**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
      SECURITIES EXCHANGE ACT OF 1934





**For
      the Quarterly Period Ended March 31, 2006**





OR





o TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d) OF


THE
      SECURITIES EXCHANGE ACT OF 1934 [ NO FEE REQUIRED ]





For
      the
      Transition Period from __________ to ___________








Commission
      File Number: 001-31896








**THE
      WILBER CORPORATION**


(Exact
      Name of the Registrant as Specified in its Charter)





**New
                York**
            **15-6018501**(State
                or Other Jurisdiction of Incorporation or Organization)
            (I.R.S.
                Employer Identification Number)





**245
      Main Street, Oneonta, NY 13820**


(Address
      of Principal Executive Offices) (Zip Code)





**607
      432-1700**


(Registrant’s
      Telephone Number Including Area Code)





Securities
      Registered Pursuant to Section 12(b) of the Act:


**Common
      Stock, $0.01 par value per share**


(Title
      of
      Class)





Securities
      Registered Pursuant to Section 12(g) of the Act:


**None**











Indicate
      by check mark whether 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
      preceding 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 ý No o





Indicate
      by check mark whether the registrant is a large accelerated filer, accelerated
      filer, or a non-accelerated filer. See definition of “Large accelerated filer
      and accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one).


Large
                accelerated filero
            Accelerated
                filerý
            Non-accelerated
                filero




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


Yes o No ý





As
      of May
      8, 2006, there were issued and outstanding 11,145,937 shares of the Registrant’s
      Common Stock.














**THE
      WILBER CORPORATION**


**FORM
      10-Q**


**INDEX**








**PART
      I - FINANCIAL INFORMATION**





FORWARD-LOOKING
                STATEMENTSITEM
                1:
            Interim
                Financial Statements
                (Unaudited)Consolidated
                Statements of
                ConditionConsolidated
                Statements of
                IncomeConsolidated
                Statements of Changes in Stockholders’
                Equity and Comprehensive IncomeConsolidated
                Statements of Cash
                FlowsNotes
                to Interim Unaudited Consolidated Financial
                StatementsITEM
                2:
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of OperationsA.
            GeneralB.
            Financial
                Condition and Performance
                OverviewC.
            Comparison
                of Financial Condition at March 31, 2006, and
                December 31, 2005D.
            Comparison
                of Results of Operation for the three months Ended
                March 31, 2006 and 2005E.
            LiquidityF.
            Capital
                Resources and DividendsITEM
                3:
            Quantitative
                and Qualitative Disclosures about Market
                RiskITEM
                4:
            Controls
                and Procedures**PART
                II - OTHER INFORMATION**ITEM
                1:
            Legal
                ProceedingsITEM
                1A:
            Risk
                FactorsITEM
                2:
            Unregistered
                Sales of Equity Securities and Use of
                ProceedsITEM
                3:
            Defaults
                Upon Senior SecuritiesITEM
                4:
            Submission
                of Matters to a Vote of Security
                HoldersITEM
                5:
            Other
                InformationITEM
                6:
            ExhibitsSignature
                PageIndex
                to Exhibits





1








FORWARD-LOOKING
      STATEMENTS








When
      we
      use words or phrases like "will probably result," "we expect," "will continue,"
      "we anticipate," "estimate," "project," "should cause," or similar expressions
      in this report or in any press releases, public announcements, filings with
      the
      Securities and Exchange Commission (the "SEC") or other disclosures, we are
      making "forward-looking statements" as described in the Private Securities
      Litigation Reform Act of 1995. In addition, certain information we provide,
      such
      as analysis of the adequacy of our allowance for loan losses or an analysis
      of
      the interest rate sensitivity of our assets and liabilities, is always based
      on
      predictions of the future. From time to time, we may also publish other
      forward-looking statements about anticipated financial performance, business
      prospects, and similar matters.





The
      Private Securities Litigation Reform Act of 1995 provides a safe harbor for
      forward-looking statements. We want you to know that a variety of future events
      and uncertainties could cause our actual results and experience to differ
      materially from what we anticipate when we make our forward-looking statements.
      Factors that could cause future results to vary from current management
      expectations include, but are not limited to, general economic conditions,
      legislative and regulatory changes, monetary and fiscal policies of the federal
      government, changes in tax policies, tax rates and regulations of federal,
      state
      and local tax authorities, changes in consumer preferences, changes in interest
      rates, deposit flows, cost of funds, demand for loan products, demand for
      financial services, competition, changes in the quality or composition of the
      Company’s loan and investment portfolios, changes in accounting principles,
      policies or guidelines and other economic, competitive, governmental and
      technological factors affecting the Company’s operations, markets, products,
      services and fees.





Please
      do
      not rely unduly on any forward-looking statements, which are valid only as
      of
      the date made. Many factors, including those described above, could affect
      our
      financial performance and could cause our actual results or circumstances for
      future periods to differ materially from what we anticipate or project. We
      have
      no obligation to update any forward-looking statements to reflect future events
      which occur after the statements are made, and we specifically disclaim such
      obligation.





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          to Index
 2


ITEM
      1 :
      Interim
      Financial Statements (Unaudited)


***The
                Wilber Corporation******Consolidated
                Statements of Condition
                (Unaudited)*****March
                31,**
            
            **December
                31,*****dollars
                in thousands except share and per share data***
            **2006**
            
            **2005****Assets**Cash
                and Due from Banks
            
            **$**
            **13,062**
            
            **$**
            **12,817**Time
                Deposits with Other Banks
            
            
            **2,300**
            
            
            **2,700**Federal
                Funds Sold
            
            
            **8,200**
            
            
            **2,900**Total
                Cash and Cash Equivalents
            
            
            **23,562**
            
            
            **18,417**SecuritiesTrading,
                at Fair Value
            
            
            **1,584**
            
            
            **1,542**Available-for-Sale,
                at Fair Value
            
            
            **242,228**
            
            
            **240,350**Held-to-Maturity,
                Fair Value of $56,653 at March 31, 2006,and
                $53,837 at December 31, 2005
            
            
            **58,177**
            
            
            **54,939**Loans
            
            
            **398,955**
            
            
            **403,665**Allowance
                for Loan Losses
            
            
            **(5,976**
            **)**
            
            **(6,640**
            **)**Loans,
                Net
            
            
            **392,979**
            
            
            **397,025**Premises
                and Equipment, Net
            
            
            **6,372**
            
            
            **6,430**Bank
                Owned Life Insurance
            
            
            **15,662**
            
            
            **15,530**Goodwill
            
            
            **4,518**
            
            
            **4,518**Intangible
                Assets, Net
            
            
            **653**
            
            
            **698**Other
                Assets
            
            
            **14,569**
            
            
            **13,279**Total
                Assets
            
            **$**
            **760,304**
            
            **$**
            **752,728****Liabilities
                and Shareholders’ Equity**Deposits:Demand
            
            **$**
            **68,450**
            
            **$**
            **72,986**Savings,
                NOW and Money Market Deposit Accounts
            
            
            **241,238**
            
            
            **244,484**Certificates
                of Deposit (Over $100M)
            
            
            **81,298**
            
            
            **78,147**Certificates
                of Deposit (Under $100M)
            
            
            **187,313**
            
            
            **183,716**Other
                Deposits
            
            
            **26,307**
            
            
            **25,625**Total
                Deposits
            
            
            **604,606**
            
            
            **604,958**Short-Term
                Borrowings
            
            
            **33,363**
            
            
            **19,357**Long-Term
                Borrowings
            
            
            **47,887**
            
            
            **52,472**Other
                Liabilities
            
            
            **6,668**
            
            
            **8,224**Total
                Liabilities
            
            
            **692,524**
            
            
            **685,011**Shareholders’
                Equity:Common
                Stock, $.01 Par Value, 16,000,000 Shares Authorized,and
                13,961,664 Shares Issued at March 31, 2006,and
                December 31, 2005
            
            
            **140**
            
            
            **140**Additional
                Paid in Capital
            
            
            **4,224**
            
            
            **4,224**Retained
                Earnings
            
            
            **87,794**
            
            
            **86,900**Accumulated
                Other Comprehensive Loss
            
            
            **(3,240**
            **)**
            
            **(2,409**
            **)**Treasury
                Stock at Cost, 2,815,727 Shares at March 31, 2006,and
                December 31, 2005
            
            
            **(21,138**
            **)**
            
            **(21,138**
            **)**Total
                Shareholders’ Equity
            
            
            **67,780**
            
            
            **67,717**Total
                Liabilities and Shareholders’ Equity
            
            **$**
            **760,304**
            
            **$**
            **752,728***See
                accompanying notes to unaudited consolidated interim financial
                statements.*




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 3





***The
                Wilber Corporation******Consolidated
                Statements of Income
                (Unaudited)***
            
            **Three
                Months Ended****March
                31,*****dollars
                in thousands except share and per share data***
            **2006**
            
            **2005****Interest
                and Dividend Income**Interest
                and Fees on Loans
            
            **$**
            **7,310**
            
            $
            6,593Interest
                and Dividends on Securities:U.S.
                Government and Agency Obligations
            
            
            **2,440**
            
            
            2,341State
                and Municipal Obligations
            
            
            **597**
            
            
            700Other
            
            
            **60**
            
            
            44Interest
                on Federal Funds Sold and Time Deposits
            
            
            **63**
            
            
            142Total
                Interest and Dividend Income
            
            
            **10,470**
            
            
            9,820**Interest
                Expense**Interest
                on Deposits:Savings,
                NOW and Money Market Deposit Accounts
            
            
            **873**
            
            
            589Certificates
                of Deposit (Over $100M)
            
            
            **783**
            
            
            581Certificates
                of Deposit (Under $100M)
            
