United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 For the Fiscal Year Ended March 31, 2007

[_]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934
         For the transition period from _________ to __________

                         Commission File Number 0-51589

                          NEW ENGLAND BANCSHARES, INC.
                 (Name of small business issuer in its charter)

         United States                                   04-3693643
(State or other jurisdiction of             (I.R.S. Employer identification No.)
incorporation or organization)

855 Enfield Street, Enfield, Connecticut                  06082
(Address of principal executive offices)                (Zip Code)

                    Issuer's telephone number: (860) 253-5200
          Securities registered Section 12(b) of the Exchange Act: None
       Securities registered pursuant to Section 12(g)of the Exchange Act:


         Title of each class          Name of each exchange on which registered
         -------------------          -----------------------------------------
       Common stock, par value                Nasdaq Stock Market, Inc.
           $0.01 per share

    Securities registered pursuant to Section 12(g) of the Exchange Act: None

         Check  whether the issuer is not required to file  reports  pursuant to
Section 13 or 15(d) of the Exchange Act. [_]

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X No

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

         The   issuer's   revenues   for  its  most  recent   fiscal  year  were
approximately $16,154,000.

         Indicate by check mark whether the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]

         The aggregate  market value of the voting and non-voting  common equity
held by non-affiliates  was $59,191,569,  based upon the closing price of $12.74
as quoted on the Nasdaq  Global  Market on June 1, 2007.  Solely for purposes of
this  calculation,  the shares held by the  directors and officers of the issuer
are deemed to be held by affiliates.

         As of June 1, 2007,  the issuer had  5,346,583  shares of common  stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
           Portions of the Proxy Statement for the 2007 Annual Meeting
               of Stockholders are incorporated by reference into
                          Part III of this Form 10-KSB

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                                      INDEX

                                                                            Page
PART I

Item 1.  Description of Business..............................................1

Item 2.  Description of Property.............................................20

Item 3.  Legal Proceedings 20

Item 4.  Submission of Matters to a Vote of Security Holders.................21


PART II

Item 5.  Market for Common Equity, Related Stockholder Matters and
         Small Business Issuer Purchases of Equity Securities................21

Item 6.  Management's Discussion and Analysis or Plan of Operation...........21

Item 7.  Financial Statements................................................48

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure ...............................................78

Item 8A. Controls and Procedures ............................................78

Item 8B. Other Information ..................................................78



PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16(a) of the Exchange Act...................78

Item 10. Executive Compensation..............................................79

Item 11. Security Ownership of Certain Beneficial Owners and Management
         and Related Stockholder Matters.....................................79

Item 12. Certain Relationships and Related Transactions......................80

Item 13. Exhibits............................................................81

Item 14. Principal Accountant Fees and Services..............................81

Signatures...................................................................82

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This annual report on Form 10-KSB contains  certain  forward-looking  statements
which are based on certain  assumptions and describe the Company's future plans,
strategies and expectations.  These forward-looking statements may be identified
by the  use of  such  words  as  "believe,"  "expect,"  "intend,"  "anticipate,"
"estimate," "project," or similar expressions.  The Company's ability to predict
results  or the  actual  effect  of future  plans or  strategies  is  inherently
uncertain.  Factors which could have a material  adverse effect on the Company's
operations  include,  but are not  limited  to,  the  items  described  in "Risk
Factors"  appearing  in Part I, Item 1 of this  annual  report and  changes  in:
interest rates,  general economic  conditions,  legislative/regulatory  changes,
monetary and fiscal policies of the U.S.  Government,  including policies of the
U.S.  Treasury and the Federal Reserve Board, the quality and composition of our
loan and  investment  portfolios,  demand  for  loan  products,  deposit  flows,
competition,  demand for financial services in the Company and Enfield Federal's
market  area  and  accounting   principles  and  guidelines.   These  risks  and
uncertainties should be considered in evaluating  forward-looking statements and
undue  reliance  should not be placed on such  statements.  The Company does not
undertake -- and  specifically  disclaims any obligation -- to publicly  release
the result of any revisions that may be made to any  forward-looking  statements
to  reflect  events or  circumstances  after the date of such  statements  or to
reflect the occurrence of anticipated or unanticipated events.

