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 ACT OF
     1934

                 For the Quarterly period ended: March 31, 2006

[_]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 or  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

           For the transition period from ___________ to ___________.

                         Commission File Number: 0-28815

                     FIRST LITCHFIELD FINANCIAL CORPORATION
             (Exact name of Registrant as specified in its Charter)


         Delaware                                          06-1241321
         --------                                         ----------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation of organization)                          Identification No.)

   13 North Street, Litchfield, CT                           06759
   -------------------------------                           -----
(Address of principal executive offices)                   (Zip Code)

       Registrant's telephone number, including area code: (860) 567-8752

Indicate  by check  mark  whether  the  Registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the past 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                             Yes [X]         No  [_]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):
Large accelerated filer [_]    Accelerated filer [_]   Non-accelerated filer [X]

Indicate by check mark whether the  registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act).

                             Yes [_]         No  [X]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common equity,  as of the latest  practicable  date:  2,136,370 shares of Common
Stock, par value $.01 per share, were outstanding at April 28, 2006.

                                       1
<PAGE>


                     FIRST LITCHFIELD FINANCIAL CORPORATION
                                    FORM 10-Q
                                      INDEX
<TABLE>
<CAPTION>
                                                                                Page
                                                                                ----
<S>                                                                            <C>
Part I - Financial Information

Item 1 - Financial Statements

        Consolidated Balance Sheets - March 31, 2006 and
        December 31, 2005 (unaudited) ...........................................3

        Consolidated Statements of Income - Three months ended
        March 31, 2006 and 2005 (unaudited) .....................................4

        Consolidated Statements of Comprehensive Income - Three months ended
        March 31, 2006 and 2005 (unaudited) .....................................5

        Consolidated Statements of Cash Flows - Three months ended
        March 31, 2006 and 2005 (unaudited) .....................................6

        Notes to Consolidated Financial Statements  (unaudited) .................8

        Item 2 - Management's Discussion and Analysis of Financial Condition
          and Results of Operations ............................................13

        Item 3 - Quantitative and Qualitative Disclosures about Market Risk.....20

        Item 4 - Controls and Procedures .......................................21


Part II - Other Information

        Item 1 - Legal Proceedings .............................................21

        Item 1A - Risk Factors .................................................22

        Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds ...22

        Item 3 - Defaults Upon Senior Securities ...............................22

        Item 4 - Submission of Matters to a Vote of Security Holders ...........22

        Item 5 - Other Information .............................................22

        Item 6 - Exhibits ......................................................23

Signatures .....................................................................24

</TABLE>

                                       2
<PAGE>
<TABLE>
<CAPTION>

FIRST LITCHFIELD FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS                                                      March 31,      December 31,
                                                                                   2006              2005
                                                                               -------------    -------------
<S>                                                                               <C>              <C>
(Unaudited)

ASSETS
    Cash and due from banks                                                    $  10,950,934    $  18,711,537
                                                                               -------------    -------------
                                              CASH AND CASH EQUIVALENTS           10,950,934       18,711,537
                                                                               -------------    -------------
   Securities:
     Available for sale securities, at fair value                                178,796,750      182,900,358
     Held to maturity securities (fair value $46,843-2006 and $47,933-2005)           47,640           49,035
                                                                               -------------    -------------
                                                       TOTAL SECURITIES          178,844,390      182,949,393
                                                                               -------------    -------------

   Federal Home Loan Bank stock, at cost                                           4,201,200        4,201,200
   Federal Reserve Bank stock, at cost                                               225,850          225,850
   Other restricted stock, at cost                                                    80,000           50,000

   Loans Receivable, net of allowance for loan losses of
                 $1,868,361 -2006, $1,759,611-2005
                                                              NET LOANS          244,878,556      240,681,739

   Premises and equipment, net                                                     4,607,230        4,247,328
   Deferred income taxes                                                           2,440,487        1,812,116
   Accrued interest receivable                                                     2,658,367        2,349,092
   Cash surrender value of insurance                                               9,366,237        9,263,737
   Other assets                                                                    2,590,016        3,068,954
                                                                               -------------    -------------

                                                           TOTAL ASSETS        $ 460,843,267    $ 467,560,946
                                                                               =============    =============

LIABILITIES
   Deposits:
     Noninterest bearing                                                       $  60,823,081    $  66,907,502
     Interest bearing                                                            216,718,029      210,962,859
                                                                               -------------    -------------
                                                         TOTAL DEPOSITS          277,541,110      277,870,361
                                                                               -------------    -------------

   Federal Home Loan Bank advances                                                65,303,000       73,616,000
   Repurchase agreements with financial institutions                              62,700,000       66,700,000
   Repurchase agreements with customers                                           20,735,368        9,974,172
   Junior subordinated debt issued by unconsolidated trust                         7,011,000        7,011,000
   Due to broker for security purchases                                                   --        3,675,373
    Accrued expenses and other liabilities                                         2,499,927        2,744,303
                                                                               -------------    -------------

                                                      TOTAL LIABILITIES          435,790,405      441,591,209
                                                                               -------------    -------------

SHAREHOLDERS' EQUITY
   Preferred stock $.00001 par value; 1,000,000 shares authorized, no shares
   outstanding Common stock $.01 par value
     Authorized - 5,000,000 shares
     2006 - Issued - 2,246,815 shares, outstanding - 2,136,370 shares
     2005 - Issued - 2,246,815 shares, outstanding - 2,136,370 shares                 22,468           22,468
   Capital surplus                                                                22,995,010       22,995,010
   Retained earnings                                                               6,746,383        6,443,479
   Less: Treasury stock at cost- 110,445 shares                                     (701,061)        (701,061)
   Accumulated other comprehensive loss-net unrealized loss
     on available for sale securities (net of taxes)                              (4,009,938)      (2,790,159)
                                                                               -------------    -------------
                                             TOTAL SHAREHOLDERS' EQUITY           25,052,862       25,969,737
                                                                               -------------    -------------

                             TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $ 460,843,267    $ 467,560,946
                                                                               =============    =============
</TABLE>

See Notes to Consolidated Financial Statements.

                                                       3
<PAGE>
<TABLE>
<CAPTION>

FIRST LITCHFIELD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

Three Months Ended March 31,                                                 2006         2005
                                                                          ----------   ----------
<S>                                                                          <C>          <C>
INTEREST AND DIVIDEND INCOME
   Interest and fees on loans                                             $3,824,615   $3,285,612
                                                                          ----------   ----------

   Interest and dividends on securities:
      Mortgage-backed securities                                             860,993    1,035,293
      US Treasury and other securities                                       714,595      591,628
      State and municipal securities                                         369,210      195,669
      Corporate bonds and other securities                                   106,402       49,414
                                                                          ----------   ----------
           Total interest on securities                                    2,051,200    1,872,004
   Other interest income                                                       1,394        7,425
                                                                          ----------   ----------
                                     TOTAL INTEREST AND DIVIDEND INCOME    5,877,209    5,165,041
                                                                          ----------   ----------

INTEREST EXPENSE
   Interest on deposits:
      Savings                                                                 24,628       29,565
      Money market                                                           302,286      239,858
      Time certificates of deposit in denominations of $100,000 or more      223,329      163,646
      Other time certificates of deposit                                     532,251      344,182
                                                                          ----------   ----------
                                             TOTAL INTEREST ON DEPOSITS    1,082,494      777,251
   Interest on Federal Home Loan Bank advances                               673,836      248,511
   Interest on repurchase agreements                                         729,545      426,947
   Interest on subordinated debt                                             129,527       96,025
                                                                          ----------   ----------
                                                 TOTAL INTEREST EXPENSE    2,615,402    1,548,734
                                                                          ----------   ----------
                                                    NET INTEREST INCOME    3,261,807    3,616,307
PROVISION FOR LOAN LOSSES                                                    105,000      100,623
                                                                          ----------   ----------
                                              NET INTEREST INCOME AFTER
                                              PROVISION FOR LOAN LOSSES    3,156,807    3,515,684
                                                                          ----------   ----------
NONINTEREST INCOME
   Banking service charges and fees                                          266,979      222,164
   Trust                                                                     259,976      228,673
   Other                                                                     140,540      162,966
                                                                          ----------   ----------
                                               TOTAL NONINTEREST INCOME      667,495      613,803
                                                                          ----------   ----------
NONINTEREST EXPENSE
   Salaries                                                                1,229,096    1,128,474
   Employee benefits                                                         424,608      381,117
   Net occupancy                                                             220,675      185,491
   Equipment                                                                 119,806      101,460
   Legal fees                                                                 50,978       36,307
   Directors fees                                                             40,525       37,070
   Computer services                                                         224,846      203,709
   Supplies                                                                   39,785       43,809
   Commissions, services and fees                                            144,491       67,411
   Postage                                                                    38,255       31,501
   Advertising                                                               104,417       64,310
   Other                                                                     458,767      383,483
                                                                          ----------   ----------
                                              TOTAL NONINTEREST EXPENSE    3,096,249    2,664,142
                                                                          ----------   ----------