            
            **1,638**
            
            
            1,317Other
                Time
            
            
            **221**
            
            
            180Interest
                on Short-Term Borrowings
            
            
            **200**
            
            
            152Interest
                on Long-Term Borrowings
            
            
            **505**
            
            
            690Total
                Interest Expense
            
            
            **4,220**
            
            
            3,509**Net
                Interest Income**
            
            
            **6,250**
            
            
            6,311Provisions
                for Loan Losses
            
            
            **420**
            
            
            240Net
                Interest Income After Provision for Loan Losses
            
            
            **5,830**
            
            
            6,071**Non-Interest
                Income**Trust
                Fees
            
            
            **389**
            
            
            328Service
                Charges on Deposit Accounts
            
            
            **407**
            
            
            392Commission
                Income
            
            
            **186**
            
            
            138Investment
                Security Gains, Net
            
            
            **293**
            
            
            244Increase
                in Cash Surrender Value of Bank Owned Life Insurance
            
            
            **132**
            
            
            134Other
                Service Fees
            
            
            **103**
            
            
            101Other
                Income
            
            
            **140**
            
            
            114Total
                Non-Interest Income
            
            
            **1,650**
            
            
            1,451**Non-Interest
                Expense**Salaries
            
            
            **2,390**
            
            
            2,221Employee
                Benefits
            
            
            **599**
            
            
            577Net
                Occupancy Expense of Bank Premises
            
            
            **454**
            
            
            470Furniture
                and Equipment Expense
            
            
            **184**
            
            
            172Computer
                Service Fees
            
            
            **204**
            
            
            131Advertising
                and Marketing
            
            
            **103**
            
            
            102Professional
                Fees
            
            
            **232**
            
            
            196Other
                Miscellaneous Expenses
            
            
            **685**
            
            
            721Total
                Non-Interest Expense
            
            
            **4,851**
            
            
            4,590Income
                Before Taxes
            
            
            **2,629**
            
            
            2,932Income
                Taxes
            
            
            **(676**
            **)**
            
            (762
            )**Net
                Income**
            
            **$**
            **1,953**
            
            $
            2,170Weighted
                Average Shares Outstanding
            
            
            **11,145,937**
            
            
            11,186,275Basic
                Earnings Per Share
            
            **$**
            **0.18**
            
            $
            0.19*See
                accompanying notes to unaudited consolidated interim financial
                statements.*





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 4


***The
                Wilber Corporation******Consolidated
                Statements of Changes in Shareholders'
                Equity and Comprehensive Income(Unaudited)*****Accumulated****Additional**
            
            
            
            **Other****Common**
            
            **Paid
                in**
            
            **Retained**
            **Comprehensive**
            **Treasury*****dollars
                in thousands except share and per share data***
            
            **Stock**
            
            **Capital**
            
            **Earnings**
            
            **Income
                (Loss)**
            
            **Stock**
            
            **Total**Balance
                December 31, 2004
            
            $
            140
            
            $
            4,224
            
            $
            83,402
            
            $
            396
            
            
            ($20,557
            )
            $
            67,605Comprehensive
                Income:Net
                Income
            
            
            -
            
            
            -
            
            
            2,170
            
            
            -
            
            
            -
            
            
            2,170Change
                in Net Unrealized Gain (Loss)on
                Securities, Net of Taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,171
            )
            
            -
            
            
            (2,171
            )Total
                Comprehensive Loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1
            )Cash
                Dividends ($.095 per share)
            
            
            -
            
            
            -
            
            
            (1,063
            )
            
            -
            
            
            -
            
            
            (1,063
            )Purchase
                of Treasury Stock (16,500 shares)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (205
            )
            
            (205
            )**Balance
                March 31, 2005**
            
            $
            140
            
            $
            4,224
            
            $
            84,509
            
            
            ($1,775
            )
            
            ($20,762
            )
            $
            66,336Balance
                December 31, 2005
            
            $
            140
            
            $
            4,224
            
            $
            86,900
            
            
            ($2,409
            )
            
            ($21,138
            )
            $
            67,717Comprehensive
                Income:Net
                Income
            
            
            -
            
            
            -
            
            
            **1,953**
            
            
            -
            
            
            -
            
            
            **1,953**Change
                in Net Unrealized Gain (Loss)on
                Securities, Net of Taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            **(831**
            **)**
            
            -
            
            
            **(831**
            **)**Total
                Comprehensive Income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **1,122**Cash
                Dividends ($.095 per share)
            
            
            -
            
            
            -
            
            
            **(1,059**
            **)**
            
            -
            
            
            -
            
            
            **(1,059**
            **)****Balance
                March 31, 2006**
            
            **$**
            **140**
            
            **$**
            **4,224**
            
            **$**
            **87,794**
            
            
            **($3,240**
            **)**
            
            **($21,138**
            **)**
            **$**
            **67,780***See
                accompanying notes to unaudited consolidated interim financial
                statements.*

















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 5


***The
                Wilber Corporation******Consolidated
                Statements of Cash Flows(Unaudited)*****Three
                Months Ended****March
                31,*****dollars
                in thousands***
            
            **2006**
            
            **2005****Cash
                Flows from Operating Activities:**Net
                Income
            
            **$**
            **1,953**
            
            $
            2,170Adjustments
                to Reconcile Net Income to Net CashProvided
                by (Used by) Operating Activities:Provision
                for Loan Losses
            
            
            **420**
            
            
            240Depreciation
                and Amortization
            
            
            **279**
            
            
            263Net
                Amortization of Premiums and Accretion of Discounts on
                Investments
            
            
            **181**
            
            
            270Available-for-Sale
                Investment Security Gains, net
            
            
            **(197**
            **)**
            
            (247
            )Other
                Real Estate Losses
            
            
            **-**
            
            
            -Increase
                in Cash Surrender Value of Bank Owned Life Insurance
            
            
            **(132**
            **)**
            
            (134
            )Net
                Decrease in Trading Securities
            
            
            **54**
            
            
            80Net
                (Gains) Losses on Trading Securities
            
            
            **(96**
            **)**
            
            3Increase
                in Other Assets
            
            
            **(680**
            **)**
            
            (321
            )Decrease
                in Other Liabilities
            
            
            **(1,695**
            **)**
            
            (2,501
            )Net
                Cash Provided by (Used by) Operating Activities
            
            
            **87**
            
            
            (177
            )**Cash
                Flows from Investing Activities:**Net
                Cash Acquired from Acquisition of a Branch
            
            
            **-**
            
            
            22,521Proceeds
                from Maturities of Held-to-Maturity Investment Securities
            
            
            **1,902**
            
            
            2,294Purchases
                of Held-to-Maturity Investment Securities
            
            
            **(5,176**
            **)**
            
            (15
            )Proceeds
                from Maturities of Available-for-Sale Investment
                Securities
            
            
            **7,559**
            
            
            19,205Proceeds
                from Sales of Available-for-Sale Investment Securities
            
            
            **2,961**
            
            
            5,351Purchases
                of Available-for-Sale Investment Securities
            
            
            **(13,705**
            **)**
            
            (20,977
            )Net
                Decrease (Increase) in Loans
            
            
            **3,626**
            
            
            (2,870
            )Purchase
                of Premises and Equipment, Net of Disposals
            
            
            **(119**
            **)**
            
            (109
            )Net
                Cash (Used by) Provided by Investing Activities
            
            
            **(2,952**
            **)**
            
            25,400**Cash
                Flows from Financing Activities:**Net
                Decrease in Demand Deposits, Savings, NOW,Money
                Market and Other Time Deposits
            
            
            **(7,100**
            **)**
            
            (5,493
            )Net
                Increase in Certificates of Deposit
            
            
            **6,748**
            
            
            501Net
                Increase (Decrease) in Short-Term Borrowings
            
            
            **14,006**
            
            
            (13,011
            )Increase
                in Long-Term Borrowings
            
            
            **-**
            
            
            16,900Repayment
                of Long-Term Borrowings
            
            
            **(4,585**
            **)**
            
            (24,092
            )Purchase
                of Treasury Stock
            
            
            **-**
            
            
            (205
            )Cash
                Dividends Paid
            
            
            **(1,059**
            **)**
            
            (1,063
            )Net
                Cash Provided by (Used by) Financing Activities
            
            
            **8,010**
            
            
            (26,463
            )Net
                Increase (Decrease) in Cash and Cash Equivalents
            
            
            **5,145**
            
            
            (1,240
            )Cash
                and Cash Equivalents at Beginning of Year
            
            
            **18,417**
            
            
            20,539Cash
                and Cash Equivalents at End of Period
            
            **$**
            **23,562**
            
            $
            19,299*.*
            
            
            
            
            
            (Continued
            )





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 6








***The
                Wilber Corporation******Consolidated
                Statements of Cash Flows (Unaudited),
                continued*****Three
                Months Ended****March
                31,*****dollars
                in thousands***
            
            **2006**
            
            **2005****Supplemental
                Disclosures of Cash Flow Information:**Cash
                Paid during Period for:Interest
            
            **$**
            **4,101**
            
            $
            3,537Income
                Taxes
            
            **$**
            **2,712**
            
            $
            3,070Non
                Cash Investing Activities:Change
                in Unrealized Gain on Securities
            
            
            **($1,359**
            **)**
            
            ($3,556
            )Fair
                Value of Assets Acquired
            
            **$**
            **0**
            
            $
            8,185Fair
                Value of Liabilities Assumed
            
            **$**
            **0**
            
            $
            32,967*See
                accompanying notes to unaudited consolidated interim financial
                statements.*




















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 7


The
      Wilber Corporation


Notes
      to Unaudited Consolidated Interim FinancialStatements





***Note
      1. Basis of Presentation***





The
      accompanying unaudited consolidated interim financial statements include the
      accounts of The Wilber Corporation (the "Company"), its wholly owned subsidiary
      Wilber National Bank (the "Bank") and the Bank's wholly owned subsidiaries.
      All
      significant intercompany accounts and transactions have been eliminated in
      consolidation. The accompanying unaudited consolidated interim financial
      statements have been prepared in accordance with accounting principles generally
      accepted in the United States of America ("GAAP") for interim financial
      information and with the instructions to Form 10-Q and Article 10 of Regulation
      S-X. Accordingly, they do not include all of the information and footnotes
      required by GAAP for complete financial statements.





The
      preparation of financial statements in conformity with GAAP required management
      to make estimates and assumptions that affect the reported amounts of assets
      and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements, and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those estimates.
      In the opinion of management, the unaudited consolidated interim financial
      statements include all necessary adjustments, consisting of normal recurring
      accruals, necessary for a fair presentation for the periods presented. The
      results for the periods presented are not necessarily indicative of results
      to
      be expected for the entire fiscal year or any other interim period.





