 |   |   | - |   |   | - |   |
|                         Other liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                       | 33,384    |   |   | - |   |   | - |   |   | 12,624 |   |   | - |   |   | - |   |
|                              Total liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                                       | 2,629,134 |   |   | 55,470 |   |   |   |   |   | 2,367,469 |   |   | 40,661 |   |   |   |   |
|                         Shareholders' equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                                       | 357,054   |   |   | - |   |   | - |   |   | 390,170 |   |   | - |   |   | - |   |
|                              Total liabilities and shareholders'                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                              equity, interest expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $                                                          | 2,986,188 |   |   | 55,470 |   |   |   |   | $ | 2,757,639 |   |   | 40,661 |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    interest income on tax equivalent basis (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                       |      |   |   | 56,491 |   |   |   |   |   |   |   |   | 56,250 |   |   |   |   |
| Net                    interest spread on                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         tax-equivalent basis (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                       |      |   |   |   |   |   | 2.59 | % |   |   |   |   |   |   |   | 2.72 | % |
| Net                    interest margin                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         tax-equivalent basis (5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                       |      |   |   |   |   |   | 2.86 | % |   |   |   |   |   |   |   | 3.01 | % |
| Tax-exempt                    adjustment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                                       |      |   |   | (1,259 | ) |   | (0.06 | )% |   |   |   |   | (1,889 | ) |   | (0.10 | )% |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    interest income and margin (4) (5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                       |      |   | $ | 55,232 |   |   | 2.80 | % |   |   |   | $ | 54,361 |   |   | 2.91 | % |
| Average                    interest-earning assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                       |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         to average interest-bearing liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                                       |      |   |   |   |   |   | 109.52 | % |   |   |   |   |   |   |   | 113.23 | % |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (1)                    Includes Federal Home Loan Bank stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (2)                    The indicated interest income and average yields are presented                    on a                    tax-equivalent basis. The taxable equivalent adjustments                    included the effect of increasing interest income over the GAAP                    basis and                    were $1.3 million and $1.9 million for the nine months                    ended September 30, 2006 and 2005, respectively. The effective                    tax rate                    used for the taxable equivalent adjustment was                    35%.          |
| (3)                    Loan fees (expenses) of $(45,790) and $(155,000) for the nine                    months ended                    September 30, 2006 and 2005, respectively, are included                    in interest income. Average loan balances include non-accruing                    loans                    of $5.5                    million and $4.9 million and average                    loans held-for-sale of $304,000 and $1.2 million for the nine                    months ended                    September 30, 2006 and 2005,                    respectively. |
| (4)                    Net interest spread is the arithmatic difference between yield                    on                    interest-earning assets, adjusted to a tax equivalent basis,and                    the rate paid on interest-bearing liabilities. On a GAAP basis,                    the                    Company's net interest spread was 2.53% and 2.62% for the                    nine months ended September 30, 2006 and                    2005.                                                                                                                           |
| (5)                    Net interest margin is computed on a GAAP basis by dividing net                    interest                    income by average interest-earning                    assets.                                                                                                                                                                                                                                                                                                                                                                                                  |