                                     PART I

Item 1.  DESCRIPTION OF BUSINESS

General

         New  England  Bancshares,   Inc.  New  England  Bancshares,  Inc.  (the
"Company") is a Maryland  corporation,  which was organized in 2005. In December
2005, New England Bancshares,  Inc. became the holding company parent of Enfield
Federal Savings  following the completion of the  "second-step"  mutual-to-stock
conversion of Enfield Mutual Holding Company.  Reference is made to "New England
Bancshares"  or the "Company" for periods both before and after the  second-step
conversion.  The  principal  asset of the Company is its  investment  in Enfield
Federal Savings and Loan Association (the  "Association" or "Enfield  Federal").
In the second-step  conversion,  the Company sold 3,075,855  shares resulting in
net proceeds of $27.2 million, of which $12.2 million was retained as capital by
the Company  and $15.0  million  was  infused as capital  into the  Association.
Shareholders  of  the  Company  immediately  prior  to  the  completion  of  the
second-step  conversion  received  2.3683  shares for each share of common stock
they held in the Company,  resulting  in an  additional  1,311,863  shares being
issued.  The Company had 5,346,583  shares issued and  outstanding  at March 31,
2007.

         The  second-step  conversion was accounted for as a change in corporate
form  with no  subsequent  change  in the  historical  carrying  amounts  of the
Company's assets and liabilities. Consolidated stockholders' equity increased by
the net cash  proceeds  from the offering.  All  references in the  consolidated
financial  statements  and notes thereto to share data  (including the number of
shares and per share  amounts)  have been  adjusted  to reflect  the  additional
shares outstanding as a result of the offering and the share exchange.

         On November  21,  2006 the Company  entered  into a  definitive  merger
agreement with First Valley Bancorp,  Inc.,  Bristol,  Connecticut,  under which
First Valley Bancorp will combine with the Company.  First Valley Bancorp is the
holding company for Valley Bank,  Bristol,  Connecticut.  Under the terms of the
transaction,  shareholders  of First Valley  Bancorp will be entitled to receive
0.8907 shares of Company  common stock and $9.00 in cash for each share of First
Valley Bancorp common stock.

         The  Company  will  continue  to operate  Valley  Bank as a  separately
chartered commercial bank subsidiary. In addition to retaining its own identity,
Valley Bank will retain its own Board of Directors,  management  team,  branches
and  employees.  The merger is not  expected to result in any lay-offs or branch
closings. As part of the transaction, the Company will also infuse approximately
$12.0 million of capital into Valley Bank.

         Enfield  Federal  Savings  and  Loan   Association.   The  Association,
incorporated in 1916, is a federally chartered savings association headquartered
in Enfield,  Connecticut.  The Association's deposits are insured by the Federal
Deposit  Insurance   Corporation  (the  "FDIC").   The  Association  is  engaged
principally  in the business of

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attracting  deposits  from the  general  public  and  investing  those  deposits
primarily in  residential  and  commercial  real estate  loans,  and to a lesser
extent, in consumer, construction,  commercial and small business loans. In June
2002, the  Association  reorganized  from the mutual form of organization to the
mutual holding company  structure.  In December 2003, the  Association  acquired
Windsor Locks Community  Bank, FSL. At March 31, 2007, the Association  operated
from eight locations in Connecticut.

New England  Bancshares'  Website and  Availability  of Securities  and Exchange
Commission Filings

         New England Bancshares' internet website is www.enfieldfederal.com. New
England  Bancshares makes available free of charge on or through its website its
annual  reports on Forms  10-KSB,  quarterly  reports on Forms  10-QSB,  current
reports on Forms 8-K and any  amendments  to these  reports  filed or  furnished
pursuant to the  Securities  and  Exchange  act of 1934,  as soon as  reasonably
practicable  after New England  Bancshares  electronically  files such  material
with,  or furnishes it to, the  Securities  and Exchange  Commission.  Except as
specifically  incorporated by reference into this annual report,  information on
our website is not a part of this annual report.

Market Area

         We conduct our operations  through our main office and one other branch
office  in  Enfield  and our  branch  offices  in  Broad  Brook,  East  Windsor,
Manchester, Ellington, Suffield and Windsor Locks, Connecticut. Our deposits are
gathered from, and our lending  activities  are  concentrated  primarily in, the
towns and the communities contiguous to our branch offices.