The
      data
      in the consolidated balance sheet for December 31, 2005, was derived from the
      Company's 2005 Annual Report on Form 10-K. The Annual Report on Form 10-K
      includes the Company's audited consolidated statements of condition as of
      December 31, 2005 and 2004, and the consolidated statements of income,
      consolidated statements of cash flows, consolidated statements of shareholders’
equity and comprehensive income for each of the years in the three-year period
      ended December 31, 2005. That data, along with the unaudited interim financial
      information presented in the consolidated statements of condition as of March
      31, 2006, and the statements of income, the statements of changes in
      shareholders' equity and comprehensive income and cash flows for the
      three-months ended March 31, 2006 and 2005, should be read in conjunction with
      the 2005 consolidated financial statements, including the notes
      thereto.





Amounts
      in prior period’s consolidated financial statements are reclassified when
      necessary to conform to the current period's presentation.





***Note
      2. Earnings Per Share***





Basic
      earnings per share (EPS) are calculated by dividing net income available to
      common shareholders by the weighted average number of common shares outstanding
      during the period. Entities with complex capital structures must also present
      diluted EPS, which reflects the potential dilution that could occur if
      securities or other contracts to issue common stock were exercised or converted
      into common shares. The Company does not have a complex capital structure and,
      accordingly, has presented only basic EPS.





***Note
      3. Guarantees***





The
      Company does not issue any guarantees that would require liability-recognition
      or disclosure, other than its stand-by letters of credit. Stand-by and other
      letters of credit are conditional commitments issued by the Company to guarantee
      the performance of a customer to a third party. Those guarantees are primarily
      issued to support public and private borrowing arrangements, including bond
      financing and similar transactions. The credit risk involved in issuing letters
      of credit is essentially the same as that involved in extending loan facilities
      to customers. Typically, these instruments have terms of 12 months or less
      and
      expire unused. Therefore, the total amounts do not necessarily represent future
      cash requirements.





The
      estimated fair value of the Company's stand-by letters of credit was $15
      thousand and $12 thousand at March 31, 2006, and December 31, 2005,
      respectively. The estimated fair value of stand-by letters of credit at their
      inception is equal to the fee that is charged to the customer by the Company.
      Generally, the Company’s stand-by letters of credit have a term of one year. In
      determining the fair values disclosed above, the fees were reduced on a
      straight-line basis from the inception of each stand-by letter of credit to
      the
      respective dates above.


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 8





***Note
      4. Employee Benefit Plans***





Effective
      February 28, 2006, the Company's defined benefit pension plan was frozen. Under
      the frozen plan, no future benefits will be accrued for plan participants,
      nor
      will any new participants be enrolled in the plan. This plan is sponsored by
      the
      Company's bank subsidiary. Prior to being frozen, the plan covered employees
      who
      had attained the age of 21 and completed one year of service. Although the
      plan
      is frozen, the Company maintains the responsibility for funding the plan. The
      Company's funding practice is to contribute at least the minimum amount annually
      to meet minimum funding requirements. An annual minimum contribution is not
      required in 2006 because the plan is more than 100% funded. Plan assets consist
      primarily of marketable fixed income securities and common stocks. Plan benefits
      are based on years of service and the employee’s average compensation during the
      five highest consecutive years of the last ten years of employment. The Company
      expects to incur a curtailment charge on the plan during the second quarter
      of
      2006 of approximately $200,000.





The
      Components of Net Periodic Benefit Cost (Benefit), based on a September 30
      measurement date, are:





**Three-Months
                Ended****March
                31,*****dollars
                in thousands***
            
            **2006**
            
            2005Service
                Cost
            
            **$**
            **106**
            
            $
            170Interest
                Cost
            
            
            **211**
            
            
            231Expected
                Return on Plan Assets
            
            
            **(334**
            **)**
            
            (311
            )Net
                Amortization
            
            
            **19**
            
            
            53**$**
            **2**
            
            $
            143




***Note
      5. Other Comprehensive Income***





The
      following is a summary of changes in other comprehensive income for the periods
      presented:





**Three-Months
                Ended****March
                31,*****dollars
                in thousands***
            
            **2006**
            
            **2005**Unrealized
                Holding Losses Arising During the Period, Net of Tax(Pre-tax
                Amount of ($1,162) and ($3,309))
            
            
            **($710**
            **)**
            
            **($2,021**
            **)**Reclassification
                Adjustment for Gains Realized in Net IncomeDuring
                the Period, Net of Tax (Pre-tax Amount of ($197) and
                ($247))
            
            
            **(121**
            **)**
            
            **(150**
            **)**Other
                Comprehensive Loss, Net of Tax of $528 and $1,385
            
            
            **($831**
            **)**
            
            **($2,171**
            **)**








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 9


ITEM
      2 :  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations





A.
      General





The
      primary objective of this quarterly report is to provide: (i) an overview of
      the
      material changes in our financial condition, including liquidity and capital
      resources, at March 31, 2006, as compared to December 31, 2005; and (ii) a
      comparison of our results of operations for the three-month period ended March
      31, 2006, as compared to the three-month period ended March 31,
      2005.





Our
      financial performance is heavily dependent upon net interest income, which
      is
      the difference between the interest income earned on our loans and investment
      securities less the interest paid on our deposits and borrowings. Results of
      operations are also affected by the provision for loan losses, investment
      securities gains (losses), service charges and penalty fees on deposit accounts,
      fees collected for trust and investment services, insurance commission income,
      the increase in the cash surrender value on bank owned life insurance, other
      service fees, and other income. Our non-interest expenses primarily consist
      of
      employee salaries and benefits, occupancy and equipment expense, advertising
      and
      marketing expense, computer service fees, professional fees and other expenses.
      Results of operations are also influenced by general economic and competitive
      conditions (particularly changes in interest rates), government policies,
      changes in Federal or State tax law, and the actions of our regulatory
      authorities.





*Critical
      Accounting Policies.* Our
      management considers the accounting policy relating to the allowance for loan
      losses to be a critical accounting policy given the uncertainty in evaluating
      the level of the allowance required to cover credit losses inherent in the
      loan
      portfolio and the material effect that such judgments can have on the results
      of
      operations. While management’s March 31, 2006, evaluation of the allowance for
      loan losses indicated that the allowance was adequate, under adversely different
      conditions or assumptions, the allowance would need to be increased. For
      example, if historical loan loss experience significantly worsened or if current
      economic conditions significantly deteriorated, additional provisions for loan
      losses would be required to increase the allowance. In addition, the assumptions
      and estimates used in our internal reviews of non-performing loans and potential
      problem loans had a significant impact on the overall analysis of the adequacy
      of the allowance for loan losses. While we have concluded that the March 31,
      2006, evaluation of collateral values was reasonable under the circumstances,
      if
      collateral valuations were significantly lowered, our allowance for loan losses
      would also require additional provisions for loan losses.




B.
      Financial Condition and Performance Overview





During
      the first quarter of 2006, we experienced modest growth in our total assets.
      At
      March 31, 2006, total assets increased to $760.304 million. This compares to
      $752.728 million in total assets at December 31, 2005, a $7.576 million, or
      1.0%
      increase. The growth in total assets was primarily funded by an increase in
      short-term borrowings. During the quarter we experienced fluctuations in total
      deposits including a decrease in total deposits during the last few weeks of
      the
      quarter, causing us to borrow $15.000 million of short-term funds at the Federal
      Home Loan Bank of New York (“FHLBNY”).





The
      allowance for loan losses at March 31, 2006, was $5.976 million or 1.50% of
      gross loans outstanding. This compares to $6.640 million or 1.65% of loans
      outstanding at December 31, 2005. The decrease in the allowance for loan losses
      totaling $664 thousand was principally due to a significant increase in net
      charge-offs during the quarter. During the first quarter of 2006, net
      charge-offs on loans totaled $1.084 million. This compares to $112 thousand
      in
      net charge-offs during the first quarter of 2005, a $972 thousand increase.
      During the first quarter of 2006, we recorded a $981 thousand charge-off on
      two
      loans to one of our large commercial borrowers. Prior to the first quarter
      of
      2006, we allocated $826 thousand in the allowance for loan losses for the
      potential losses on these loans due to the weakened financial condition of
      the
      borrower. During the first quarter of 2006, we determined that a significant
      portion of the gross loans outstanding to this borrower were non-collectible
      and
      charged-off $981 thousand to the allowance for loan losses.





Net
      income for the first quarter of 2006 was less than net income for the first
      quarter of 2005. Specifically, net income decreased $217 thousand or 10.0%,
      from
      $2.170 million in the first quarter of 2005 to $1.953 million during the first
      quarter of 2006. The decrease in net income reduced earnings per share from
      $0.19 in the first quarter of 2005 to $0.18 in the first quarter of 2006. The
      net decrease in net income on a comparable quarter basis was caused by a
      decrease in net interest income, an increase in the provision for loan losses,
      an increase in non-interest expense, partially offset by an improvement
      in


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 10


non-interest
      income, and a reduction in income tax expense.





The
      following tables set forth in this quarterly financial report provide readers
      with supplementary information, which is not directly obtainable from the
      interim unaudited financial statements provided in PART I, Item 1 of this
      quarterly report. These tables are to be read in conjunction with our management
      discussion and analysis narrative regarding the financial condition, results
      of
      operations, liquidity and capital resources contained within this
      report.





Asset
      and
      Yield Summary Table:





The
      following tables set forth the total dollar amount and resultant yields of
      interest income from average earning assets, as well as the interest expense
      on
      average interest bearing liabilities for the periods stated. No tax equivalent
      adjustments were made. Average balances are daily averages.