                                             INCOME BEFORE INCOME TAXES      728,053    1,465,345
PROVISION FOR INCOME TAXES                                                   104,693      407,710
                                                                          ----------   ----------
                                                             NET INCOME   $  623,360   $1,057,635
                                                                          ==========   ==========

INCOME PER SHARE
                                             BASIC NET INCOME PER SHARE   $      .29   $      .50
                                                                          ==========   ==========
                                           DILUTED NET INCOME PER SHARE   $      .29   $      .49
                                                                          ==========   ==========
   DIVIDENDS PER SHARE                                                    $      .15   $      .14
                                                                          ==========   ==========

 See Notes to Consolidated Financial Statements.
</TABLE>

                                               4
<PAGE>
<TABLE>
<CAPTION>

FIRST LITCHFIELD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Three months ended March 31,                                                   2006           2005
                                                                           -----------    -----------
<S>                                                                         <C>            <C>
Net income                                                                 $   623,360    $ 1,057,635
Unrealized holding losses on securities:
       Unrealized holding losses arising during the period, net of taxes    (1,219,779)    (1,517,855)
                                                                           -----------    -----------

Comprehensive loss                                                         $  (596,419)   $  (460,220)
                                                                           ===========    ===========

</TABLE>


See Notes to Consolidated Financial Statements.

                                                5
<PAGE>
<TABLE>
<CAPTION>

FIRST LITCHFIELD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three months ended March 31,                                                 2006            2005
                                                                        ------------    ------------
<S>                                                                          <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                              $    623,360    $  1,057,635
Adjustments to reconcile net income to net cash (used in)
  provided by operating activities:
       Amortization and accretion of premiums and discounts
          on investment securities, net                                       51,221          85,237
       Provision for loan losses                                             105,000         100,623
       Depreciation and amortization                                         110,315          97,006
       Deferred tax benefit on stock options exercised                            --          11,250
       Increase in accrued interest receivable                              (309,275)       (137,396)
       Decrease in other assets                                              478,938         344,696
       Increase in cash surrender value of insurance                        (102,500)        (93,084)
             Increase in deferred loan origination costs                      (2,101)        (34,602)
       Decrease in accrued expenses and other liabilities                 (3,919,749)       (146,093)
                                                                        ------------    ------------

           Net cash (used in) provided by operating activities            (2,964,791)      1,285,272
                                                                        ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Available for sale securities:
       Proceeds from maturities and principal payments                     3,665,102       5,272,477
       Purchases                                                          (1,460,865)     (3,000,000)
Held to maturity mortgage-backed securities:
       Proceeds from maturities and principal payments                         1,395           8,178
Purchase of restricted stock                                                 (30,000)             --
Net increase in loans                                                     (4,299,716)     (8,682,319)
Purchase of bank premises and equipment                                     (470,217)       (183,984)
                                                                        ------------    ------------

       Net cash used in investing activities                              (2,594,301)     (6,585,648)
                                                                        ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in savings, money market and demand deposits                (17,645,359)     (3,913,192)
Net increase in certificates of deposit                                   17,316,108       2,258,234
Net (decrease) increase in short term Federal Home Loan Bank advances    (12,313,000)     11,496,000
Proceeds from Federal Home Loan Bank advances                              7,000,000       4,000,000
Repayments on Federal Home Loan Bank advances                             (3,000,000)     (9,000,000)
Net decrease in repurchase agreements with financial institutions         (4,000,000)             --
Net increase in repurchase agreements with customers                      10,761,196       2,307,412
Proceeds from the exercise of stock options                                       --          16,052
Dividends paid on common stock                                              (320,456)       (283,592)
                                                                        ------------    ------------

       Net cash (used in) provided by financing activities                (2,201,511)      6,880,914
                                                                        ------------    ------------

       Net (decrease) increase in cash and cash equivalents               (7,760,603)      1,580,538

CASH AND CASH EQUIVALENTS, at beginning of period                         18,711,537      12,222,713
                                                                        ------------    ------------

CASH AND CASH EQUIVALENTS, at end of period                             $ 10,950,934    $ 13,803,251
                                                                        ============    ============

SUPPLEMENTAL INFORMATION

Cash paid during the period for:
       Interest on deposits and borrowings                              $  2,739,039    $  1,526,063
                                                                        ============    ============
       Income taxes                                                     $        400    $        500
                                                                        ============    ============

Non cash investing and financing activities:
       Accrued dividends declared                                       $    320,456    $    284,061
                                                                        ============    ============
</TABLE>

See Notes to Consolidated Financial Statements.


                                               6
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   The  consolidated  balance sheet at December 31, 2005 has been derived from
     the audited financial  statements at that date, but does not include all of
     the information and footnotes required by accounting  principles  generally
     accepted in the United States of America for complete financial statements.

2.   The accompanying  unaudited  consolidated  financial statements and related
     notes  have been  prepared  pursuant  to the rules and  regulations  of the
     Securities and Exchange  Commission.  Accordingly,  certain information and
     footnote  disclosures normally included in financial statements prepared in
     accordance  with  accounting  principles  generally  accepted in the United
     States of America have been omitted pursuant to such rules and regulations.
     The accompanying  financial  statements and related notes should be read in
     conjunction with the audited financial  statements of the Company and notes
     thereto for the fiscal year ended December 31, 2005.

     These  financial  statements  reflect,  in the opinion of  Management,  all
     adjustments, consisting of only normal recurring adjustments, necessary for
     a fair presentation of the Company's  financial position and the results of
     their operations and its cash flows for the periods presented.  The results
     of operations for the three months ended March 31, 2006 are not necessarily
     indicative  of the results of  operations  that may be expected  for all of
     2006.

3.   The  Company is  required  to present  basic  income per share and  diluted
     income  per share in its  statements  of  income.  Basic  income  per share
     amounts are computed by dividing net income by the weighted  average number
     of common shares outstanding.  Diluted income per share assumes exercise of
     all potential common stock in weighted average shares  outstanding,  unless
     the  effect is  antidilutive.  The  Company is also  required  to provide a
     reconciliation  of the numerator and denominator used in the computation of
     both basic and diluted income per share.

     The following is information  about the computation of net income per share
     for the  three  month  periods  ended  March 31,  2006 and  2005.  The 2005
     information  has been  restated  to give  retroactive  effect  to all stock
     dividends.