         Enfield is a largely  suburban  town  located  along the  Massachusetts
border in the north-central  part of the state in Hartford County,  Connecticut.
Enfield  is  between  the  cities  of  Hartford,  Connecticut  and  Springfield,
Massachusetts,  and is two hours from both Boston and New York City.  Enfield is
near Interstate 91, the major north-south highway that runs directly through the
heart of New England. The region serves as the governmental and financial center
of  Connecticut.  Hartford  County has a  diversified  mix of  industry  groups,
including insurance and financial services,  manufacturing,  service, government
and  retail.   The  major  employers  in  the  area  include  several  prominent
international and national insurance and manufacturing companies, such as Aetna,
Inc., The Hartford  Financial  Services Group, Inc., St. Paul Travelers Property
Casualty Corp.,  United  Technologies  Corp., CIGNA Corporation,  Stanley Works,
Lego Toys,  Hallmark  Cards,  as well as many regional banks and the Connecticut
State Government.

         According to published  statistics,  Hartford  County's 2006 population
was approximately 882,000 and consisted of approximately 344,000 households. The
population increased approximately 2.1% from 2000. Per capita income in 2005 for
Hartford County was approximately  $32,000,  which was less than the Connecticut
average of approximately $35,000. Likewise, median household income for Hartford
County was $59,000 compared to approximately $63,000 for Connecticut.

Competition

         We  face  intense  competition  both in  making  loans  and  attracting
deposits.  As of June 30, 2006, the most recent date for which data is available
from the Federal Deposit Insurance  Corporation,  we held  approximately 0.8% of
the deposits in Hartford  County,  which was the 14th largest  share of deposits
out of 28 financial institutions in the county.  North-central Connecticut has a
high concentration of financial  institutions and financial services  providers,
many of which are branches of large money centers,  super-regional  and regional
banks which have resulted from the  consolidation of the banking industry in New
England.  Many of these  competitors  have greater  resources than we do and may
offer products and services that we do not provide.

         Our  competition  for  loans  comes  from  commercial  banks,   savings
institutions,   mortgage  banking  firms,  credit  unions,   finance  companies,
insurance  companies and brokerage and investment banking firms. Our most direct
competition for deposits has historically  come from commercial  banks,  savings
banks,  savings and loan  associations,  credit unions and mutual funds. We face
additional competition for deposits from short-term money market funds and other
corporate and government securities funds and from brokerage firms and insurance

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companies.

         We  expect  competition  to  increase  in the  future  as a  result  of
legislative,  regulatory and  technological  changes and the continuing trend of
consolidation in the financial services industry.  Technological  advances,  for
example,  have lowered the  barriers to market  entry,  allowed  banks to expand
their  geographic  reach by  providing  services  over the  Internet and made it
possible for  non-depository  institutions  to offer  products and services that
traditionally  have been  provided  by banks.  Changes  in  federal  law  permit
affiliation  among  banks,  securities  firms  and  insurance  companies,  which
promotes  a  competitive   environment  in  the  financial   services  industry.
Competition  for  deposits and the  origination  of loans could limit our future
growth.

Lending Activities

         General.  The  largest  segment  of  our  loan  portfolio  is  one-  to
four-family residential real estate loans. The other significant segments of our
loan portfolio are multi-family  and commercial real estate loans,  construction
loans,  consumer loans and commercial  loans.  We originate loans for investment
purposes.

         One- to Four-Family Loans. Our primary lending activity is to originate
loans secured by one- to  four-family  residences  located in our primary market
area. At March 31, 2007, one- to four-family loans,  excluding home equity loans
and lines of credit,  totaled $105.4  million or 52.6% of total loans.  At March
31, 2007, 86.1% of our one- to four-family  loans were fixed-rate and 13.9% were
adjustable-rate.

         We originate  fixed-rate fully amortizing loans with maturities ranging
between 10 and 30 years. Management establishes the loan interest rates based on
market  conditions.  We offer  mortgage  loans  that  conform  to Fannie Mae and
Freddie Mac  guidelines,  as well as jumbo loans,  which  presently are loans in
amounts over $417,000.