**For
                the Three Months Ended March 31,****2006**
            
            **2005**Average
              Outstanding
              Balance
            
            Interest
              Earned
                /Paid
            
            Yield
                / Rate
            
            Average
              Outstanding
              Balance
            
            Interest
              Earned
                /Paid
            
            Yield
                / Rate**Earning
                Assets:**
            
            (Dollars
                in thousands)Federal
                Funds Sold
            
            $
            4,000
            
            $
            44
            
            
            4.46
            %
            $
            4,356
            
            $
            25
            
            
            2.33
            %Interest
                bearing deposits
            
            
            2,314
            
            
            19
            
            
            3.33
            %
            
            9,810
            
            
            117
            
            
            4.84
            %Securities
                (1)
            
            
            302,373
            
            
            3,097
            
            
            4.15
            %
            
            309,013
            
            
            3,085
            
            
            4.05
            %Loans,
                Net (2)
            
            
            395,312
            
            
            7,310
            
            
            7.50
            %
            
            389,866
            
            
            6,593
            
            
            6.86
            %Total
                earning assets
            
            
            703,999
            
            
            10,470
            
            
            6.03
            %
            
            713,045
            
            
            9,820
            
            
            5.59
            %Non-earning
                assets
            
            
            48,499
            
            
            
            
            
            
            
            
            47,046Total
                assets
            
            $
            752,498
            
            
            
            
            
            
            
            $
            760,091**Liabilities:**Savings
                accounts
            
            $
            92,406
            
            $
            142
            
            
            0.62
            %
            $
            98,552
            
            $
            152
            
            
            0.63
            %Money
                market accounts
            
            
            53,122
            
            
            451
            
            
            3.44
            %
            
            32,792
            
            
            156
            
            
            1.93
            %NOW
                accounts
            
            
            97,031
            
            
            280
            
            
            1.17
            %
            
            121,301
            
            
            281
            
            
            0.94
            %Time
                accounts
            
            
            293,476
            
            
            2,642
            
            
            3.65
            %
            
            275,246
            
            
            2,078
            
            
            3.06
            %Borrowings
            
            
            75,507
            
            
            705
            
            
            3.79
            %
            
            94,871
            
            
            842
            
            
            3.60
            %Total
                interest bearing liabilities
            
            
            611,542
            
            
            4,220
            
            
            2.80
            %
            
            622,762
            
            
            3,509
            
            
            2.29
            %Non-interest
                bearing deposits
            
            
            68,332
            
            
            
            
            
            
            
            
            61,705Other
                non-interest bearing liabilities
            
            
            4,962
            
            
            
            
            
            
            
            
            7,614Total
                liabilities
            
            
            684,836
            
            
            
            
            
            
            
            
            692,081Shareholders'
                equity
            
            
            67,662
            
            
            
            
            
            
            
            
            68,010Total
                liabilities and shareholder equity
            
            $
            752,498
            
            
            
            
            
            
            
            $
            760,091Net
                interest income
            
            
            
            
            $
            6,250
            
            
            
            
            
            
            
            $
            6,311Net
                interest rate spread (3)
            
            
            
            
            
            
            
            
            3.23
            %
            
            
            
            
            
            
            
            3.30
            %Net
                earning assets
            
            $
            92,457
            
            
            
            
            
            
            
            $
            90,283Net
                interest margin (4)
            
            
            
            
            
            
            
            
            3.60
            %
            
            
            
            
            
            
            
            3.59
            %Ratio
                of earning assets to interest bearing liabilities
            
            
            115.12
            %
            
            
            
            
            
            
            
            114.50
            %(1)
                Securities are shown at average amortized cost with net unrealized
                gains
                or losses on securities available-for-sale included as a component
                of
                non-earning assets.(2)
                Average net loans equal average gross loans less the average allowance
                for
                loan losses. However, for purposes of these computations, non-accrual
                loans are included in average loan balances outstanding.(3)
                Net interest rate spread represents the difference between the weighted
                average yield on interest-earning assets and the weighted average
                cost of
                interest-bearing liabilities.(4)
                The net interest margin, also known as the net yield on average
                interest-earning assets, represents net interest income as a percentage
                of
                average interest-earning
                assets.


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 11


Table
      of
      Non-performing Assets:





The
      following table sets forth information regarding non-performing loans and assets
      as of the periods indicated.








*Dollars
                in Thousands*
            
            **At
                March 31,**
              **2006**
            
            **At
                December 31,**
              **2005**Loans
                in Non-Accrual Status:Residential
                real estate (1)
            
            $
            473
            
            $
            327Commercial
                real estate
            
            
            925
            
            
            2,287Commercial
                (2)
            
            
            467
            
            
            1,191Consumer
            
            
            54
            
            
            61Total
                non-accruing loans
            
            
            1,919
            
            
            3,866Loans
                Contractually Past Due 90 Days or More and Still Accruing
                Interest
            
            
            86
            
            
            181Troubled
                Debt Restructured Loans
            
            
            0
            
            
            871Total
                non-performing loans
            
            
            2,005
            
            
            4,918Other
                real estate owned
            
            
            20
            
            
            20Total
                non-performing assets
            
            $
            2,025
            
            $
            4,938Total
                non-performing assets as a percentage of total assets
            
            
            0.27
            %
            
            0.66
            %Total
                non-performing loans as a percentage of total loans
            
            
            0.50
            %
            
            1.22
            %(1)
                Includes loans secured by 1-4 family dwellings, 5+ family residential
                dwellings, home equity loans and residential construction
                loans.


(2)
        Includes commercial and industrial loans, agricultural loans and obligations
        (other than securities and leases) of states and political subdivisions in
        the
        United States.


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 12


Analysis
      of the Allowance for Loan Losses Table:





The
      following table sets forth changes in the allowance for loan losses for the
      periods indicated:








**Three
                months ended**
              **March
                31,****2006**
            
            **2005**(Dollars
                in thousands)Balance
                at beginning of period
            
            $
            6,640
            
            $
            6,250Charge
                offs:Residential
                real estate (1)
            
            
            7
            
            
            18Commercial
                real estate
            
            
            2
            
            
            0Commercial
                (2)
            
            
            983
            
            
            0Consumer
            
            
            210
            
            
            162Total
                charge offs
            
            
            1,202
            
            
            180Recoveries:Residential
                real estate (1)
            
            
            1
            
            
            20Commercial
                real estate
            
            
            0
            
            
            0Commercial
                (2)
            
            
            13
            
            
            10Consumer
            
            
            104
            
            
            38Total
                recoveries
            
            
            118
            
            
            68Net
                charge-offs
            
            
            1,084
            
            
            112Provision
                for loan losses
            
            
            420
            
            
            240Balance
                at end of period
            
            $
            5,976
            
            $
            6,378Ratio
                of net charge-offs during the period to average loans outstanding
                during
                the period (annualized)
            
            
            1.09
            %
            
            0.11
            %Allowance
                for loan losses to gross loans
            
            
            1.50
            %
            
            1.59
            %Allowance
                for loan losses to non-performing loans
            
            
            298
            %
            
            184
            %(1)
                Includes loans secured by 1-4 family dwellings, 5+ family residential
                dwellings, home equity loans and residential construction
                loans.


(2)
        Includes commercial and industrial loans, agricultural loans and obligations
        (other than securities and leases) of states and political subdivisions in
        the
        United States.





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 13


C.
      Comparison of Financial Condition at March 31, 2006, and December 31,
      2005





*Overview.* Total
      assets did not increase significantly during the first quarter of 2006.
      Specifically, total assets increased by $7.576 million or 1.0% between December
      31, 2005, and March 31, 2006. During the first quarter of 2006 we did not
      acquire or sell any branch offices or execute or unwind any wholesale leverage
      that would cause a significant fluctuation in total assets.





Although
      total deposits did not change significantly between December 31, 2005, and
      March
      31, 2006, $604.958 million and $604.606 million, respectively, throughout the
      first quarter, we experienced modest fluctuations in total deposits from week
      to
      week due to a competitive local market for deposit funding. In addition, the
      composition of our deposits changed during the quarter as an increasing number
      of depositors transferred monies from low interest-bearing non-maturity deposits
      to higher interest-bearing certificates of deposit as interest rates increased
      during the quarter.





During
      the first quarter of 2006, we experienced a modest decrease in gross loans.
      Specifically, gross loans decreased $4.710 or 1.2% during the quarter, from
      $403.665 million at December 31, 2005, to $398.955 million at March 31, 2006.
      We
      attribute the decrease in gross loans during the quarter to a lack of growth
      in
      the regional economy and recent increases in short-term interest
      rates.




*Asset
      Quality.* We use
      several measures to determine the overall credit quality of our loan portfolio.
      These include the level of delinquent loans (those 30 or more days delinquent,
      excluding non-performing loans), the level of non-performing loans, the level
      of
      potential problem loans, and the dollar amount and type of loan charge-offs
      we
      experience. Between December 31, 2005, and March 31, 2006, the level of
      non-performing loans declined (an improvement), while all of our other credit
      quality measures worsened. Specifically, the level of delinquent loans,
      potential problem loans, and net charge-offs increased during the first quarter
      of 2006.





Total
      non-performing loans, including non-accruing loans, loans 90 days or more past
      due and still accruing interest, and troubled debt restructured loans decreased
      $2.913 million during the quarter, from $4.918 million at December 31, 2005,
      to
      $2.005 million at March 31, 2006. During the first quarter of 2006, a $1.646
      million commercial real estate loan on non-accrual was paid-off in full by
      a
      related party of the borrower. In addition, during the first quarter of 2006,
      an
      $871 thousand loan, previously recorded as a troubled debt restructured loan,
      was removed from troubled debt status. At March 31, 2006, the loan was
      performing and yielding a market rate. And finally, during the first quarter,
      we
      charged-off a $746 thousand loan to one of our large commercial borrowers,
      which
      was previously on non-accrual status. These decreases in non-performing loans
      were offset by the addition of eight (8) loans with small balances being placed
      on non-accrual status during the quarter.





Net
      loan
      charge-offs increased significantly during the first quarter of 2006 due
      principally to a $981 thousand charge-off for loans made to one of our large
      commercial borrowers. By comparison, during the first quarter of 2005 we
      recorded net charge-offs of $112 thousand.