                                                      Three Months Ended
                                                        March 31, 2006
                                            ------------------------------------
                                                Net                    Per Share
                                              Income       Shares       Amount
                                              ------       ------       ------
Basic Net Income Per Share
  Income available to common shareholders   $  623,360    2,136,370   $      .29
                                                                      ==========
Effect of Dilutive Securities
  Options Outstanding                               --       11,171
Diluted Net Income Per Share
  Income available to common shareholders
                                            ----------   ----------
  plus assumed conversions                  $  623,360    2,147,541   $      .29
                                            ==========   ==========   ==========


                                                      Three Months Ended
                                                        March 31, 2005
                                            ------------------------------------
                                                Net                    Per Share
                                              Income       Shares       Amount
                                              ------       ------       ------
Basic Net Income Per Share
  Income available to common shareholders   $1,057,635    2,128,621   $      .50
                                                                      ==========
Effect of Dilutive Securities
  Options Outstanding                               --       24,586
Diluted Net Income Per Share
  Income available to common shareholders
                                            ----------   ----------
  plus assumed conversions                  $1,057,635    2,153,207   $      .49
                                            ==========   ==========   ==========

4.   Other  comprehensive  income,  which is  comprised  solely of the change in
     unrealized  gains  and  losses  on  available  for sale  securities,  is as
     follows:

                                       7
<PAGE>
<TABLE>
<CAPTION>

                                                                                      Three Months Ended
                                                                                        March 31, 2006
                                                                           ----------------------------------------

                                                                            Before-Tax        Tax       Net-of-Tax
                                                                              Amount         Effect       Amount
                                                                           -----------    -----------   -----------
<S>                                                                        <C>            <C>           <C>
Unrealized holding losses arising during the period                        $(1,848,150)   $   628,371   $(1,219,779)
Less:  reclassification adjustment for amounts recognized in net income             --             --            --
                                                                           -----------    -----------   -----------

Unrealized holding losses on available for sale securities, net of taxes   $(1,848,150)   $   628,371    (1,219,779)
                                                                           ===========    ===========   ===========
<CAPTION>
                                                                                      Three Months Ended
                                                                                        March 31, 2005
                                                                           ----------------------------------------

                                                                            Before-Tax        Tax       Net-of-Tax
                                                                              Amount         Effect       Amount
                                                                           -----------    -----------   -----------
<S>                                                                        <C>            <C>           <C>
Unrealized holding losses arising during the period                        $(2,299,780)   $   781,925   $(1,517,855)
Less:  reclassification adjustment for amounts recognized in net income             --             --            --
                                                                           -----------    -----------   -----------

Unrealized holding losses on available for sale securities, net of taxes   $(2,299,780)   $   781,925    (1,517,855)
                                                                           ===========    ===========   ===========
</TABLE>

5.   The Bank has a  noncontributory  defined  benefit pension plan (the "Plan")
     that covers  substantially  all  employees  who have  completed one year of
     service  and have  attained  age 21.  The  benefits  are  based on years of
     service  and the  employee's  compensation  during  the last five  years of
     employment. The Bank's funding policy was to contribute amounts to the Plan
     sufficient  to meet  the  minimum  funding  requirements  set  forth in the
     Employee  Retirement  Income  Security  Act of 1974,  plus such  additional
     amounts as the Bank may determine to be appropriate  from time to time. The
     actuarial  information has been calculated  using the projected unit credit
     method.  During the first  quarter of 2005,  the  Bank's  pension  plan was
     curtailed  as the Bank's  Board of  Directors  approved  the  cessation  of
     benefit  accruals under the Plan effective April 30, 2005.  Because of this
     action,  commencing  with the Plan year  beginning  November 15,  2005,  no
     further contributions will be made by the Bank.

     Components  of net  periodic  benefit cost for the three months ended March
     31:

                                         2006        2005
                                       --------    --------
     Service cost                      $     --    $     --
     Interest cost                       48,290      52,516
     Expected return on plan assets     (53,715)    (58,310)
     Amortization of unrealized loss     17,455      13,222
                                       --------    --------
     Net periodic benefit cost         $ 12,030    $  7,428
                                       ========    ========

6.   The Bank is a member of the Federal Home Loan Bank of Boston (the "FHLBB").
     As a member of the  FHLBB,  the Bank has  access to a  preapproved  line of
     credit of up to 2% of its total assets and the capacity to borrow up to 30%
     of its total assets.  In accordance  with an agreement with the FHLBB,  the
     Bank is required to maintain qualified collateral,  as defined in the FHLBB
     Statement  of  Products  Policy,  free and  clear  of  liens,  pledges  and
     encumbrances  for  the  advances.  FHLBB  stock  and  certain  loans  which
     aggregate  approximately  100%  of the  outstanding  advance  are  used  as
     collateral.  Federal  Home Loan Bank  advances  as of March 31, 2006 are as
     follows:

                      due 4/01/06         $ 4,803,000 @ 4.56%
                      due 4/17/06           7,000,000 @ 2.60%
                      due 7/18/06           4,500,000 @ 2.33%
                      due 7/16/07           4,500,000 @ 2.59%

                                       8
<PAGE>

                      due 8/27/07           5,000,000 @ 3.76%
                      due 7/18/08           4,500,000 @ 3.27%
                      due 6/24/10           5,000,000 @ 4.15%
                      due 5/29/12           5,000,000 @ 4.32%
                      due 9/04/12           5,000,000 @ 4.38%
                      due 12/14/15         20,000,000 @ 3.93%
                                        -------------
                         Total          $  65,303,000
                                        =============

     As of March 31, 2006, the Bank had borrowings under  repurchase  agreements
     with financial  institutions  totaling  $62,700,000.  This amount  includes
     borrowings:

                      due   4/23/06        $4,500,000  @ 4.87%
                      due   4/28/06         3,000,000  @ 4.90%
                      due   5/01/06         3,000,000  @ 4.73%
                      due   5/02/06         5,000,000  @ 4.68%
                      due   1/28/07         4,000,000  @ 3.60%
                      due   2/19/07        10,000,000  @ 2.74%
                      due   2/25/07         4,650,000  @ 2.40%
                      due  10/27/07         7,000,000  @ 3.26%
                      due   4/26/08         7,000,000  @ 4.19%
                      due   7/28/08         5,000,000  @ 3.25%
                      due   7/31/08         5,000,000  @ 3.27%
                      due   2/25/09         4,550,000  @ 3.20%
                                          -----------
                           Total          $62,700,000
                                          ===========

7.   A  reconciliation  of the  anticipated  income  tax  expense  (computed  by
     applying the Federal  statutory income tax rate of 34% to the income before
     taxes) to the provision  for income taxes as reported in the  statements of
     income is as follows:

<TABLE>
<CAPTION>
For the three months ended March 31,

                                                                2006                       2005
                                                       ----------------------     ----------------------
<S>                                                       <C>               <C>       <C>              <C>
Provision for income taxes at statutory Federal rate   $ 247,538           34%    $ 498,217           34%
Increase (decrease) resulting from:
   Tax exempt income                                    (160,740)         (22)      (98,544)          (7)
   Nondeductible interest expense                         12,459            2         4,174            1
   Other                                                   5,436            0         3,863            0
                                                       ----------------------     ----------------------
Provision for income taxes                             $ 104,693           14%    $ 407,710           28%
                                                       ======================     ======================
</TABLE>

8.   The amortized cost, gross  unrealized  gains,  gross unrealized  losses and
     approximate fair values of securities which are classified as available for
     sale and held to maturity at March 31,  2006 and  December  31, 2005 are as
     follows:

<TABLE>
<CAPTION>
AVAILABLE FOR SALE                                              March 31, 2006
                                        ---------------------------------------------------------------
                                                            Gross           Gross
                                          Amortized      Unrealized       Unrealized          Fair
                                            Cost            Gains           Losses            Value
                                        -------------   -------------    -------------    -------------
<S>                                        <C>                  <C>         <C>              <C>
Debt Securities:
   U.S. Treasury securities             $   4,293,062   $          --    $     (63,099)   $   4,229,963
    U.S. Government Agency securities      57,959,668           1,260       (1,873,796)      56,087,132
    State and Municipal Obligations        33,919,502         161,484         (448,814)      33,632,172
   Corporate and Other Bonds                7,377,473          18,750          (57,473)       7,338,750
                                        -------------   -------------    -------------    -------------
                                          103,549,705         181,494       (2,443,182)     101,288,017
                                        -------------   -------------    -------------    -------------

                                       9
<PAGE>


Mortgage-Backed Securities:
   GNMA                                     4,840,265              --          (63,281)       4,776,984
   FNMA                                    56,373,356           2,133       (2,794,682)      53,580,807
   FHLMC                                   18,109,088           1,075         (886,392)      17,223,771
                                        -------------   -------------    -------------    -------------
                                           79,322,709           3,208       (3,744,355)      75,581,562
                                        -------------   -------------    -------------    -------------

Marketable Equity Securities                2,000,000              --          (72,829)       1,927,171
                                        -------------   -------------    -------------    -------------

Total available for sale securities     $ 184,872,414   $     184,702    $  (6,260,366)   $ 178,796,750
                                        =============   =============    =============    =============
<CAPTION>