         We  also  currently  offer  adjustable-rate  mortgage  loans,  with  an
interest rate based on the one-year Constant Maturity Treasury Bill index, which
adjust  annually  from the outset of the loan or which adjust  annually  after a
three-, five- or ten-year initial fixed period and with terms of up to 30 years,
with the majority of adjustable rate loans  adjusting after a five-year  period.
Interest rate adjustments on such loans are generally limited to no more than 2%
during any adjustment period and 6% over the life of the loan.

         We  underwrite   fixed-rate  and  variable-rate   one-  to  four-family
residential  mortgage  loans  with  loan-to-value  ratios of up to 100% and 95%,
respectively,  provided that a borrower  obtains private  mortgage  insurance on
loans that exceed 80% of the appraised value or sales price,  whichever is less,
of the secured  property.  We also require that fire,  casualty,  title,  hazard
insurance and, if  appropriate,  flood insurance be maintained on all properties
securing  real  estate  loans  made by us.  An  independent  licensed  appraiser
generally appraises all properties.

         We offer our full-time  employees who satisfy certain  criteria and our
general  underwriting  standards fixed- and adjustable-rate  mortgage loans with
reduced  interest  rates  that are  currently  50 basis  points  below the rates
offered to our other customers.  The employee mortgage rate normally ceases upon
termination of employment.  Upon termination of the employee  mortgage rate, the
interest  rate reverts to the contract  rate in effect at the time that the loan
was extended.  All other terms and conditions contained in the original mortgage
and note continue to remain in effect. As of March 31, 2007, we had $3.2 million
of employee mortgage rate loans, or 1.6% of total loans.

         Home Equity  Loans and Lines of Credit.  We offer home equity loans and
home equity lines of credit, both of which are secured by owner-occupied one- to
four-family residences. At March 31, 2007, home equity loans and equity lines of
credit totaled $17.6 million, or 8.8% of total loans. Additionally, at March 31,
2007,  the  unadvanced  amounts  of home  equity  lines of credit  totaled  $1.7
million.  Home equity  loans are offered  with fixed rates of interest  and with
terms up to 15 years.  Home equity lines of credit are offered  with  adjustable
rates of  interest  that are  indexed to the prime rate as  reported in The Wall
Street  Journal.  Interest rate  adjustments  on home equity lines of credit are
limited to a maximum of 18% or 6% above the initial interest rate,  whichever is
lower.

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         The procedures for  underwriting  home equity loans and lines of credit
include an  assessment  of the  applicant's  payment  history on other debts and
ability to meet existing obligations and payments on the proposed loans. We will
offer home  equity  loans with  maximum  combined  loan-to-value  ratios of 90%,
provided  that loans in excess of 80% will be charged a higher rate of interest.
A home  equity line of credit may be drawn down by the  borrower  for an initial
period of 10 years from the date of the loan agreement.  During this period, the
borrower has the option of paying,  on a monthly  basis,  either  principal  and
interest or only  interest.  If not  renewed,  the  borrower has to pay back the
amount  outstanding under the line of credit over a term not to exceed 10 years,
beginning at the end of the 10-year period.

         Multi-Family   and   Commercial   Real  Estate   Loans.   We  originate
multi-family and commercial real estate loans that are generally secured by five
or more unit apartment  buildings and properties used for business purposes such
as small office buildings,  industrial facilities or retail facilities primarily
located in our primary market area. At March 31, 2007,  multi-family real estate
loans  totaled $5.8  million,  or 2.9% of total  loans.  Also on March 31, 2007,
commercial real estate loans totaled $50.1 million, or 25.0% of total loans. Our
multi-family  loans  are  generally  made  with  terms  up to 20  years  and our
commercial  real estate loans are  generally  made with terms of up to 25 years.
These  loans  are  offered  with  interest   rates  that  are  fixed  or  adjust
periodically and are generally indexed to the prime rate as reported in The Wall
Street  Journal plus a margin of 100 basis points or the five-year  Federal Home
Loan Bank (the  "FHLB")  Classic  Advance Rate plus a margin of 225 to 325 basis
points.  At March 31,  2007,  the largest  multi-family  loan was a $1.3 million
loan,  which  was  secured  by a  42-unit  apartment  building.  This  loan  was
performing  according  to its terms at March 31, 2007.  At March 31,  2007,  the
largest  commercial real estate loan was a $3.2 million loan,  which was secured
by a hotel.  This loan was performing  according to its terms at March 31, 2007.
We generally do not make these loans with loan-to-value ratios exceeding 80%.