----

|                                                           |   | For                    the Three Months Ended |                                                  |
|----------------------------------------------------------------|--------|-----------------------------------------------|-------------------------------------------------------|
|                                                           |   | September                    30, 2006         |                                                  | September                    30, 2005 |   |
|                                                           |   |                                          |                                                  | Average |   |   |   | Average |   |
|                                                           |   | Interest                                      |                                                  | Yield/Cost |   | Interest |   | Yield/Cost |   |
|                                                           |   | (dollars                    in thousands)     |
|                                                           |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
| Investment                    securities - nontaxable          |   | $                                             | 37                                                    |   |   | 4.86 | % | $ | 949 |   |   | 4.48 | % |
| Tax                    equivalent adjustments                  |   |                                          | 20                                                    |   |   |   |   |   | 489 |   |   |   |   |
| Investment                    securities - nontaxable to a     |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
|                        taxable equivalent yield |   | $                                             | 57                                                    |   |   | 7.49 | % | $ | 1,438 |   |   | 6.80 | % |
|                                                           |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
| Loans                    receivable - nontaxable               |   | $                                             | 322                                                   |   |   | 3.90 | % | $ | 224 |   |   | 4.39 | % |
| Tax                    equivalent adjustments                  |   |                                          | 173                                                   |   |   |   |   |   | 116 |   |   |   |   |
| Loans                    receivable - nontaxable to a taxable  |   | $                                             | 495                                                   |   |   | 5.99 | % | $ | 340 |   |   | 6.66 | % |
|                        equivalent yield         |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
| Net                    interest income                         |   | $                                             | 17,975                                                |   |   |   |   | $ | 20,162 |   |   |   |   |
| Tax                    equivalent adjustment                   |   |                                          | 193                                                   |   |   |   |   |   | 605 |   |   |   |   |
| Net                    interest income, tax equivalent         |   | $                                             | 18,168                                                |   |   |   |   | $ | 20,767 |   |   |   |   |
| Net                    interest rate spread, no tax adjustment |   |                                          |                                                  |   |   | 2.49 | % |   |   |   |   | 2.60 | % |
| Net                    interest margin, no tax adjustment      |   |                                          |                                                  |   |   | 2.76 | % |   |   |   |   | 2.90 | % |
|                                                           |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                                          | For                    the Nine Months Ended     |   |
|                                                           |   |                                          | September                    30, 2006            |   |   | September                    30, 2005 |   |
|                                                           |   |                                          |                                                  |   | Average |   |   |   |   |   | Average |   |
|                                                           |   |                                          | Interest                                              |   | Yield/Cost |   |   | Interest |   |   | Yield/Cost |   |
|                                                           |   |                                          |  (dollars                    in thousands)  |
|                                                           |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
| Investment                    securities - nontaxable          |   | $                                             | 1,373                                                 |   |   | 4.69 | % | $ | 3,272 |   |   | 4.34 | % |
| Tax                    equivalent adjustments                  |   |                                          | 740                                                   |   |   |   |   |   | 1,686 |   |   |   |   |
| Investment                    securities - nontaxable to a     |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
|                        taxable equivalent yield |   | $                                             | 2,113                                                 |   |   | 7.22 | % | $ | 4,958 |   |   | 6.57 | % |
|                                                           |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
| Loans                    receivable - nontaxable               |   | $                                             | 965                                                   |   |   | 3.90 | % | $ | 394 |   |   | 4.25 | % |
| Tax                    equivalent adjustments                  |   |                                          | 519                                                   |   |   |   |   |   | 203 |   |   |   |   |
| Loans                    receivable - nontaxable to a taxable  |   | $                                             | 1,484                                                 |   |   | 5.99 | % | $ | 597 |   |   | 6.43 | % |
|                        equivalent yield         |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
| Net                    interest income                         |   | $                                             | 55,232                                                |   |   |   |   | $ | 54,361 |   |   |   |   |
| Tax                    equivalent adjustment                   |   |                                          | 1,259                                                 |   |   |   |   |   | 1,889 |   |   |   |   |
| Net                    interest income, tax equivalent         |   | $                                             | 56,491                                                |   |   |   |   | $ | 56,250 |   |   |   |   |
| Net                    interest rate spread, no tax adjustment |   |                                          |                                                  |   |   | 2.53 | % |   |   |   |   | 2.62 | % |
| Net                    interest margin, no tax adjustment      |   |                                          |                                                  |   |   | 2.80 | % |   |   |   |   | 2.91 | % |
|                                                           |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |
|                                                           |   |                                          |                                                  |   |   |   |   |   |   |   |   |   |   |