AVAILABLE FOR SALE                                             December 31, 2005
                                        ---------------------------------------------------------------
                                                            Gross           Gross
                                          Amortized      Unrealized       Unrealized          Fair
                                            Cost            Gains           Losses            Value
                                        -------------   -------------    -------------    -------------
<S>                                        <C>                  <C>         <C>              <C>
Value
Debt Securities:
   U.S. Treasury securities             $   4,292,659   $          --    $     (58,746)   $   4,233,913
    U.S. Government Agency securities      57,955,558         125,130       (1,319,233)      56,761,455
    State and Municipal Obligations        34,727,011         255,067         (238,212)      34,743,866
   Corporate and Other Bonds                5,916,080           7,457          (21,037)       5,902,500
                                        -------------   -------------    -------------    -------------

                                          102,891,308         387,654       (1,637,228)     101,641,734
                                        -------------   -------------    -------------    -------------

Mortgage-Backed Securities:
   GNMA                                     5,142,926              --         (107,149)       5,035,777
   FNMA                                    58,192,401          26,658       (2,153,239)      56,065,820
   FHLMC                                   18,901,237           3,865         (712,594)      18,192,508
                                        -------------   -------------    -------------    -------------
                                           82,236,564          30,523       (2,972,982)      79,294,105
                                        -------------   -------------    -------------    -------------

Marketable Equity Securities                2,000,000              --          (35,481)       1,964,519
                                        -------------   -------------    -------------    -------------

Total available for sale securities     $ 187,127,872   $     418,177    $  (4,645,691)   $ 182,900,358
                                        =============   =============    =============    =============

<CAPTION>

HELD TO MATURITY                                                March 31, 2006
                                        ---------------------------------------------------------------
                                                            Gross            Gross
                                          Amortized       Unrealized      Unrealized         Fair
                                             Cost           Gains           Losses           Value
                                        -------------   -------------   -------------    -------------
<S>                                        <C>                  <C>         <C>              <C>
Mortgage-Backed Securities:
GNMA                                    $      47,640   $          --   $        (797)   $      46,843
                                        =============   =============   =============    =============

<CAPTION>

HELD TO MATURITY                                               December 31, 2005
                                        ---------------------------------------------------------------
                                                            Gross            Gross
                                          Amortized       Unrealized      Unrealized         Fair
                                             Cost           Gains           Losses           Value
                                        -------------   -------------   -------------    -------------
<S>                                        <C>                  <C>         <C>              <C>
Mortgage-Backed Securities:
GNMA                                    $      49,035   $          --   $      (1,102)   $      47,933
                                        =============   =============   =============    =============
</TABLE>

     At March 31, 2006,  gross  unrealized  holding losses on available for sale
     and held to maturity securities totaled $6,261,163.  Of the securities with
     unrealized  losses,  there were forty-three  securities that have been in a
     continuous  unrealized loss position for a period of twelve months or more.
     The unrealized losses on these securities  totaled  $4,746,563 at March 31,
     2006.  Management  does not believe that any of the  unrealized  losses are
     other than temporary as they relate  primarily to debt and  mortgage-backed
     securities  issued  by  U.S.  Government  and  U.S.  Government   sponsored
     agencies,  and are due to changes in the  interest  rate  environment.  The
     Company has both the intent and the ability to hold these  securities until
     maturity or until the fair value fully  recovers.  In addition,  management

                                       10
<PAGE>

     considers the issuers of the  securities to be  financially  sound and that
     the Company will receive all contractual  principal and interest related to
     these investments.  As a result,  management believes that these unrealized
     losses  will not have a negative  impact on future  earnings or a permanent
     effect on capital.  However,  management  periodically evaluates investment
     alternatives to properly  manage the overall  balance sheet.  The timing of
     sales and reinvestments is based on various factors, including management's
     evaluation of interest rate risks and liquidity needs.

9.   A summary of the Bank's loan  portfolio  at March 31, 2006 and December 31,
     2005 is as follows:

                                                2006             2005
                                           -------------    -------------
     Real estate--residential mortgage     $ 147,181,196    $ 145,927,290
     Real estate--commercial mortgage         42,351,845       42,144,448
     Real estate--construction                31,389,588       28,549,180
     Commercial                               20,379,329       21,150,306
     Installment                               4,849,916        4,334,274
     Other                                       304,181           47,091
                                           -------------    -------------
                      TOTAL LOANS            246,456,055      242,152,589
     Net deferred loan origination costs         290,862          288,761
     Allowance for loan losses                (1,868,361)      (1,759,611)
                                           -------------    -------------
                      NET LOANS            $ 244,878,556    $ 240,681,739
                                           =============    =============


10.  A summary of the Bank's deposits at March 31, 2006 and December 31, 2005 is
     as follows:

                                                         2006          2005
                                                    ---------------------------
 Noninterest bearing:
     Demand                                         $ 60,823,081   $ 66,907,502
                                                    ------------   ------------
 Interest bearing:
     Savings                                          44,930,498     48,502,205
     Money market                                     71,252,765     79,241,996
     Time certificates of deposit in
       denominations of $100,000 or more              40,342,987     27,134,125
     Other time certificates of deposit               60,191,779     56,084,533
                                                    ------------   ------------
          Total Interest bearing deposits            216,718,029    210,962,859
                                                    ------------   ------------
                                   TOTAL DEPOSITS   $277,541,110   $277,870,361
                                                    ============   ============

     Included  in  deposits  as of March  31,  2006 and  December  31,  2005 are
     approximately $3,225,000 and $3,073,000, respectively, of brokered deposits
     which have varying maturities through May 2007.

11.  At December  31,  2005,  the Company had one fixed  option  plan,  which is
     described below. Effective January 1, 2006, the Company adopted SFAS No.123
     (revised),  `Share-Based  Payment"  (SFAS  123(R))  utilizing  the modified
     prospective  approach.  Prior to the adoption of SFAS  123(R),  the Company
     accounted for stock option  grants in  accordance  with APB Opinion No. 25,
     "Accounting  for Stock Issued to Employees"  (the intrinsic  value method),
     and  accordingly,  recognized  no  compensation  expense  for stock  option
     grants.  Because there were no  share-based  awards at January 1, 2006, the
     adoption of this statement had no initial effect on the Company's financial
     statements.

     A stock option plan for officers and outside  directors was approved by the
     shareholders  during 1994. The price and number of options in the plan have
     been adjusted for all stock dividends and splits.

     The stock option plan for directors  automatically granted each director an
     initial  option of 3,376 shares of the Company's  common  stock.  Automatic
     annual grants of an additional  573 shares for each director were given for
     each of the four following years.

     The stock option plan for officers  grants  options  based upon  individual
     officer performance.

                                       11
<PAGE>

     Under  both the  director  and  officer  plans,  the price per share of the
     option is the fair market value of the  Company's  stock at the date of the
     grant.  No option may be  exercised  until 12 months after it is granted at
     which time options fully vest.  Options are exercisable for a period of ten
     years from the grant thereof.

     Activity in the option plan for  officers  and  outside  directors  for the
     three months ended March 31, 2006,  2005 and 2004 is summarized as follows:
     (The  number of shares  and price  per  share  have been  adjusted  to give
     retroactive effect to all stock dividends and splits.)

<TABLE>
<CAPTION>
                                                  2006                          2005                           2004
                                      -----------------------------  -----------------------------  ----------------------------
                                                       Weighted                      Weighted                       Weighted
                                       Number of   Average Exercise   Number of   Average Exercise  Number of   Average Exercise
                                         Shares     Price Per Share    Shares     Price Per Share     Shares     Price Per Share
                                       ----------------------------  -----------------------------  ----------------------------
<S>                                          <C>      <C>                  <C>      <C>                  <C>      <C>
Options outstanding at the
   beginning of the year                     28,965   $      10.74         38,608   $       9.96         74,110   $       8.98
      Granted                                    --             --             --             --             --             --
      Exercised                                  --             --          1,719           9.34         15,161           6.04
      Cancelled                                  --             --             --             --             --             --
                                       ----------------------------  -----------------------------  --------------------------
Options outstanding and
    exercisable at end of the period         28,965   $      10.74         36,889   $       9.99         58,949   $       9.74
                                       ============================  =============================  ==========================
</TABLE>

     The intrinsic  value of options  outstanding  and  exercisable at March 31,
     2006, 2005 and 2004 is $471,099, $685,290 and $695,996, respectively. There
     were no options exercised during the three months ended March 31, 2006. The
     intrinsic  value of options  exercised  during the three months ended March
     31, 2005 and 2004 was $33,088 and $205,584, respectively.