         We also  originate  land  loans  primarily  to  local  contractors  and
developers for making  improvements  on approved  building lots.  Such loans are
generally  written with a maximum  loan-to-value  ratio based upon the appraised
value or purchase price, whichever is less, of 75% for a term of up to 15 years.
Interest  rates on our land loans are fixed for the first  three  years and them
adjust annually  thereafter to a rate typically 3.25% over the one year Constant
Maturity  Treasury index. At March 31, 2007, we had six land loans totaling $1.1
million and are included in the commercial real estate loan category.

         Construction Loans. We originate  construction loans to individuals for
the  construction  and  acquisition of personal  residences.  At March 31, 2007,
residential construction loans amounted to $2.7 million, or 1.4% of total loans.
At March 31, 2007, the unadvanced  portion of these  construction  loans totaled
$678,000.  Our residential mortgage construction loans generally provide for the
payment of interest  only  during the  construction  phase,  which is usually 12
months.  At the end of the construction  phase, the loan converts to a permanent
mortgage loan. Loans generally can be made with a maximum loan-to-value ratio of
90% of the appraised  value or cost of the project,  whichever is less. At March
31, 2007, the largest residential construction loan commitment was for $620,000,
all of which was disbursed.  The loan was  performing  according to its terms at
March 31, 2007.

         We make construction  loans for commercial  development  projects.  The
projects include multi-family,  apartment,  small industrial,  retail and office
buildings.   These  loans   generally   have  an   interest-only   phase  during
construction,  which is  usually  12  months,  and  then  convert  to  permanent
financing.  Disbursements of funds are at the sole discretion of Enfield Federal
and are based on the progress of  construction.  At March 31,  2007,  commercial
construction  loans totaled $4.9 million,  or 2.5% of total loans.  At March 31,
2007, the unadvanced  portion of these  construction loans totaled $5.1 million.
Loans  generally  can be made with a maximum  loan-to-value  ratio of 75% of the
appraised  value or cost of the project,  whichever is less.  At March 31, 2007,
the largest  commercial  loan  commitment was for $3.0 million,  $2.0 million of
which was disbursed. The loan was performing according to its terms at March 31,
2007.

         Commercial Loans. At March 31, 2007, we had $11.1 million in commercial
loans, which amounted to 5.5% of total loans. In addition,  at such date, we had
$4.3  million  of  unadvanced  commercial  lines of credit.  We make  commercial
business loans primarily in our market area to a variety of professionals,  sole
proprietorships  and small businesses.  Commercial lending products include term
loans,  revolving lines of credit and Small Business  Administration  guaranteed
loans.  Commercial  loans and lines of credit are made with  either  variable or
fixed rates

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of interest. Variable rates are based on the prime rate as published in The Wall
Street Journal,  plus a margin.  Fixed-rate business loans are generally indexed
to the two-,  five- or ten-year FHLB Amortizing  Advance Rate, as corresponds to
the  term of the  loan,  plus a  margin.  The  Company  generally  does not make
unsecured commercial loans.

         When making commercial  loans, we consider the financial  statements of
the  borrower,   our  lending  history  with  the  borrower,  the  debt  service
capabilities  of the borrower,  the projected cash flows of the business and the
value of the collateral, primarily accounts receivable, inventory and equipment,
and are supported by personal  guarantees.  Depending on the collateral  used to
secure the loans, commercial loans are made in amounts of up to 80% of the value
of the collateral  securing the loan. At March 31, 2007, our largest  commercial
loan was a $2.8  million  loan  secured by  vehicles.  This loan was  performing
according to its original terms at March 31, 2007.

         Consumer Loans. We offer  fixed-rate  automobile  loans for new or used
vehicles with terms of up to 66 months and loan-to-value  ratios of up to 90% of
the  lesser of the  purchase  price or the  retail  value  shown in the NADA Car
Guide.  At March 31, 2007,  automobile  loans totaled  $755,000 or 0.4% of total
loans and 27.2% of consumer loans. For the fiscal year ended March 31, 2007, the
Company originated $656,000 of automobile loans.