Potential
      problem loans are loans which are currently performing, but where information
      about possible credit problems exists. The amount of potential problem loans
      may
      vary significantly from quarter to quarter due to our significant volume of
      commercial loans with balances in excess of $1.0 million. During the first
      quarter of 2006, potential problem loans increased $7.367 million, from $7.897
      million at December 31, 2005, to $15.264 million at March 31, 2006. The increase
      in potential problem loans from the period ended December 31, 2005, to the
      period ended March 31, 2006, was primarily due to the identification of a
      decline of the financial condition of five (5) large commercial borrowers during
      the quarter with combined total loan balances of $7.670 million.





At
      March
      31, 2006, loans that were 30 or more days delinquent (excluding non-performing
      loans) totaled $2.797 or 0.70% of loans outstanding. By comparison, at December
      31, 2005, we had $2.062 million or 0.51% of loans outstanding in this same
      category, a net increase of $735 thousand between the periods. Although the
      level of delinquent loans increased during the quarter, we still deem the level
      of delinquent loans as low and within reasonable industry
      standards.





The
      allowance for loan losses at March 31, 2006, was $5.976 million or 1.50% of
      gross loans outstanding. This compares to $6.640 million or 1.65% of loans
      outstanding at December 31, 2005. The significant decrease in the allowance
      for
      loan losses was principally due to a significant increase in the level of net
      charge-offs recorded during the first quarter of 2006, totaling $1.084 million.
      This amount far exceeds historical quarterly averages because it includes a
      $981
      thousand charge-off on two loans to one


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 14


of
      our
      large commercial borrowers. We specifically allocated $826 thousand in the
      allowance for loan losses for anticipated losses on these two loans to this
      borrower during prior periods. Management and the Board of Directors deemed
      the
      allowance for loan losses as adequate at March 31, 2006, and December 31,
      2005.





The
      credit quality of the investment securities portfolios, both available-for-sale
      and held-to-maturity, remained strong during the quarter. At March 31, 2006,
      99.7% of the securities held in the Company’s bond portfolio were rated “A” or
      better by Moody’s credit rating service; 95.2% were rated AAA. By comparison, at
      December 31, 2005, 99.8% were rated “A” or better and 95.1% were rated
      AAA.




D.
      Comparison of Results of Operations for the Three-Months Ended March
      31, 2006 and 2005





*Overview.* During
      the first quarter of 2006, our net income and earnings per share were $1.953
      million and $0.18 respectively. This was a $217 thousand or 10.0% decrease
      in
      net income and a $0.01 decrease in earnings per share as compared to the first
      quarter of 2005. During the first quarter of 2005, we earned $2.170 million
      in
      net income and earnings per share of $0.19. Net interest income decreased $61
      thousand or 1.0% between comparable quarters due principally to a decrease
      in
      the average volume of earning assets. In addition, non-interest expense
      increased $261 thousand or 5.7% due principally to increases in salaries and
      employee benefits, while the provision for loan losses increased $180 thousand
      or 75.0% due to the overall weaker credit quality of our loan portfolio between
      the comparable periods. The decrease in net income caused by these factors
      was
      offset by an improvement in non-interest income and a decrease in income
      taxes.





The
      decrease in net income resulted in a decrease in both our return on average
      assets and return on average stockholders’ equity. More specifically, during the
      first quarter of 2006 our return on average assets and return on average equity
      were 1.05% and 11.71%, respectively, as compared to 1.16% and 12.94% during
      the
      first quarter of 2005.




*Net
      Interest Income.* Net
      interest income is our most significant source of revenue. During the first
      quarter of 2006 and first quarter of 2005, net interest income comprised 79%
      and
      81% of our net revenue (net interest income plus non-interest income),
      respectively. In the three month period ended March 31, 2006, our net interest
      income was $6.250 million. By comparison, for the three-month period ended
      March
      31, 2005, our net interest income was $6.311 million. The $61 thousand or 1.0%
      decrease in net interest income was principally due to a decrease in our average
      earning assets on a comparable quarter basis.





The
      Treasury yield curve became increasingly flat throughout the last three quarters
      of 2005 and the first quarter of 2006. During the 12-month period ended March
      31, 2006, the Federal Open Market Committee raised the Federal funds target
      rate
      2.00% (in eight 25 basis point increases). These actions reduced the interest
      spread between the Federal funds target rate and the 10-year Treasury note
      yield
      at March 31, 2006, to approximately 10 basis points. By comparison, at the
      end
      of the first quarter of 2005, the interest spread between the Federal funds
      target rate and the 10-year Treasury note was approximately 185 basis points.
      This flattening of the yield curve eliminated wholesale leverage opportunities
      and reduced the economic benefit of borrowing funds throughout the period,
      causing us to reduce borrowings and, in turn, our earning assets. During the
      first quarter of 2005, our average earning assets were $713.045 million, this
      compares to $703.999 million during the first quarter of 2006.





Between
      comparable quarterly periods, total interest and dividend income increased
      $650
      thousand or 6.6%, from $9.820 million for the three month period ended March
      31,
      2005, to $10.470 million for the three month period ended March 31, 2006.
      Between the quarterly periods, the weighted average yield on the loan portfolio
      increased 64 basis points, from 6.86% in the first quarter of 2005 to 7.50%
      in
      the first quarter of 2006. Between the periods, the prime rate, the primary
      index rate for our variable rate loans, increased significantly, which drove
      the
      increase in our loan yields. The increase in loan yields contributed $623
      thousand of additional interest income between comparable quarterly periods.





Interest
      expense increased $711 thousand, or 20.3%, for the quarterly period ended March
      31, 2006, versus the quarterly period ended March 31, 2005. Between the
      comparable quarterly periods interest rates increased. This prompted us, as
      well
      as our competitors, to raise the interest rate paid on interest-bearing deposit
      accounts, particularly the more interest-sensitive deposit accounts, such as
      money market accounts and time accounts. Between the periods we recorded a
      $645
      thousand net increase in the cost of interest bearing deposit liabilities due
      to
      increase in interest rates. In addition, due to the


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 15


higher
      interest rates, our customers increased the amount of deposits held in money
      market and time accounts. The combination of higher interest rates and increased
      deposit levels increased the interest expense recorded on money market accounts
      from $156 thousand during the first quarter of 2005 to $451 thousand during
      the
      first quarter of 2006, a $295 thousand increase. Similarly, the interest expense
      recorded on time accounts increased from $2.078 million during the first quarter
      of 2005 to $2.642 million during the first quarter of 2006.





In
      addition, due to the flat yield curve environment, we repaid borrowings between
      the comparable quarterly periods. During the three month period ended March
      31,
      2005, we averaged $94.871 million in borrowings. By comparison, during the
      three
      month period ended March 31, 2006, we averaged $75.507 million in borrowings,
      a
      $19.364 million or 25.6% decrease. The decrease in average borrowings resulted
      in a net decrease in interest expense on borrowings of $137 thousand between
      the
      periods.





*Rate
      and Volume Analysis:* The
      purpose of a rate volume analysis is to identify the dollar amount of change
      in
      net interest income due to changes in interest rates versus changes in the
      volume of earning assets and interest bearing liabilities.





Rate
      and
      Volume Table:





The
      following table presents changes in interest income and interest expense
      attributable to changes in volume (change in average balance multiplied by
      prior
      year rate), changes in rate (change in rate multiplied by prior year volume),
      and the net change in net interest income. The net change attributable to the
      combined impact of volume and rate has been allocated to each in proportion
      to
      the absolute dollar amount of change. The table has not been adjusted for
      tax-exempt interest.








**For
                the Three Months Ended March 31,****2006
                vs. 2005****Rate**
            
            **Volume**
            
            **Total****(In
                thousands)****Earning
                assets:**Federal
                Funds Sold
            
            $
            21
            
            
            ($2
            )
            $
            19Interest
                bearing deposits
            
            
            (27
            )
            
            (71
            )
            
            (98
            )Securities
            
            
            79
            
            
            (67
            )
            
            12Loans
            
            
            623
            
            
            94
            
            
            717Total
                earning assets
            
            
            696
            
            
            (46
            )
            
            650**Interest
                bearing liabilities:**Savings
                accounts
            
            
            (2
            )
            
            (8
            )
            
            (10
            )Money
                market accounts
            
            
            165
            
            
            130
            
            
            295NOW
                accounts
            
            
            62
            
            
            (63
            )
            
            (1
            )Time
                accounts
            
            
            420
            
            
            144
            
            
            564Borrowings
            
            
            42
            
            
            (179
            )
            
            (137
            )Total
                interest bearing liabilities
            
            
            687
            
            
            24
            
            
            711Change
                in net interest income
            
            $
            9
            
            
            ($70
            )
            
            ($61
            )





Net
      interest income for the three-month period ended March 31, 2006, was $6.250
      million. This compares to $6.311 million for the three-month period ended March
      31, 2005, a $61 thousand or 1.0% decrease between comparable periods. Although
      the net decrease in interest income between comparable periods was not
      significant, several components of interest income and interest expense changed
      significantly between the periods due to both rate and volume factors.





Interest
      income increased $650 thousand between the periods due principally to an
      increase in the rate on earning assets. More specifically, the interest income
      on earning assets increased $696 thousand between periods as interest rates
      and
      resultant yields on Federal Funds Sold, securities, and loans increased. The
      $27
      thousand decrease in interest income on interest bearing deposits due to rate
      between the periods was due to the maturity of $7.499 million of long term
      high-yield certificates of


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 16


deposit
      between the periods. The improvement in interest income on earning assets of
      $696 thousand due to a change in rate was offset by a $46 thousand reduction
      in
      interest income due to a decrease in the average volume of most categories
      of
      earning assets, including Federal Funds Sold, interest bearing deposits, and
      securities. Although the average volume of net loans increased $5.446 million
      between the periods, resulting in a $94 thousand increase in interest income,
      it
      was offset by a decrease in the other categories of earning assets totaling
      $14.492 million, which decreased interest income by $140 thousand. Throughout
      the last three quarters of 2005 and the first quarter of 2006, we recorded
      an
      increase in average loans outstanding due to our loan production efforts. The
      growth in average loans outstanding, coupled with the reduction in borrowings
      between the periods, caused us to reduce the volume of other earning
      assets.