     There are no pro forma  disclosures  required  for the three  months  ended
     March 31, 2006, 2005 and 2004 because there was no share-based compensation
     attributed  to those  periods,  as no awards were granted or vested  during
     those periods.

                                       12
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

First Litchfield Financial  Corporation (the "Company"),  a Delaware corporation
formed in 1988, is the one-bank  holding  company for The First National Bank of
Litchfield  (the "Bank"),  a national bank supervised and examined by the Office
of the  Comptroller  of the  Currency  (the  "OCC").  The Bank is the  Company's
primary subsidiary and only source of income. The Bank has two subsidiaries, The
Lincoln  Corporation  and Litchfield  Mortgage  Service  Corporation,  which are
Connecticut  corporations.  The  purpose of The Lincoln  Corporation  is to hold
property such as real estate,  personal property,  securities,  or other assets,
acquired by the Bank through  foreclosure  or otherwise to compromise a doubtful
claim or  collect  a debt  previously  contracted.  The  purpose  of  Litchfield
Mortgage Service  Corporation is to operate as a passive  investment  company in
accordance with Connecticut law.

Both the Company and the Bank are headquartered in Litchfield,  Connecticut. The
Bank is a full-service  commercial bank serving both  individuals and businesses
generally  within  Litchfield  County  Connecticut.  Deposits  are insured up to
specific limits of the Federal Deposit Insurance Act by the Bank Insurance Fund,
which is administered by the Federal Deposit Insurance  Corporation.  The Bank's
lending   activities   include  loans  secured  by  residential  and  commercial
mortgages.  Other  loan  products  include  consumer  and  business  installment
lending,  as well as other secured and  nonsecured  lending.  The Bank has eight
banking  locations located in the towns of Torrington,  Litchfield,  Washington,
Marble  Dale,  Goshen and Roxbury,  Connecticut.  The newest  banking  facility,
located in Canton, Connecticut,  opened in February of 2006. On May 9, 2006, the
OCC  approved  the  Bank's  application  to open a full  service  branch  in New
Milford,  Connecticut.  The office is scheduled to open in July,  2006. In 1975,
the Bank was  granted  Trust  powers by the OCC.  The  Bank's  Trust  Department
provides trust and fiduciary  services to individuals,  nonprofit  organizations
and  commercial  customers.  Additionally,  the Bank  offers  nondeposit  retail
investment  products such as mutual funds,  annuities and insurance  through its
relationship with Infinex Investments, Inc.

During the second quarter of 2003, the Company formed a statutory  trust,  First
Litchfield Statutory Trust I. The Company owns 100% of the Trust's common stock.
The Trust  has no  independent  assets or  operations  and  exists  for the sole
purpose of issuing trust  securities and investing the proceeds in  subordinated
debentures  issued by the Company.  On June 26, 2003, the Trust issued its first
series of trust preferred securities.

As of March 31, 2006, the Company had total assets of $460,843,267,  which was a
decrease of  approximately  $6.7 million or 1.4% from year-end 2005 total assets
of  $467,560,946.  The decrease in assets resulted mainly from decreases in cash
and due from banks and the securities portfolio.  The decrease in assets enabled
the Company to decrease its level of Federal Home Loan Bank advances.

The following  discussion and analysis of the Company's  consolidated  financial
condition  and  results of  operations  should be read in  conjunction  with the
consolidated  financial  statements  and  notes  to the  consolidated  financial
statements.

                                       13
<PAGE>

FINANCIAL CONDITION

Total assets as of March 31, 2006 were $460,843,267, a decrease of $6,717,679 or
1.4% from year-end 2005 total assets of $467,560,946.

Consistent with management's  intent to shift the mix of earning assets from the
securities  portfolio into the loan portfolio,  net loans  increased  $4,196,817
over the year-end 2005 amount.  Net loans as of March 31, 2006 were $244,878,556
as compared to the  year-end  2005 level of  $240,681,739.  First  quarter  2006
growth was in residential mortgage loans and in construction mortgage loans. The
residential mortgage loan portfolio totaled $147,181,196,  which was an increase
of  $1,253,906  from  year-end  2005.  Growth  in these  mortgage  products  was
primarily in fixed rate loans.  Commercial  mortgage  loans totaled  $42,351,845
remaining  within  1% of their  year-end  balance  and were 17% of total  loans.
During the first three months of 2006,  construction mortgage loans increased by
$2,840,408, or 10.0%, and totaled $31,389,588 as of March 31, 2006. The increase
in the construction  mortgage portfolio was primarily in residential real estate
loans.  This  growth is the  result of the  popularity  of the  construction  to
permanent mortgage product as well as a streamlined  application process and the
addition of mortgage  originators  for the Bank. The  commercial  loan portfolio
decreased $770,977 or 3.6% from its year-end 2005 balance.

As of March 31, 2006, the securities portfolio totaled $178,844,390,  which is a
2.2%  decrease  from the year-end  2005  balance.  The decrease in the portfolio
resulted   primarily  from  principal   payments  received  on   mortgage-backed
securities as well as called state and municipal security.  Liquidity from these
securities was utilized to fund the loan portfolio growth.

Cash and cash equivalents totaled $10,950,934, which is a decrease of $7,760,603
or 41.5% from  year-end  2005.  High  dollar  transactions  included in the cash
letter activity of December 31, 2005 is the cause of this decrease.  As of March
31, 2006 and December 31, 2005, there were no investments in Federal Funds Sold.

Total  liabilities were  $435,790,405 as of March 31, 2006, which was a decrease
of $5,800,804 from total  liabilities of $441,591,209 as of year-end 2005. Total
deposits remained very close to their year-end levels.  However, demand deposits
declined by  $6,084,421  or 9.1%,  and interest  bearing  deposits  increased by
nearly the same amount of $5,755,170. The decrease in demand deposits was due to
customers moving deposits into certificates of deposits and customer  repurchase
agreements.  Similarly,  decreases  experienced in both savings and money market
deposits were the result of the same movement. During the first quarter of 2006,
the Bank offered a certificate  of deposit with no penalty  withdrawal  and open
deposit   features.   The  popularity  of  this  deposit  product   resulted  in
certificates of deposits below $100,000 in denomination increasing by $4,107,246
or 7.3% and  certificates  of deposit in  denominations  of  $100,000  and above
increasing by $13,208,862 or 48.7%.

As of March 31, 2006,  repurchase agreements with customers totaled $20,735,368,
which was an increase of  $10,761,196  from the  year-end  2005  balance.  These
accounts  represent  overnight  investments  by commercial  and  municipal  cash
management customers. The growth of these balances enabled the Company to reduce
its Federal Home Loan Bank borrowings, as well as it borrowings under repurchase
agreements with financial institutions during the first quarter.  Advances under
Federal Home Loan Bank  borrowings  decreased  by  $8,313,000  while  repurchase
agreements  with  financial  institutions  decreased by  $4,000,000.  Management
considers  interest rate levels,  the yield curve and the Company's  current and
future  liquidity  needs in determining the funding  structures  utilized by the
Bank.

                                       14
<PAGE>

RESULTS OF OPERATIONS

Summary

Net income for the Company for the first quarter of 2006 totaled $623,360. These
earnings  are $434,275 or 41.1% below  earnings  for the first  quarter of 2005,
which  totaled  $1,057,635.  Basic and  diluted  income  per share for the first
quarter of 2006 were both $.29,  compared to basic and diluted  income per share
of $.50 and $.49,  respectively,  for the first quarter of 2005.  Decline in net
income is due to a decrease in net interest  income caused by the compression of
our interest rate spread and an increase in non-interest  expenses due mainly to
the opening of our new branch in Canton,  Connecticut.  For the first quarter of
2006,  the return on average  equity for the Company  totaled 9.61%  compared to
17.06% earned for the first quarter of 2005.

Net Interest Income

Net interest  income is the single  largest  source of the Company's net income.
Net interest income is defined as the difference  between  interest and dividend
income from earning  assets,  primarily  loans and  investment  securities,  and
interest expense on deposits and borrowed money.  Interest income is the product
of the average balances  outstanding on loans,  securities and  interest-bearing
deposit  accounts  multiplied by their  effective  yields.  Interest  expense is
similarly  calculated as the result of the average balances of  interest-bearing
deposits and borrowed funds multiplied by the average rates paid on those funds.
Other  components  of  operating  income  are the  provision  for  loan  losses,
noninterest income such as service charges and trust fees,  noninterest expenses
and income taxes.