----

**Rate        Volume Analysis. **

|                                                                                                                                                                                                                                                          |   | Three                    Months Ended September 30, 2006 |   | Nine                    Months Ended September 30, 2006 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|---------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                          |   | Compared                    to                           |   | Compared                    to                          |   |
|                                                                                                                                                                                                                                                          |   | Three                    Months Ended September 30, 2005 |   | Nine                    Months Ended September 30, 2005 |   |
|                                                                                                                                                                                                                                                          |   | Increase                    (Decrease)                   |   | Total                                                   |   | Increase                    (Decrease) |   | Total |   |
|                                                                                                                                                                                                                                                          |   | Due                    to                                |   | Increase                                                |   | Due                    to |   | Increase |   |
|                                                                                                                                                                                                                                                          |   | Rate                                                     |   | Volume                                                  |   | (Decrease) |   | Rate |   | Volume |   | (Decrease) |   |
|                                                                                                                                                                                                                                                          |   | (in                    thousands)                        |   | (in                    thousands)                       |   |
| Interest                    Income:                                                                                                                                                                                                                           |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         Interest bearing deposits with banks                                                                                                                                                                              |   | $                                                        | 32     |                                                    | $      | (290 | ) | $ | (258 | ) | $ | 166 |   | $ | (939 | ) | $ | (773 | ) |
|                         Fed funds sold                                                                                                                                                                                                    |   |                                                     | -      |                                                    |   | 297 |   |   | 297 |   |   | - |   |   | 395 |   |   | 395 |   |
|                         Investment securities (1)                                                                                                                                                                                         |   |                                                     | 830    |                                                    |   | (3,234 | ) |   | (2,404 | ) |   | 2,787 |   |   | (3,934 | ) |   | (1,147 | ) |
|                         Loans receivable, net (2)                                                                                                                                                                                         |   |                                                     | 1,296  |                                                    |   | 1,981 |   |   | 3,277 |   |   | 3,290 |   |   | 13,285 |   |   | 16,575 |   |
|                              Total interest-earning assets                                                                                                                                                       |   |                                                     | 2,158  |                                                    |   | (1,246 | ) |   | 912 |   |   | 6,243 |   |   | 8,807 |   |   | 15,050 |   |
|                                                                                                                                                                                                                                                          |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                    Expense:                                                                                                                                                                                                                          |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         Demand deposits                                                                                                                                                                                                   |   |                                                     | 243    |                                                    |   | 2 |   |   | 245 |   |   | 635 |   |   | 46 |   |   | 681 |   |
|                         Money market deposits                                                                                                                                                                                             |   |                                                     | 1,640  |                                                    |   | 743 |   |   | 2,383 |   |   | 4,316 |   |   | 1,554 |   |   | 5,870 |   |
|                         Savings deposits                                                                                                                                                                                                  |   |                                                     | 34     |                                                    |   | (51 | ) |   | (17 | ) |   | 40 |   |   | 6 |   |   | 46 |   |
|                         Certificates of deposit                                                                                                                                                                                           |   |                                                     | 2,018  |                                                    |   | 214 |   |   | 2,232 |   |   | 4,686 |   |   | 2,650 |   |   | 7,336 |   |
|                              Total interest-bearing deposits                                                                                                                                                     |   |                                                     | 3,935  |                                                    |   | 908 |   |   | 4,843 |   |   | 9,677 |   |   | 4,256 |   |   | 13,933 |   |
|                                                                                                                                                                                                                                                          |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities                    sold under agreements                                                                                                                                                                                                           |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to                    repurchase                                                                                                                                                                                                                              |   |                                                     | 87     |                                                    |   | (204 | ) |   | (117 | ) |   | 355 |   |   | 198 |   |   | 553 |   |
| FHLB                    advances and other borrowings                                                                                                                                                                                                         |   |                                                     | 413    |                                                    |   | (1,688 | ) |   | (1,275 | ) |   | 2,049 |   |   | (2,449 | ) |   | (400 | ) |
| Other                    debt                                                                                                                                                                                                                                 |   |                                                     | 68     |                                                    |   | (8 | ) |   | 60 |   |   | 154 |   |   | 569 |   |   | 723 |   |
|                         Total interest-bearing liabilities                                                                                                                                                                                |   |                                                     | 4,503  |                                                    |   | (992 | ) |   | 3,511 |   |   | 12,235 |   |   | 2,574 |   |   | 14,809 |   |
|                                                                                                                                                                                                                                                          |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          (Decrease) increase in net                                                                                                                                                                                  |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                           interest income (3)                                                                                                                                                                                   |   | $                                                        | (2,345 | )                                                       | $      | (254 | ) | $ | (2,599 | ) | $ | (5,992 | ) | $ | 6,233 |   | $ | 241 |   |
|                                                                                                                                                                                                                                                          |   |                                                     |   |                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)                    Total decrease in investment securities on a nontaxable equivalent                    basis                    would be $(1.9 million) and $(201,000) for the three and nine                    month comparisons, respectively.       |
| (2)                    Total increase in loans receivable on a nontaxable equivalent                    basis would                    be $3.2 million and $16.3 million for the three and nine                    month comparisons, respectively.           |
| (3)                    Total (decrease) increase in net interest income on a nontaxable                    equivalent basis would be $(2.2) million and $871,000 for thethree                    and nine month comparisons,                    respectively. |

**Provision        for Loan Losses**
**.        **

** **

----

**Non-Interest        Income. **

**Non-Interest        Expense.**

----

**Income        Tax Expense.**
** **
** **

| **Item                  3.    ****Quantitative                  and Qualitative Disclosures About Market                  Risk** |
|------------------------------------------------------------------------------------------------------------------------------------------------------|

| **Item                  4.    ****Controls                  and Procedures** |
|--------------------------------------------------------------------------------------------------|

**Evaluation        of Disclosure Controls and Procedures. **

**Changes        in Internal Control Over Financial Reporting.**

**PART        II -**
**        OTHER INFORMATION**

| **Item1.**.    **Legal                  Proceedings** |
|---------------------------------------------------------------------------|

| **Item                  1A.       ****Risk                  Factors** |
|-----------------------------------------------------------------------------------------------------|