The
      $650
      thousand increase in interest income was offset by a $711 thousand increase
      in
      the cost of interest bearing liabilities, $687 thousand due to the increase
      in
      rate and $24 thousand due to the increase in the volume of interest bearing
      liabilities. The interest expense recorded on our most interest-sensitive
      liabilities, including time accounts and money market accounts, increased due
      to
      both an increase in volume and an increase in rate. Specifically, interest
      expense on time accounts and interest expense on money market accounts increased
      $564 thousand and $295 thousand, respectively, over the comparable periods.
      Between the end of the first quarter of 2005 and the end of the first quarter
      of
      2006, we raised the interest rates paid on our certificates of deposit to remain
      competitive within our market. This drove up the cost of time accounts resulting
      in a $420 thousand increase in interest expense due to rate. In addition, a
      significant portion of money market account balances were indexed to the 90-day
      Treasury bill rate, causing an increase in the average rate paid for money
      market deposits from 1.93% during the first quarter of 2005 to 3.44% during
      the
      first quarter of 2006. The rate increase resulted in an additional $165 thousand
      of interest expense on a comparable quarter basis.





As
      short-term interest rates increased rapidly between the periods we only modestly
      increased the interest rate on our NOW account deposits. This caused some of
      our
      customers with NOW account deposits to either move their monies to another
      institution or transfer their NOW account funds to a higher-yield deposit
      account. This decreased the average volume of NOW accounts between the periods
      from $121.301 million in the first quarter of 2005 to $97.031 million in the
      first quarter of 2006. The decrease in the average volume of NOW account
      deposits reduced interest expense by $63 thousand between comparable periods.
      This improvement was offset, however, by a $62 thousand increase in interest
      expense on NOW account deposits due to a 23 basis point increase in the average
      rate paid between the periods.





The
      interest expense on borrowings decreased $137 thousand between comparable
      quarters due principally to the repayment of borrowed funds throughout the
      last
      three quarters of 2005. Between the comparable periods, the average volume
      of
      borrowings decreased by $19.364 million resulting in a $179 thousand decrease
      in
      interest expense due to changes in volume. This was offset by a $42 thousand
      increase in interest expense on borrowings between comparable periods due to
      higher interest rates.





*Provision
      for Loan Losses.* We
      recorded a provision for loan losses of $420 thousand for the three month period
      ended March 31, 2006, as compared to $240 thousand for the three month period
      ended March 31, 2005, a $180 thousand increase. During the first quarter of
      2006, most of our credit quality measures worsened, prompting an increase to
      provision for loan losses. In particular, during the quarter we downgraded
      some
      of our large commercial credits, which increased the level of potential problem
      loans from $7.897 million at December 31, 2005, to $15.264 million at March
      31,
      2006. In addition the amount of delinquent loans increased modestly between
      the
      period ended December 31, 2005, and the period ended March 31, 2006. A more
      significant increase in the provision for loan losses was mitigated by the
      reduction in non-performing loans. Between the period ended December 31, 2005,
      and the period ended March 31, 2006, total non-performing loans decreased $2.913
      million. Although net charge-offs increased $972 thousand between the first
      quarter of 2005 and the first quarter of 2006, we did not specifically record
      an
      increase in the provision for loan losses for this factor because $981 thousand
      of the net charge-offs in the first quarter of 2006 was due to the charge-off
      of
      two loans to a single commercial borrower, in which we previously allocated
      $826
      thousand in the allowance for loan losses for these loans.





*Non-Interest
      Income.* Non-interest
      income increased from $1.451 million in the three-month period ended March
      31,
      2005, to $1.650 million in the three-month period ended March 31, 2006, a $199
      thousand or 13.7% increase. Between comparable periods all categories of
      non-interest income increased, except bank-owned life insurance
      income.


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 17


Trust
      fees increased $61 thousand or 18.6% between the comparable quarters, from
      $328
      thousand for the quarter ended March 31, 2005, to $389 thousand for the quarter
      ended March 31, 2006. During the first quarter of 2006, we recorded account
      termination fees totaling $45 thousand on five trust accounts and $14 thousand
      in executor fees on an estate we administered and closed. By comparison, similar
      fees were not recorded during the first quarter of 2005.





During
      the first quarter of 2006, we recorded $407 thousand of service charges on
      deposit accounts. This compares to $392 thousand during the first quarter of
      2005, a $15 thousand or 3.8% increase. The net increase in service charges
      on
      deposit accounts was primarily due to an increase in penalty charges on our
      demand deposit accounts and an increase in ATM fees.





Our
      commission income is generated from the Bank’s insurance agency subsidiary, Mang
      - Wilber LLC. During the first quarter of 2006, we recorded $186 thousand of
      commission income. This compares to $138 thousand during the first quarter
      of
      2005, a $48 thousand or 34.8% increase. During the first quarter of each year,
      our insurance agency receives payments from various insurance carriers for
      the
      prior year’s loss performance. These payments, as well as the general level of
      sales commission for the agency, increased period over period resulting in
      a $48
      thousand increase in commission income.





During
      the first quarter of 2006, we recognized investment securities gains of $293
      thousand. This compares to $244 thousand during the first quarter of 2005,
      a $49
      thousand or 20.1% increase between the periods. During the first quarter of
      2006
      we sold $2.961 million of available-for-sale investment securities; principally
      municipal and equity securities to meet our funding and liquidity objectives.
      We
      also had an additional $9.461 million in available-for-sale and held-to-maturity
      securities mature or be called. These activities generated net investment
      securities gains of $197 thousand for the quarter. In addition, we recorded
      a
      $96 thousand gain on our trading securities during the quarter. By comparison,
      during the first quarter of 2005, we sold $5.351 million of available-for-sale
      investment securities and had an additional $21.499 million in
      available-for-sale and held-to-maturity securities mature or be called,
      generating net gains of $247 thousand. These gains were offset by a $3 thousand
      net loss on our trading securities during the quarter.





Other
      income is comprised of numerous types of fee income, including investment
      services, lease income, safe deposit box income, title insurance agency income,
      rental of foreclosed real estate, and distributions from two insurance trusts,
      in which the Bank participates. Other income increased from $114 thousand in
      the
      first quarter of 2005 to $140 thousand in the first quarter of 2006, a $26
      thousand or 22.8% increase. The increase was principally attributed to an
      increase in investment services income. During the first quarter of 2005, we
      recorded $38 thousand of investment services income, as compared to $84 thousand
      in the first quarter of 2006, a $46 thousand or 121.1% increase. The fee income
      improvements experienced in the first quarter of 2006 were the result of
      additional mutual fund, annuity, and investment securities sales generated
      by
      our licensed investment services employees.





*Non-Interest
      Expense.* Non-interest
      expense is comprised of salaries, employee benefits, occupancy expense,
      furniture and equipment expense, computer service fees, advertising and
      marketing expense, professional fees, and other miscellaneous expense. Total
      non-interest expense increased $261 thousand or 5.7% on a comparable quarter
      basis, from $4.590 million in the first quarter of 2005 to $4.851 million in
      the
      first quarter of 2006. The most significant increases between the comparable
      quarters were in salaries expense, computer service fees and professional fees.
      During 2005 we acquired two branch offices from HSBC, opened a loan production
      office in Syracuse, New York, converted our core computer operating system,
      and
      created several new positions to monitor and assure compliance with newly
      imposed Federal regulations, in particular, Section 404 of the Sarbanes - Oxley
      Act of 2002 and the Bank Secrecy Act. These activities and efforts resulted
      in
      significant increases in several categories of non-interest expense, including
      salaries, employee benefits, computer service fees, and professional
      fees.





Salaries
      expense increased $169 thousand or 7.6% between the quarterly periods, from
      $2.221 million during the first quarter of 2005 to $2.390 million during the
      first quarter of 2006. The increase between periods was due to net increases
      in
      several components of salary. In particular, base salaries and overtime
      increased $118 thousand between the periods due to a slight increase in staff
      and general increases in base salary amounts. During the first quarter of 2006,
      we recorded $22 thousand of additional commission and incentive pay for the
      production efforts of sales and support staff. And finally, the salaries expense
      related to the Company’s executive deferred compensation plan increased $29
      thousand between the periods, from $35 thousand during the first quarter of
      2005
      to $64 thousand during the first quarter of 2006.


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 18


During
      the first quarter of 2006, employee benefits expense increased $22 thousand
      or
      3.8%, from $577 thousand during the first quarter of 2005 to $599 thousand
      during the first quarter of 2006. Although the net increase between the periods
      was not significant, some components of employee benefits expense changed
      significantly between the quarterly periods. During the first quarter of 2006,
      we froze the Company’s defined benefit pension plan. Because no further benefits
      will accrue to plan participants, we recorded a $142 thousand decrease in the
      defined pension plan expense during the first quarter of 2006, as compared
      to
      the first quarter of 2005. In conjunction with the curtailment of the defined
      benefit plan, we modified our 401k retirement plan to provide for employer
      contributions. As a result, during the first quarter of 2006, we recorded $101
      thousand of employee benefits expense for commitments to contribute to this
      plan. By comparison, no expense was recorded for the 401k plan during the first
      quarter of 2005. The remaining net increase in employee benefits expense between
      comparable periods was principally due to general increases in F.I.C.A. expense,
      group health insurance, group disability insurance, workers compensation, and
      unemployment insurance. We expect to incur approximately a $200 thousand
      curtailment charge on the Company’s defined benefit pension plan during the
      second quarter of 2006.





Computer
      service fees increased from $131 thousand in the first quarter of 2005 to $204
      thousand in the first quarter of 2006, a $73 thousand or 55.7% increase. During
      the third quarter of 2005, we converted our proprietary core computer operating
      system to a system(s) more widely used throughout the banking industry. To
      operate the new system(s) we entered into various software licensing agreements
      and maintenance contracts with several hardware and software computer system
      vendors resulting in an increase in computer service fees.





During
      the first quarter of 2006, we incurred $232 thousand of professional fees,
      as
      compared to $196 thousand during the first quarter of 2005, a $36 thousand
      or
      18.4% increase. The increase in professional fees was due to several factors.
      On
      April 4, 2006, we announced a self-tender offer for the Company’s common stock.
      To complete the offer we incurred significant legal and other professional
      fees.
      In addition, in 2006 we outsourced the internal audit function to a third party
      accounting and auditing firm, thereby increasing professional fees. And finally,
      during the first quarter of 2006 we incurred $14 thousand of professional fees
      for loan review services.