Net interest  income is comprised  of the  following  for the three months ended
March 31,

                                     2006           2005
                                 -----------    -----------

Interest and dividend income     $ 5,877,209    $ 5,165,041
Tax-equivalent adjustments (1)       171,865         95,032
Interest expense                  (2,615,402)    (1,548,734)
                                 -----------    -----------
Net interest income              $ 3,433,672    $ 3,711,339
                                 ===========    ===========

(1)  Interest  income is presented on a  tax-equivalent  basis which  reflects a
federal tax rate of 34% for all periods presented.

The  following  table  presents the  Company's  average  balance  sheet  amounts
(computed on a daily  basis),  net interest  income,  interest  rates,  interest
spread and net  interest  margin for the three  months  ended March 31, 2006 and
2005. Average loans outstanding include nonaccruing loans.

<TABLE>
<CAPTION>
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL

                                           Three months ended March 31, 2006              Three months ended March 31, 2005
                                      --------------------------------------------------------------------------------------------
                                                         Interest                                      Interest
                                         Average          Earned/       Yield/          Average         Earned/         Yield/
                                         Balance           Paid          Rate           Balance          Paid            Rate
                                      -------------   -------------  -------------   -------------   -------------   -------------
<S>                                         <C>               <C>             <C>        <C>                 <C>              <C>
Assets
Interest Earning Assets:
Loans                                 $ 243,702,000   $   3,824,959           6.28%  $ 223,545,000   $   3,286,022            5.88%
Investment Securities                   190,676,000       2,222,721           4.66%    177,607,000       1,966,626            4.43%
Other interest earning assets               450,000           1,394           1.24%      2,875,000           7,425            1.03%
                                      -------------   -------------  -------------   -------------   -------------   -------------

Total interest earning assets           434,828,000       6,049,074           5.56%    404,027,000       5,260,073            5.21%
                                      -------------   -------------  -------------   -------------   -------------   -------------

Allowance for loan losses                (1,800,000)                                    (1,426,000)
Cash and due from banks                  14,283,000                                     14,272,000
Bank premises and equipment               4,489,000                                      2,826,000
Net unrealized loss on
  securities                             (4,506,000)                                    (2,200,000)
Other assets                             16,055,000                                     14,704,000
                                      -------------                                  -------------

                                       15
<PAGE>

Total Average Assets                  $ 463,349,000                                  $ 432,203,000
                                      =============                                  =============



Liabilities and Shareholders' Equity
Interest Bearing Liabilities:
Savings deposits                      $  47,083,000          24,628            .21%  $  57,964,000          29,565             .20%
Money Market deposits                    75,026,000         302,286           1.61%    100,325,000         239,858             .96%
Time deposits                            91,730,000         755,580           3.29%     86,618,000         507,828            2.35%
Borrowed funds                          160,700,000       1,532,908           3.82%    103,523,000         771,483            2.98%
                                      -------------   -------------                  -------------   -------------

Total interest bearing liabilities      374,539,000       2,615,402           2.79%    348,430,000       1,548,734            1.78%
                                                      -------------  -------------                   -------------   -------------

Demand deposits                          60,620,000                                     57,157,000
Other liabilities                         2,231,000                                      1,813,000
Shareholders' Equity                     25,959,000                                     24,803,000
                                      -------------                                  -------------

Total liabilities and equity          $ 463,349,000                                  $ 432,203,000
                                      =============                                  =============

Net interest income                                   $   3,433,672                                  $   3,711,339
                                                      =============                                  =============
Net interest spread                                                           2.77%                                           3.43%
                                                                     =============                                   =============
Net interest margin                                                           3.16%                                           3.67%
                                                                     =============                                   =============
</TABLE>

RATE/VOLUME ANALYSIS
The following table, which is presented on a tax-equivalent  basis, reflects the
changes for the three  months  ended  March 31, 2006 when  compared to the three
months  ended March 31, 2005 in net  interest  income  arising  from  changes in
interest  rates and from asset and liability  volume mix. The change in interest
attributable  to both rate and volume has been  allocated  to the changes in the
rate and the volume on a pro rata basis.

<TABLE>
<CAPTION>
                                                  3/31/06 Compared to 3/31/05
                                                  Increase (Decrease) Due to
                                            ---------------------------------------

                                               Volume         Rate         Total
                                            -----------   -----------   -----------
<S>                                             <C>           <C>           <C>
Interest earned on:
Loans                                       $   307,760   $   231,177   $   538,937
Investment securities                           149,158       106,937       256,095
Other interest income                            (7,274)        1,243        (6,031)
                                            -----------   -----------   -----------
Total interest earning assets                   449,644       339,357       789,001
                                            -----------   -----------   -----------

Interest paid on:
Deposits                                       (108,909)      414,152       305,243
Borrowed money                                  505,271       256,154       761,425
                                            -----------   -----------   -----------
Total interest bearing liabilities              396,362       670,306     1,066,668
                                            -----------   -----------   -----------

Increase (decrease) in net interest income  $    53,282   $  (330,949)  $  (277,667)
                                            ===========   ===========   ===========
</TABLE>

Tax-equivalent  net  interest  income  for the  first  quarter  of 2006  totaled
$3,433,672,  a decrease of $277,667 or 7.5% from the first  quarter of 2005.  Of
the  decrease  in net  interest  income,  $330,949  is due to the erosion of net
interest  spread,  while the effect of increased  volume of earning  assets over
interest bearing liabilities offset this decrease by $53,282.

The net interest  spread  decreased by 66 basis points from the first quarter of
2005.  Higher  short term rates  increased  overall  funding  costs by 101 basis
points.  The total  rate paid on all  interest  bearing  deposits  for the first
quarter of 2006 was 2.03%, up 76 basis points compared to the first quarter 2005
cost of 1.27%.  However, the continued flattening of the yield curve resulted in
considerably  less than a  comparable  increase in the yield on earning  assets.
Because  most of the  Company's  assets  are of a long term  nature and rates on
products such as mortgages and  mortgage-backed  securities  remained  flat, the
yield on earning assets increased by only 35 basis points over the first quarter
of  2005.  Average  earning  assets  for  the  first  quarter  of  2006  totaled
$434,828,000,  $30,801,000  or 7.6% greater than average  earning assets for the
first  quarter of 2005 which  totaled  $404,027,000.  This  increase  in earning
assets,  in both loans and  investment  securities,  net of increased  volume of
interest  bearing  liabilities,  contributed  to an  additional  $53,282  in net
interest income.

                                       16
<PAGE>

Provision for Loan Losses

The provision  for loan losses for the first  quarter of 2006 totaled  $105,000,
which is an increase of $4,377 over the provision for the first quarter of 2005.
The provision for loan losses is  determined  quarterly and assessed  along with
the  adequacy of the loan loss  reserve.  (See page 20 for a  discussion  of the
Allowance for Loan Losses.)

During the first quarter of 2006, the Company  recorded net recoveries of $3,750
compared to first quarter 2005 net charge-offs of $485.  Recovery and charge-off
activity, although minimal, is related to consumer loans, including credit card,
overdraft and installment debt.

Noninterest Income

Noninterest  income for the first quarter of 2006 totaled  $667,495,  increasing
$53,692 or 8.8% from the first  quarter  2005 income of  $613,803.  Trust income
increased  $31,303 or 13.7% from the first quarter of 2005. This increase is the
result of an  increased  volume of  investments  under  management.  Income from
banking  service  charges and fees  increased by $44,815 or 20.2% from the first
quarter of 2005.  This  increase  is due to higher  levels of deposit  overdraft
charges,  master money  interchange  fees and loan  referral  fees and increased
income from the Bank's cash management product. Other noninterest income totaled
$140,540,  which was a decrease  of  $22,426 or 13.8% from the first  quarter of
2005.  This  decline is mostly  related to lower  levels of fee income  from the
Bank's retail sales of non-deposit investment products.