         Other  consumer  loans at March 31, 2007 amounted to $2.0  million,  or
1.0% of total loans and 72.8% of consumer loans. These loans include mobile home
loans and secured and unsecured personal loans. Our mobile home loans, which are
made primarily to borrowers in the Northeastern  United States, have terms of up
to 25 years and fixed interest  rates. We generally will finance up to a maximum
of 90% of the value of the mobile  home and  require  that the  borrower  obtain
hazard  insurance.  At March 31, 2007, we had 24 mobile homes loans, the average
size of  which  was  approximately  $55,000.  Personal  loans  generally  have a
fixed-rate, a maximum borrowing limitation of $10,000 and a maximum term of four
years.  Collateral  loans are  generally  secured  by a  passbook  account  or a
certificate of deposit.

         Loan Underwriting Risks. While we anticipate that adjustable-rate loans
will  better  offset the adverse  effects of an  increase  in interest  rates as
compared to fixed-rate  mortgages,  the increased  mortgage payments required of
adjustable-rate loan borrowers in a rising interest rate environment could cause
an increase in delinquencies  and defaults.  The marketability of the underlying
property also may be adversely affected in a high interest rate environment.  In
addition,  although adjustable-rate mortgage loans help make our asset base more
responsive to changes in interest rates, the extent of this interest sensitivity
is limited by the annual and lifetime interest rate adjustment limits.

         Loans secured by multi-family and commercial real estate generally have
larger  balances and involve a greater  degree of risk than one- to  four-family
residential  mortgage loans.  Of primary concern in multi-family  and commercial
real estate lending is the borrower's  creditworthiness  and the feasibility and
cash  flow  potential  of the  project.  Payments  on loans  secured  by  income
properties   often  depend  on  successful   operation  and  management  of  the
properties.  As a result,  repayment  of such  loans may be subject to a greater
extent than  residential  real estate  loans to adverse  conditions  in the real
estate  market or the economy.  To monitor cash flows on income  properties,  we
require  borrowers  and loan  guarantors,  if any, to provide  annual  financial
statements on  multi-family  and  commercial  real estate  loans.  In reaching a
decision on whether to make a multi-family  and commercial  real estate loan, we
consider the net operating  income of the property,  the  borrower's  expertise,
credit history, and profitability and the value of the underlying  property.  In
addition, with respect to commercial real estate rental properties, we will also
consider the term of the lease and the quality of the tenants. We have generally
required that the properties  securing these real estate loans have debt service
coverage  ratios (the ratio of earnings  before debt service to debt service) of
at least 1.20x. Environmental surveys are generally required for commercial real
estate loans of $250,000 or more.

         Construction  financing  is  generally  considered  to involve a higher
degree of risk of loss than  long-term  financing  on  improved,  occupied  real
estate. Risk of loss on a construction loan depends largely upon the accuracy of
the initial  estimate of the property's  value at completion of construction and
the estimated cost (including interest) of construction. During the construction
phase,  a number of factors  could  result in delays and cost  overruns.  If the
estimate of  construction  costs proves to be inaccurate,  we may be required to
advance funds beyond the amount

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originally  committed to permit  completion of the building.  If the estimate of
value proves to be inaccurate,  we may be confronted,  at or before the maturity
of the loan, with a building having a value which is insufficient to assure full
repayment.  If we are forced to foreclose on a building  before or at completion
due to a default,  there can be no assurance that we will be able to recover all
of the unpaid  balance of, and accrued  interest on, the loan as well as related
foreclosure and holding costs.

         Unlike  residential  mortgage  loans,  which  generally are made on the
basis of the borrower's  ability to make repayment from his or her employment or
other  income,  and which are secured by real  property  whose value tends to be
more easily ascertainable, commercial loans are of higher risk and typically are
made on the basis of the borrower's ability to make repayment from the cash flow
of the  borrower's  business.  As a result,  the  availability  of funds for the
repayment of  commercial  loans may depend  substantially  on the success of the
business itself. Further, any collateral securing such loans may depreciate over
time, may be difficult to appraise and may fluctuate in value.