*Income
      Taxes.* Income
      tax expense decreased from $762 thousand during the three-month period ended
      March 31, 2005, to $676 thousand during the three month period ended March
      31,
      2006. The decrease in income tax expense was primarily due to a decreased amount
      of pre-tax income. ** Our
      effective tax rate decreased between periods, from 26.0% in the three-month
      period ended March 31, 2005, to 25.7% in the three month period ended March
      31,
      2006.




E.
      Liquidity





Liquidity
      describes our ability to meet financial obligations in the normal course of
      business. Liquidity is primarily needed to meet the borrowing and deposit
      withdrawal requirements of our customers and to fund our current and planned
      expenditures. We are committed to maintaining a strong liquidity position.
      Accordingly, we monitor our liquidity position on a daily basis through our
      daily funds management process. This includes:





· maintaining
      the appropriate levels of currency throughout our branch system to meet the
      daily cash needs of our customers,


· balancing
      our
      mandated deposit or “reserve” requirements at the Federal Reserve Bank of New
      York,


· maintaining
      adequate cash balances at our correspondent banks, and


· assuring
      that adequate levels of Federal Funds Sold, liquid assets, and borrowing
      resources are available to meet obligations including reasonably anticipated
      daily fluctuations.





In
      addition to the daily funds management process, we also monitor certain
      liquidity ratios and complete a liquidity assessment every 90 days to estimate
      current and future sources and uses of liquidity. The 90-day sources and uses
      assessment is reviewed by our Asset and Liability Committee (“ALCO”). The ALCO,
      based on this assessment and other data, determines our future funding or
      investment needs and strategies. The results of the 90-day sources and uses
      assessment are reported to the Board of Directors of the Bank quarterly. We
      were
      in compliance with all of our internal liquidity policy limits at December
      31,
      2005, and March 31, 2006. The following list represents the sources of funds
      available to meet our liquidity requirements. Our primary sources of funds
      are
      denoted by an asterisk (*).


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 19








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





Table
      of
      Liquidity Measures:





The
      following table summarizes several of our key liquidity measures for the periods
      stated:





Liquidity
                  Measure
                *Dollars
                  in Thousands*
              March
                  31,
                2006
              December
                  31,
                2005Cash
                  and Cash Equivalents
              $23,562
              $18,417Available-for-Sale
                  Investment Securities at Estimated Fair Value less Securities pledged
                  for
                  State and Municipal Deposits and Borrowings
              $68,370
              $64,622Gross
                  Loan to Total Asset Ratio
              52.47%
              53.63%FHLBNY
                  Remaining Borrowing Capacity
              $1,883
              $19,413Available
                  Unsecured Correspondent Bank Lines of Credit
              $15,000
              $10,000





Between
      December 31, 2005, and March 31, 2006, our liquidity position did not materially
      change, primarily because our principal correspondent bank increased our
      unsecured overnight funds line of credit by $5.0 million, from $10.0 million
      at
      December 31, 2005, to $15.0 million at March 31, 2006. During the first quarter
      of 2006, deposit balances fluctuated significantly from week to week. In the
      last few weeks of the first quarter, deposit balances decreased significantly
      due to the maturity of several large municipal certificates of deposit. This
      outflow of deposits prompted us to borrow $15.0 million of short-term funds
      at
      the FHLBNY just prior to the end of the quarter. This transaction was the
      primary reason we experienced a $17.530 million decrease in our FHLBNY borrowing
      capacity between the periods ended December 31, 2005, and March 31, 2006. The
      borrowing was subsequently repaid in full during the first week of April
      2006.





The
      substantial majority of our unencumbered available-for-sale investment
      securities are highly liquid and could be sold immediately or pledged for
      borrowing purposes to meet our anticipated or unanticipated loan and other
      funding requirements. In addition, the anticipated principal repayments on
      existing loans and investment securities, as well as the anticipated deposit
      retention levels, continue to provide us with an adequate amount of liquidity.





Our
      commitments to extend credit and stand-by letters of credit decreased $267
      thousand between December 31, 2005, and March 31, 2006. At March 31, 2006,
      commitments to extend credit and stand-by letters of credit were $85.396
      million, as compared to $85.663 million at December 31, 2005. Our experience
      indicates that draws on the commitments to extend credit and stand-by letters
      of
      credit do not fluctuate significantly from quarter to quarter, and therefore,
      are not expected to materially impact our


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 20


liquidity
      prospectively.





We
      recognize that deposit flows and loan and investment prepayment activity are
      affected by the level of interest rates, the interest rates and products offered
      by competitors, and other factors. Based on our deposit retention experience,
      anticipated levels of regional economic activity, particularly moderate levels
      of loan demand within our primary market area, and current pricing strategies,
      we anticipate that we will have sufficient levels of liquidity to meet our
      current funding commitments for several quarters prospectively.




F.
      Capital Resources and Dividends





The
      maintenance of appropriate capital levels is a management priority. Overall
      capital adequacy is monitored on an ongoing basis by our management and reviewed
      quarterly by the Board of Directors. Our principal capital planning goal is
      to
      provide an adequate return to shareholders while retaining a sufficient capital
      base to provide for future expansion and comply with all regulatory
      standards.





At
      March
      31, 2006, shareholders’ equity was $67.780 million. This represents a $63
      thousand or less than 1.0% increase over total shareholders’ equity of $67.717
      million at December 31, 2005. The slight increase in shareholders’ equity was
      primarily due to an $894 thousand increase in retained earnings, offset by
      an
      $831 thousand decrease in net unrealized loss on securities. During the first
      quarter of 2006, interest rates increased, which caused a decrease in the fair
      market value of our available-for-sale investment securities and the related
      accumulated other comprehensive loss.





The
      Company and the Bank are both subject to regulatory capital guidelines. Under
      these guidelines, as established by federal bank regulators, to be adequately
      capitalized, the Company and the Bank must both maintain the minimum ratio
      of
      Tier 1 capital to risk-weighted assets at 4.0% and the minimum ratio of total
      capital to risk-weighted assets of 8.0%. Tier 1 capital is comprised of
      shareholders' equity, less intangible assets and accumulated other comprehensive
      income. Total capital, for this risk-based capital standard, includes Tier
      1
      capital plus the Company’s allowance for loan losses. Similarly, for the Bank to
      be considered “well capitalized,” it must maintain a Tier 1 capital to
      risk-weighted assets ratio of 6.0% and a total capital to risk-weighted assets
      ratio of 10.0%. The Company and the Bank exceeded all capital adequacy and
      well
      capitalized guidelines at March 31, 2006, and December 31, 2005. The Company’s
      Tier 1 capital to risk-weighted assets ratio and total capital to risk-weighted
      assets ratio at March 31, 2006, were 13.29% and 14.51%,
      respectively.




The
      principal source of funds for the payment of shareholder dividends by the
      Company has been dividends declared and paid to the Company by its subsidiary
      bank. There are various legal and regulatory limitations applicable to the
      payment of dividends to the Company by its subsidiaries as well as the payment
      of dividends by the Company to its shareholders. As of March 31, 2006, under
      this statutory limitation, the maximum amount that could have been paid by
      the
      Bank subsidiary to the Company, without special regulatory approval, was $6.801
      million. The ability of the Company and the Bank to pay dividends in the future
      is, and will continue to be, influenced by regulatory policies, capital
      guidelines and applicable laws.





On
      April
      4, 2006, the Company announced a Dutch auction style self-tender offer to
      purchase up to 650,000 shares of its common stock (“the Offer”). Under the terms
      of the Offer, shareholders’ may tender their shares at a price (in 10 cent
      increments) between $9.90 and $11.40 per share. The expiration date for the
      offer was initially set for May 4, 2006. On May 5, 2006, the Company’s Board of
      Directors announced an extension of the expiration date to May 18,
      2006.





Under
      the
      proposed terms of the offer, the Company may use up to $7.455 million of
      shareholders’ equity to acquire 650,000 of its shares. If the Company is
      successful in acquiring 650,000 shares at the maximum price of $11.40 per share
      pursuant to the Offer, the Company and the Bank, following the execution of
      the
      Offer, will remain adequately capitalized and well capitalized, respectively,
      per all federal regulatory standards. Through May 4, 2006, 518,802 shares were
      tendered pursuant to the Offer.





See
      PART
      II, Item 2 of this document “Unregistered Sales of Equity Securities and Use of
      Proceeds” for a recent history of the Company’s stock repurchase
      activities.


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 21


**ITEM
      3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





Our
      business activities generate market risk. Market risk is the possibility that
      changes in future market conditions, including rates and prices, will reduce
      earnings and make the Company less valuable. We are primarily exposed to market
      risk through changes in interest rates. This risk is called interest rate risk
      and is an inherent component of risk for all banks. The risk occurs because
      we
      pay interest on deposits and borrowed funds at varying rates and terms, while
      receiving interest income on loans and investments with different rates and
      terms. As a result, our earnings and the imputed economic value of assets and
      liabilities are subject to potentially significant fluctuations as interest
      rates rise and fall. Our objective is to minimize the fluctuation in net
      interest margin and net interest income caused by anticipated and unanticipated
      changes in interest rates.





Ultimately,
      the Company’s Board of Directors is responsible for monitoring and managing
      market and interest rate risk. The Board accomplishes this objective by annually
      reviewing and approving an Asset and Liability Management Policy, which
      establishes broad risk limits and delegates responsibility to carry out asset
      and liability oversight and control to the Directors’ Loan and Investment
      Committee and management’s ALCO.