Noninterest Expense

First quarter 2006 noninterest expense totaled  $3,096,249,  increasing 16.2% or
$432,107  from the  first  quarter  2005  expense  of  $2,664,142.  Much of this
increase is related to the Bank's Canton,  Connecticut  branch,  which opened in
February of 2006.  Salaries and  benefits  expense  increased  by $144,113,  due
mostly to staffing for the new Canton branch. Similarly, costs for occupancy and
equipment  reflect increases due to the Canton branch as well as to increases in
maintenance and utility costs. Advertising expense totaled $104,417, which was a
$40,107 or 62.4% increase from the first quarter of 2005.  Much of this increase
also relates to the new branch opening,  however,  costs for deposit  promotions
also  increased  this expense.  Postage  expenses also  increased.  Commissions,
services and fees expense totaled $144,491 which was an increase of $77,080 over
first quarter 2005 expense.  This increase  relates  primarily to one time costs
incurred for core processor due diligence services.  Costs for external computer
services  increased by $21,137 or 10.4%, due to costs for ancillary  services as
well as for new trust products.

Other  noninterest  expenses totaled $458,767 which is an increase of $75,284 or
19.6% from the first quarter of 2005. Costs for computer software and technology
consulting for new products  contributed to this increase.  Increased regulatory
requirements  led to higher costs for both internal and external audit services.
Correspondent  bank services,  travel and courier expenses  increased from first
quarter of 2005 due to increased costs, as well as to the Company's growth.

Income Taxes

The first quarter 2006 provision for income taxes totaled  $104,693,  which is a
decrease of $303,017 or 74.3% from the first  quarter of 2005.  The  decrease in
income tax expense is due to the lower level of taxable  income.  Pretax  income
totaled  $728,053  in the first  quarter of 2006 which was 50.3% lower than that
for the first quarter of 2005. Additionally, the Company's effective tax rate of
14% for the first quarter of 2006 was considerably  lower than the effective tax
rate of 28% for the first  quarter of 2005.  The decrease in the  effective  tax
rate is due to a  proportionately  higher level of non-taxable  income from both
state and municipal investments as well as that from bank owned life insurance.

                                       17
<PAGE>

LIQUIDITY

Management's  objective  is to ensure  continuous  ability to meet cash needs as
they arise.  Such needs may occur from time to time as a result of  fluctuations
in loan  demand  and the level of total  deposits.  Accordingly,  the Bank has a
liquidity  policy that provides  flexibility  to meet cash needs.  The liquidity
objective is achieved through the maintenance of readily  marketable  investment
securities as well as a balanced flow of asset maturities and prudent pricing on
loan and deposit products.

The Bank is a member of the Federal Home Loan Bank system, which provides credit
to its  member  banks.  This  enhances  the  liquidity  position  of the Bank by
providing a source of  available  overnight  as well as  short-term  borrowings.
Additionally, federal funds, borrowings through the use of repurchase agreements
and the sale of mortgage  loans in the  secondary  market are  available to fund
short term cash needs. . [See note 6 to the  Consolidated  Financial  Statements
for information on Federal Home Loan Bank borrowings and repurchase agreements.]

As of March 31, 2006, the Company had $83,319,981 in loan commitments and credit
lines outstanding. Because some commitments are expected to expire without being
drawn upon,  the total  commitment  amount does not  necessarily  represent  all
future cash requirements. The funding of these commitments are anticipated to be
met through deposits, loan and security amortizations and maturities. Management
believes liquidity is adequate to meet its present and foreseeable needs.

CAPITAL

At March 31,  2006,  total  shareholders'  equity was  $25,052,862  compared  to
$25,969,737  at December 31, 2005.  From a regulatory  perspective,  the capital
ratios of the Company  and the Bank place each entity in the  "well-capitalized"
categories  under  applicable  regulations.  The various  capital  ratios of the
Company and the Bank are as follows as of March 31, 2006:

                                               Minimum
                                            Regulatory
                                        Capital Levels   The Company   The Bank
                                        --------------   -----------   --------
TIER 1:
  Leverage capital ratio                            4%         7.73%      7.05%

  Risk-based capital ratio                          4%        13.33%     12.19%

  Total risk-based capital ratio                    8%        14.03%     12.89%

ALLOWANCE FOR LOAN LOSSES AND CRITICAL ACCOUNTING POLICIES

In the ordinary course of business,  the Bank has made a number of estimates and
assumptions  relating  to the  reporting  results of  operations  and  financial
condition in preparing its financial  statements in conformity  with  accounting
principles  generally  accepted in the United States of America.  Actual results
could differ significantly from those estimates under different  assumptions and
conditions.  The Company believes the following  discussion addresses the Bank's
only critical  accounting policy,  which is the policy that is most important to
the portrayal of the Bank's  financial  results and requires  management's  most
difficult,  subjective and complex  judgments,  often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.

The Bank makes  provisions for loan losses on a quarterly basis as determined by
a continuing  assessment of the adequacy of the  allowance for loan losses.  The
Bank performs an ongoing review of loans in

                                       18
<PAGE>

accordance  with an  individual  loan rating  system to  determine  the required
allowance for loan losses at any given date. The review of loans is performed to
estimate potential exposure to losses.  Management's judgment in determining the
adequacy of the allowance is inherently subjective and is based on an evaluation
of the known and inherent risk  characteristics and size of the loan portfolios,
the assessment of current economic and real estate market conditions,  estimates
of the current value of underlying collateral, past loan loss experience, review
of regulatory  authority  examination reports and evaluations of impaired loans,
and other relevant factors. Loans, including impaired loans, are charged against
the allowance for loan losses when management believes that the uncollectibility
of  principal  is  confirmed.  Any  subsequent  recoveries  are  credited to the
allowance for loan losses when received. In connection with the determination of
the  allowance  for loan losses and the  valuation  of  foreclosed  real estate,
management  obtains  independent  appraisals for  significant  properties,  when
considered necessary.

The allowance  consists of specific,  general and  unallocated  components.  The
specific  component  relates to loans that are  classified  as either  doubtful,
substandard  or special  mention.  For such loans  that are also  classified  as
impaired,  an  allowance  is  established  when the  discounted  cash  flows (or
collateral value or observable  market price) of the impaired loan is lower than
the carrying value of that loan.  The general  component  covers  non-classified
loans  and is based on  historical  loss  experience  adjusted  for  qualitative
factors.  An  unallocated  component is maintained to cover  uncertainties  that
could affect management's estimate or probable losses. The unallocated component
of the allowance  reflects the margin of imprecision  inherent in the underlying
assumptions.

There were no material changes in loan  concentration or loan quality that had a
significant  effect on the  allowance for loan losses  calculation  at March 31,
2006. In addition,  there were no material changes in the estimation methods and
assumptions  used in the Company's  allowance for loan losses  calculation,  and
there were no material  reallocations  of the allowance among different parts of
the loan portfolio.

At March 31, 2006, the allowance for loan losses was equivalent to 516% of total
non-performing  assets as compared with 644% of total  non-performing  assets at
December 31, 2005.  Both  comparisons  are  favorably  impacted by the excellent
asset quality of the loan  portfolio  and extremely low level of  non-performing
assets. As of March 31, 2006, non-performing assets were .15% of total loans. As
of December 31, 2005,  non-performing  assets  totaled .11% of total loans.  The
ratio of the allowance for loan losses to total loans at March 31, 2006 was .76%
as compared to .73% as of December 31, 2005.

Changes in the  allowance  for loan losses for the periods  ended March 31, 2006
and 2005 are as shown below:

For the three months ended March 31,            2006          2005
                                            -----------   -----------

Balance at beginning of the year            $ 1,759,611   $ 1,389,947
Provision for loan losses                       105,000       100,623
Loans charged-off                                (1,798)       (7,007)
Recoveries of loans previously charged-off        5,548         6,522
                                            -----------   -----------

Balance at end of period                    $ 1,868,361   $ 1,490,085
                                            ===========   ===========

The following table  summarizes the Bank's OREO, past due and nonaccrual  loans,
and nonperforming assets as of March 31, 2006 and December 31, 2005.

                                               March 31, 2006  December 31, 2005
                                               --------------  -----------------

Nonaccrual loans                              $       362,213   $       273,330

Other real estate owned                                    --                --
                                              ---------------   ---------------

Total nonperforming assets                    $       362,213   $       273,330
                                              ===============   ===============

Loans past due in excess of 90 days and
  accruing interest                           $        68,269   $         4,884
                                              ===============   ===============

                                       19
<PAGE>

POTENTIAL PROBLEM LOANS

As of March 31, 2006, there were no potential problem loans not disclosed above,
which  cause  management  to  have  serious  doubts  as to the  ability  of such
borrowers to comply with their present loan repayment terms.