         Consumer  loans may entail  greater risk than do  residential  mortgage
loans,  particularly in the case of consumer loans that are unsecured or secured
by assets that depreciate rapidly. In such cases,  repossessed  collateral for a
defaulted  consumer loan may not provide an adequate source of repayment for the
outstanding  loan and the remaining  deficiency  often does not warrant  further
substantial collection efforts against the borrower. In addition,  consumer loan
collections  depend  on  the  borrower's  continuing  financial  stability,  and
therefore are more likely to be adversely affected by job loss, divorce, illness
or personal  bankruptcy.  Furthermore,  the  application of various  federal and
state laws,  including  federal and state  bankruptcy and  insolvency  laws, may
limit the amount which can be recovered on such loans.

         Loan Originations, Purchases and Sales. Our mortgage lending activities
are conducted by our salaried loan representatives  operating at our main office
in Enfield.  We underwrite  all loans that we originate  under our loan policies
and  procedures,  which model those of Fannie Mae and Freddie  Mac. We originate
both  adjustable-rate  and fixed-rate  mortgage loans.  Our ability to originate
fixed- or  adjustable-rate  loans is dependent upon the relative customer demand
for such loans,  which is affected by the current and  expected  future level of
interest rates.

         We  generally  retain  all of the  loans  that  we  originate  for  our
portfolio;  however,  we will sell  participation  interests to local  financial
institutions,  primarily  on the  portion  of loans that  exceed  our  borrowing
limits.  The sales occur at time of  origination;  therefore  no loans have been
classified as held-for-sale.  We sold $1.6 million of these loans in fiscal 2007
and $3.1 million in fiscal 2006. In fiscal 2007, we commenced selling long-term,
fixed rate one -to four-family  loans to the Federal Home Loan Bank (the "FHLB")
to assist with managing our interest rate risk and  increasing  our net interest
margin.  Loans are sold with  servicing  retained and the loans have recourse to
the Company on a formula  basis.  We sold $2.3  million of these loans in fiscal
2007.

         We  purchase   participation   interests  from  other   community-based
financial  institutions,  primarily  commercial  real estate  loans,  commercial
construction  loans,  commercial loans and one- to four-family loans. Such loans
totaled  $22.1 and $6.6  million at March 31,  2007 and 2006,  respectively.  We
perform our own  underwriting  analysis on each of our  participation  interests
before  purchasing such loans and therefore  believe there is no greater risk of
default on these obligations.  However, in a purchased participation loan, we do
not service the loan and thus are subject to the policies  and  practices of the
lead lender with regard to monitoring  delinquencies,  pursuing  collections and
instituting  foreclosure  proceedings.  We are  permitted  to review  all of the
documentation relating to any loan in which we participate, including any annual
financial statements provided by a borrower.  Additionally,  we receive periodic
updates on the loan from the lead lender. We have not historically purchased any
whole loans.  However, we would entertain doing so if a loan was presented to us
that met our underwriting criteria and fit within our interest rate strategy.

         Loan Approval  Procedures and Authority.  Our lending policies and loan
approval limits are recommended by senior management,  reviewed by the Executive
Committee of the Board of Directors and approved by the Board of Directors.  The
Executive  Committee  must be  comprised  of at a minimum:  the  Chairman of the
Board,  the President and Chief  Executive  Officer and at least one independent
director.  The  Senior  Loan  Officer  and all  division  heads  also  serve  as
non-voting members of the committee.  Each individual's  lending authority limit
is based on his or her experience  and  capability and reviewed  annually by the
board.  Certain  individuals are

                                       6
<page>

assigned lending authority grades of "Level 1" through "Level 4" and may approve
extensions  of  credit  up to their  individual  lending  authority  limit.  Any
extension of credit that exceeds an individual's authority requires the approval
of  a  second  individual  with  a  higher  level  of  authority  sufficient  to
accommodate  the  request  as  appropriate,  or  requires  the  approval  of the
Executive  Committee.  Notwithstanding  individual and joint lending  authority,
board  approval  is  required  for  any  request  involving  any  compromise  of
indebtedness,  such as the forgiveness of unpaid  principal,  accrued  interest,
accumulated  fees,  or  acceptance  of  collateral  or other  assets  in lieu of
payment.