----

| **Item                  2.    ****Unregistered                  Sales of Equity Securities and Use of                  Proceeds** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a)   | Not                  applicable.                                                                                                                                                       |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b)   | Not                  applicable.                                                                                                                                                       |
| (c)   | The                  following table sets forth information regarding KNBT’s repurchases of its                  common stock during the quarter ended September 30, 2006.  |

| Period                                                                                                                                                                                                                                                                                                                                                                                                              |   | Total                    Number of                    Shares Purchased |    | Average                    Price                    PaidPer                    Share |   | Total                    Number of Shares                    Purchased as                    Part of Publicly Announced                    Plans or                    Programs |   | Maximum                    Number of                    Shares that may yet                    be Purchased Under                    the Plan or Program(s)                    (1) |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|---------|--------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                   |    |                                                                                 |   |                                                                                                                                                                                 |   | 3,088,902                                                                                                                                                                          |    |
| July                    1 - 31, 2006                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                   | 313,562 |                                                                                 | $      | 16.16                                                                                                                                                                                |   |                                                                                                                                                                               | 313,472 |   |   | 2,775,430 |   |
| August                    1 - 31, 2006                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                   | 24,000  |                                                                                 | $      | 15.36                                                                                                                                                                                |   |                                                                                                                                                                               | 24,000  |   |   | 2,751,430 |   |
| September                    1 - 30, 2006                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                   | 5,000   |                                                                                 | $      | 16.21                                                                                                                                                                                |   |                                                                                                                                                                               | 5,000   |   |   | 2,746,430 |   |
|                         Total                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                   | 342,562 |                                                                                 | $      | 16.16                                                                                                                                                                                |   |                                                                                                                                                                               | 342,472 |   |   | N/A |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                   |    |                                                                                 |   |                                                                                                                                                                                 |   |                                                                                                                                                                               |    |   |   |   |   |
| (1)                    On July 19, 2006, KNBT completed its second stock repurchase                    plan covering                    3,151,297 shares. The Company commenced its third stock repurchase                    plan                    announced June 26, 2006 covering 2,807,219 shares of which 60,789                    shares                    had been repurchased as of September 30, 2006. |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                   |    |                                                                                 |   |                                                                                                                                                                                 |   |                                                                                                                                                                               |    |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                                                   |    |                                                                                 |   |                                                                                                                                                                                 |   |                                                                                                                                                                               |    |   |   |   |   |

| **Item                  3.    ****Defaults                  Upon Senior Securities Risk                  Factors** |
|----------------------------------------------------------------------------------------------------------------------------------------|

| (a) | There                  were no matters required to be reported under this                  item. |
|-----|--------------------------------------------------------------------------------------------------|
| (b) | There                  were no matters required to be reported under this                  item. |

| **Item                  4.    ****Submission                  of Matters to a Vote of Security                  Holders** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|

| **Item                  5.    ****Other                  Information** |
|--------------------------------------------------------------------------------------------|

| (a)   | There                  were no matters required to be reported under this                  item. |
|-----------------|--------------------------------------------------------------------------------------------------|
| (b)             | There                  were no matters required to be reported under this                  item. |

| **Item                  6.    ****Exhibits** |
|------------------------------------------------------------------|

| (a)    | List                  of exhibits:                                                                                                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 10.1                  Form of 2006 Performance Share                  Award                                                                                                                           |
|   | 10.2                  Form of 2006 Executive Annual Incentive Plan                  Performance Agreement                                                                                             |
|   | 10.3                  Employment Agreement with G. Allen                  Weiss                                                                                                                       |
|   | 31.1                  Section 302 Certification of the Chief Executive                  Officer                                                                                                       |
|   | 31.2                  Section 302 Certification of the Chief Financial                  Officer                                                                                                       |
|   | 32.1                  Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant                   to                  Section 906 of the Sarbanes-Oxley Act of                  2002. |

----

**SIGNATURES**

|   |                              |   |   | **KNBT                BANCORP, INC.**                        |
|--------|-----------------------------------|--------|--------|-------------------------------------------------------------------|
|   |                              |   |   |                                                              |
| DATE:  | November                  9, 2006 |   | BY:    | /S/                  Scott V. Fainor                              |
|   |                              |   |   | Scott                  V. Fainor                                  |
|   |                              |   |   | President                  and Chief Executive Officer            |
|   |                              |   |   |                                                              |
|   |                              |   |   |                                                              |
|   |                              |   |   |                                                              |
| DATE:  | November                  9, 2006 |   | BY:    | /S/                  Eugene T. Sobol                              |
|   |                              |   |   | Eugene                  T. Sobol                                  |
|   |                              |   |   | Senior                  Executive Vice President, Chief Financial |
|   |                              |   |   | Officer                  and Treasurer                            |

----