We
      manage
      a few different forms of interest rate risk. The first is mismatch risk, which
      involves the mismatch of maturities of fixed rate assets and liabilities. The
      second is basis risk. Basis risk is the risk associated with non-correlated
      changes in different interest rates. For example, we price many of our
      adjustable rate commercial loans (an asset) using the prime rate as a basis,
      while some of our deposit accounts (a liability) are tied to Treasury security
      yields. In a given timeframe, the prime rate might decrease 2% while a
      particular Treasury security might only decrease 1%. If this were to occur,
      our
      yield on prime based commercial loans would decrease by 2%, while the cost
      of
      deposits might only decrease by 1%, negatively affecting net interest income
      and
      net interest margin. The third risk is option risk. Option risk generally
      appears in the form of prepayment volatility on residential mortgages,
      commercial and commercial real estate loans, consumer loans, mortgage-backed
      securities, and callable agency or municipal investment securities. The Bank’s
      customers generally have alternative financing sources (or options) to refinance
      their existing debt obligations with other financial institutions. When interest
      rates decrease, many of these customers exercise this option and refinance
      at
      other institutions and prepay their loans with us, forcing us to reinvest the
      prepaid funds in lower yielding investments and loans. The same type of
      refinancing activity also accelerates principal payments on mortgage-backed
      securities held by the Bank. Municipal investment securities and agency
      securities are issued with specified call dates and call prices and are
      typically exercised by the issuer when interest rates on comparable maturity
      securities are lower than the current coupon rate on the security.





Measuring
      and managing interest rate risk is a dynamic process that the Bank’s management
      must continually perform to meet the objective of maintaining stable net
      interest income and net interest margin. This means that prior to setting the
      term or interest rate on loans or deposits, or before purchasing investment
      securities or borrowing funds, management must understand the impact that
      alternative interest rates will have on the Bank’s interest rate risk profile.
      This is accomplished through simulation modeling. Simulation modeling is the
      process of “shocking” the current balance sheet under a variety of interest rate
      scenarios and then measuring the impact of interest rate changes on both
      projected earnings and the economic value of the Bank’s equity. The estimates
      underlying the sensitivity analysis are based on numerous assumptions including,
      but not limited to: the nature and timing of interest rate changes, prepayments
      on loans and securities, deposit retention rates, pricing decisions on loans
      and
      deposits, and reinvestment/replacement rates on asset and liability cash flows.
      While assumptions are developed based on available information and current
      economic and local market conditions, management cannot make any assurances
      as
      to the ultimate accuracy of these assumptions, including competitive influences
      and customer behavior. Accordingly, actual results will differ from those
      predicted by simulation modeling.





The
      following table shows the projected changes in net interest income from a
      parallel shift in all market interest rates. The shift in interest rates is
      assumed to occur in monthly increments of 0.50% per month until the full shift
      is complete. In other words, we assume it will take 6 months for a 3.00% shift
      to take place. This is also known as a “ramped” interest rate shock. The
      projected changes in net interest income are totals for the 12-month period
      beginning April 1, 2006, and ending March 31, 2007, under ramped shock
      scenarios.


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Interest
      Rate Sensitivity Table:




Interest
                Rates
            *Dollars
                in Thousands*Interest
              Rate
              Shock
                (1)
            Prime
              Rate
            Projected
              Annualized
              Net
              Interest
              Income
            Projected
              Dollar
              Change
              in
                Net
              Interest
                Income
            Projected
              Percentage
              Change
                in
              Net
              Interest
                Income
            Projected
              Change
                in
              Net
                Interest
              Income
                as a
              Percent
                of
              Total
              Shareholders'
              Equity3.00%
            10.75%
            $26,216
            $603
            2.35%
            0.89%2.00%
            9.75%
            25,692
            79
            0.31%
            0.12%1.00%
            8.75%
            25,692
            79
            0.31%
            0.12%No
                change
            7.75%
            25,613
            -
            -
            --1.00%
            6.75%
            25,303
            (310)
            -1.21%
            -0.46%-2.00%
            5.75%
            24,283
            (1,330)
            -5.19%
            -1.96%-3.00%
            4.75%
            23,369
            (2,244)
            -8.76%
            -3.31%




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


Many
      assumptions are embedded within our interest rate risk model. These assumptions
      are approved by the Bank’s ALCO and are based upon both management’s experience
      and projections provided by investment securities companies. Assuming our
      prepayment and other assumptions are accurate and assuming we take reasonable
      actions to preserve net interest income, we project that net interest income
      would increase by $79 thousand or 0.12% of total shareholders’ equity in a
      +2.00% ramped interest rate shock and decline by $1.330 million or 1.96% of
      total shareholders’ equity in a -2.00% ramped interest rate shock. This is
      within our Asset and Liability Policy guideline, which limits the maximum
      projected decrease in net interest income in a +2.00% or -2.00% ramped interest
      rate shock to -5.0% of the Company’s total equity capital.





Our
      strategy for managing interest rate risk is impacted by general market
      conditions and customer demand. We try to limit the volume and term of
      fixed-rate assets and fixed-rate liabilities so that we can adjust the mix
      and
      pricing of assets and liabilities to mitigate net interest income volatility.
      We
      also purchase investments for the securities portfolio and structure borrowings
      from the FHLBNY to offset interest rate risk taken in the loan portfolio. We
      also offer adjustable rate loan and deposit products that change as interest
      rates change. At March 31, 2006, approximately 23% of our total assets were
      invested in adjustable rate loans and investments.





At
      March
      31, 2006, the Treasury yield curve was very “flat.” This flat interest rate
      environment inhibits our ability to earn net interest income, since Banks
      typically earn net interest income by procuring short-term deposits and
      borrowings and investing those proceeds in longer term loans and investments.
      This practice, which is sometimes referred to as mismatching assets and
      liabilities, typically allows Banks to enhance their “interest spread,” which
      generates net interest income. If this flat interest rate environment persists,
      it may negatively impact our ability to increase net interest income for several
      quarters prospectively.




ITEM
      4 :  Controls
      and Procedures





Our
      management, including the Chief Executive Officer and Chief Financial Officer,
      evaluated the design and operational effectiveness of the Company’s disclosure
      controls and procedures (as defined in Rule 13(a)-15(e) and 15(d)-15(e) under
      the Securities Exchange Act of 1934, as amended) as of March 31, 2006. Based
      upon that evaluation, the Chief Executive Officer and Chief Financial Officer
      concluded that the Company’s disclosure controls and procedures were effective
      in ensuring that information required to be disclosed by the Company in reports
      that it files or submits under the Securities Exchange Act of
      1934


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 23


are
      recorded, processed, summarized, and reported within the time periods specified
      in the SEC’s rules and forms.





There
      were no changes made in the Company’s internal controls over financial reporting
      that occurred during the Company’s most recent fiscal quarter that have
      materially affected, or are reasonably likely to materially affect, the
      Company’s internal controls over financial reporting.








**PART
      II - OTHER INFORMATION**





ITEM
      1 :  Legal
      Proceedings





From
      time
      to time, the Company becomes subject to various legal claims which arise in
      the
      normal course of business. At March 31, 2006, the Company was not the subject
      of
      any material pending legal proceedings, other than ordinary routine litigation
      occurring in the normal course of its business. The various pending legal claims
      against the Company will not, in the opinion of management based upon
      consultation with legal counsel, result in any material liability to the Company
      and will not materially affect our financial position, results of operation,
      or
      cash flow.





Neither
      the Company, the Bank, nor any of the Bank’s subsidiaries have been subject to
      review by the Internal Revenue Service of any transactions that have been
      identified as abusive or that have a significant tax avoidance
      purpose.





ITEM
      1A: Risk
      Factors





During
      the first quarter of 2006 there were no material changes to the Company’s risk
      factors as disclosed in the Annual Report on Form 10-K, Item 1A, filed with
      the
      SEC on March 15, 2006.





ITEM
      2 :  Unregistered Sales of Equity Securities and Use of Proceeds





A.
      Not
      applicable.





B.
      Not
      applicable





C.
      Purchases of Equity Securities by Issuer and Affiliated Purchasers





On
      July
      26, 2005, our Board of Directors reauthorized management to purchase up to
      $1.5
      million of the Company’s common stock under a previously approved and publicly
      announced stock repurchase program. Between July 26, 2005 and December 31,
      2005,
      management purchased 17,155 shares under this authority, which reduced the
      amount of additional shareholders’ equity available to management to purchase
      shares under the program to $1.308 million. No additional shares were purchased
      under this stock repurchase program during the three-month period ended March
      31, 2006. In addition, at March 31, 2006 management’s authority to purchase
      shares under this program was suspended pending the results of the Company’s
      common stock self-tender offer announced April 4, 2006.





All
      shares repurchased under our repurchase program were made in the open market
      or
      through private transactions, were limited to one transaction per week, and
      were
      conducted exclusively through Merrill Lynch, a registered broker-dealer. All
      such purchases were in compliance with the laws of the State of New York, Rule
      10b(18) of the Securities Exchange Act of 1934 and the rules and regulations
      there under, and the rules and regulations of the Amex®.





During
      the three month period ended March 31, 2006, the rights of holders of our
      registered securities were not modified; nor was any other class of security
      issued that could materially limit or qualify our registered
      securities.




ITEM
      3:  Defaults
      Upon Senior Securities





The
      Company did not default on any senior securities during the three-month period
      ended March 31, 2006.





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ITEM
      4:  Submission of Matters to a Vote of Security Holders





None.








ITEM
      5 :  Other
      Information





None.








ITEM
      6 :  Exhibits





See
      Exhibit Index to this Form 10-Q


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 25


**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.




THE
                  WILBER CORPORATIONBy:
              /s/
                  Douglas C. Gulotty
              
              Dated:
              05/08/2006Douglas
                  C. GulottyPresident
                  and Chief Executive OfficerBy:
              /s/
                  Joseph E. Sutaris
              
              Dated:
              05/08/2006Joseph
                  E. SutarisSecretary,
                  Treasurer and Chief Financial Officer


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 26


**EXHIBIT
      INDEX**








**No.**
            **Document**





31.1
            Certification
                of Chief Executive Officer Pursuant to 302 of the Sarbanes-Oxley
                Act of
                2002





31.2
            Certification
                of Chief Financial Officer Pursuant to 302 of the Sarbanes-Oxley
                Act of
                2002





32.1
            Certification
                of Chief Executive Officer Pursuant to 18 U.S.C.
                1350





32.2 Certification
      of Chief Financial Officer Pursuant to 18 U.S.C. 1350










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27