OFF BALANCE SHEET ARRANGEMENTS

The Company is a party to financial  instruments with off-balance  sheet risk in
the normal course of business to meet the financing  needs of its customers such
as letters of credit.  In the opinion of  management,  these  off-balance  sheet
arrangements are not likely to have a material effect on the Company's financial
condition, results of operation, or liquidity.

At March 31,  2006,  there have been no  significant  changes  in the  Company's
off-balance sheet arrangements from December 31, 2005.

FORWARD-LOOKING STATEMENTS

This Quarterly Report and future filings made by the Company with the Securities
and Exchange  Commission,  as well as other filings,  reports and press releases
made or  issued  by the  Company  and the  Bank,  and  oral  statements  made by
executive  officers  of  the  Company  and  Bank,  may  include  forward-looking
statements  relating  to  such  matters  as (a)  assumptions  concerning  future
economic and business  conditions and their effect on the economy in general and
on the  markets  in  which  the  Company  and  the  Bank  do  business,  and (b)
expectations  for  increased  revenues  and  earnings  for the  Company and Bank
through growth resulting from acquisitions,  attractions of new deposit and loan
customers   and  the   introduction   of  new   products  and   services.   Such
forward-looking  statements are based on assumptions  rather than  historical or
current facts and, therefore,  are inherently uncertain and subject to risk. For
those  statements,  the  Company  claims the  protection  of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.

The Company  notes that a variety of factors  could cause the actual  results or
experience  to  differ   materially  from  the  anticipated   results  or  other
expectations described or implied by such forward-looking  statements. The risks
and uncertainties that may affect the operations,  performance,  development and
results of the Company's and Bank's business include the following: (a) the risk
of adverse changes in business  conditions in the banking industry generally and
in the  specific  markets  in  which  the  Bank  operates;  (b)  changes  in the
legislative and regulatory  environment  that negatively  impact the Company and
Bank through increased operating expenses;  (c) increased competition from other
financial  and  nonfinancial  institutions;  (d)  the  impact  of  technological
advances;  and (e)  other  risks  detailed  from  time to time in the  Company's
filings with the Securities and Exchange  Commission.  Such  developments  could
have an adverse  impact on the Company  and the Bank's  financial  position  and
results of operation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT  MARKET RISK

The main components of market risk for the Company are equity price risk, credit
risk, interest rate risk and liquidity risk.

The  Company  manages  interest  rate risk and  liquidity  risk  through an ALCO
Committee  comprised of senior  management  and other  officers.  The  committee
monitors  compliance  with the  Bank's  Asset/Liability  Policy  which  provides
guidelines to analyze and manage gap, which is the difference

                                       20
<PAGE>

between  the amount of assets and the  amounts of  liabilities  which  mature or
reprice during specific time frames.  The Company manages its interest-rate risk
sensitivity  through the use of a simulation  model that  projects the impact of
rate shocks,  rate cycles and rate  forecast  estimates on net interest  income.
These   simulations  take  into   consideration   factors  such  as  maturities,
reinvestment rates,  prepayment speeds,  repricing limits and other factors. The
results of these simulations are compared to earnings tolerance limits set forth
in the Bank's Asset/Liability Policy.

ITEM 4.  CONTROLS AND PROCEDURES

The Company  maintains  disclosure  controls and procedures that are designed to
ensure that information  required to be disclosed in the Company's  Exchange Act
report is recorded,  processed,  summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and  communicated  to the Company's  management,  including its Chief  Executive
Officer and Chief Financial Officer,  as appropriate,  to allow timely decisions
regarding  required  disclosure  based closely on the  definition of "disclosure
controls and  procedures"  in Rule  13a-15(e).  In designing and  evaluating the
disclosure controls and procedures,  management recognized that any controls and
procedures,  no  matter  how  well  designed  and  operated,  can  provide  only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit of
possible controls and procedures.

As of the end of the period covered by this report,  the Company  carried out an
evaluation,  under the supervision and with the  participation  of the Company's
management,  including the Company's Chief  Executive  Officer and the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's  disclosure  controls  and  procedures.  Based on the  foregoing,  the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective.

There are no changes in the Company's internal control over financial  reporting
that  occurred  during the Company's  first quarter of 2006 that has  materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.


PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

Neither the Company nor the Bank (or any of their properties) are the subject of
any material  pending legal  proceedings  other than routine  litigation that is
incidental  to their  business  with the  possible  exception  of the  following
matter.

On September  9, 2003,  the Bank  commenced an action in Superior  Court for the
Judicial  District of Litchfield,  Connecticut in a matter  captioned "The First
National   Bank  of   Litchfield   v.  Theresa   Sullivan  and  John   Sullivan:
CV-03-0091476-S"  in an effort to collect principal and past due interest due on
two (2) loans,  which the Bank extended several years earlier and upon which the
Borrowers defaulted.  The aggregate principal balance outstanding on the two (2)
loans was approximately $135,000. The Borrowers  counterclaimed against the Bank
alleging that the Bank, through current and former employees, engaged in conduct
in violation of covenants of good faith and fair dealing pursuant to both common
law and Connecticut statutes and that the Bank's conduct constitutes a violation
of the Connecticut  Uniform Trade Practices Act. The Borrowers seek a variety of
unspecified  damages including money damages,  interest,  punitive damages,  and
"such other and further relief as the Court deems fair and just."

                                       21
<PAGE>

The Bank is conducting  discovery  with respect to the merits of the  underlying
action and counterclaim.  While the outcome of such litigation is unresolved, it
is not  expected  to  have  any  material  adverse  effect  upon  the  financial
statements of the Company.


Item 1A. Risk Factors.  Not applicable

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.
         Not applicable

Item 3.  Defaults Upon Senior Securities.   Not applicable

Item 4.  Submission of Matters to a Vote of Security Holders.   Not applicable

Item 5.  Other Information .   Not applicable


                                       22
<PAGE>


Item 6. Exhibits


                                  EXHIBIT INDEX

Exhibit
   No.       Exhibit
-------      -------

3.1          Certificate  of  Incorporation   of  First   Litchfield   Financial
             Corporation,  as amended.  Exhibit is  incorporated by reference to
             Exhibit 3.1 set forth in the  Company's  Registration  Statement on
             Form 10-SB as filed with the Securities and Exchange  Commission on
             January 7, 2000.

3.2          Bylaws  of First  Litchfield  Financial  Corporation,  as  amended.
             Exhibit is  incorporated  by  reference to Exhibit 3.2 set forth in
             the  Company's  Registration  Statement on Form 10-SB as filed with
             the Securities and Exchange Commission on January 7, 2000.

4.           Specimen  Common  Stock  Certificate.  Exhibit is  incorporated  by
             reference  to  Exhibit 4. set forth in the  Company's  Registration
             Statement on Form 10-SB as filed with the  Securities  and Exchange
             Commission on January 7, 2000.

21.          List of Subsidiaries  of First  Litchfield  Financial  Corporation.
             Exhibit is incorporated by reference to Exhibit 21 set forth in the
             Company's  10-K for the year ended  December 31, 2005 as filed with
             the Securities and Exchange Commission on March 31, 2006.

31.1         Rule  13a-14(a)/15-14(a)   Certification  of  the  Chief  Executive
             Officer of the Company.

31.2         Rule  13a-14(a)/15-14(a)   Certification  of  the  Chief  Financial
             Officer of the Company.

32.0         Certification  of  the  Chief  Executive   Officer  and  the  Chief
             Financial Officer of the Company, pursuant to 18 U.S.C. ss.1350, as
             adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.


                                       23
<PAGE>


                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.



Dated:  May 12, 2006                          FIRST LITCHFIELD FINANCIAL
                                              CORPORATION


                                              By:  /s/ Joseph J. Greco
                                                  --------------------------
                                                  Joseph J. Greco, President and
                                                  Chief Executive Officer



Dated:  May 12, 2006                          By: /s/ Carroll A. Pereira
                                                  --------------------------
                                                  Carroll A. Pereira
                                                  Principal Financial and
                                                  Accounting Officer



                                       24