         The  Executive  Committee  has the authority to approve all loans up to
$1.5  million.  Requests in excess of this limit must be  submitted  to the full
Board of Directors for approval.  Individuals possessing "Level 1" authority may
approve residential mortgage loans in amounts of up to $750,000 (owner occupied)
and $500,000 (non-owner occupied), commercial and multi-family real estate loans
in  amounts of up to  $750,000,  commercial  loans in amounts of up to  $500,000
(secured) and $250,000  (unsecured)  and consumer  loans,  including home equity
loans and lines of credit, in amounts of up to $150,000.

         Individuals  possessing  "Level 2"  authority  may approve  residential
mortgage  loans in amounts  of up to  $350,000  (owner  occupied)  and  $250,000
(non-owner  occupied),  commercial and multi-family real estate loans in amounts
of up to $375,000,  commercial loans in amounts of up to $250,000  (secured) and
$125,000  (unsecured) and consumer loans,  including home equity loans and lines
of credit, in amounts of up to $100,000.

         Individuals  possessing  "Level 3"  authority  may approve  residential
mortgage  loans in amounts  of up to  $175,000  (owner  occupied)  and  $125,000
(non-owner  occupied),  commercial and multi-family real estate loans in amounts
of up to $175,000,  commercial loans in amounts of up to $100,000  (secured) and
$25,000 (unsecured) and consumer loans, including home equity loans and lines of
credit, in amounts of up to $50,000.

         Individuals  possessing  "Level 4"  authority  may approve only secured
consumer loans in amounts of up to $25,000.

         Loan   Commitments.   We   issue   commitments   for   fixed-rate   and
adjustable-rate  mortgage  loans  conditioned  upon the  occurrence  of  certain
events.  Commitments to originate  mortgage loans are legally binding agreements
to lend to our customers.

Investment Activities

         The Board of  Directors  reviews and  approves  our  investment  policy
annually.  The Board of Directors is responsible for  establishing  policies for
conducting  investment  activities,  including the establishment of risk limits.
The Board of Directors reviews the investment  portfolio and reviews  investment
transactions  on a  monthly  basis  and is  responsible  for  ensuring  that the
day-to-day  management  of the  investment  portfolio  is conducted by qualified
individuals. The Board has directed the President and Chief Executive Officer to
implement the investment policy based on the Board's  established  guidelines as
reflected in the written investment  policy,  and other established  guidelines,
including those set periodically by the  Asset/Liability  Management  Committee.
The President and Chief Executive  Officer  presents the Board of Directors with
potential investment strategies and investment portfolio performance reports, at
least on a monthly basis.

         The investment  portfolio is primarily viewed as a source of liquidity.
Our policy is to invest funds in assets with varying maturities that will result
in the best  possible  yield  while  maintaining  the  safety  of the  principal
invested and assists in managing  interest rate risk. The  investment  portfolio
management policy is designed to:

         1.       enhance profitability by maintaining an acceptable spread over
                  the cost of funds;

         2.       absorb  funds when loan  demand is low and  infuse  funds into
                  loans when loan demand is high;

         3.       provide  both the  regulatory  and the  operational  liquidity
                  necessary to conduct our daily business activities;

                                       7
<page>

         4.       provide a degree of  low-risk,  quality  assets to the balance
                  sheet;

         5.       provide a medium for the  implementation  of certain  interest
                  rate  risk  management  measures  intended  to  establish  and
                  maintain an  appropriate  balance  between the  sensitivity to
                  changes in interest  rates of: (i) interest  income from loans
                  and  investments,  and (ii) interest expense from deposits and
                  borrowings;

         6.       have collateral available for pledging requirements;

         7.       generate  a  favorable  return on  investments  without  undue
                  compromise of other objectives; and

         8.       evaluate  and take  advantage  of  opportunities  to  generate
                  tax-exempt income when appropriate.

         In determining its investment strategies, we consider the interest rate
sensitivity,  yield, credit risk factors,  maturity and amortization  schedules,
collateral value and other characteristics of the securities to be held. We also
consider  the  secondary  market for the sale of assets and the  ratings of debt
instruments  in which it invests and the  financial  condition  of the  obligors
issuing such instruments.

         We have authority to invest in various types of assets,  including U.S.
Treasury  obligations,  securities of various federal agencies,  mortgage-backed
securities,  certain certificates of deposit of insured financial  institutions,
overnight and short-term loans to other banks,  corporate debt instruments,  and
Fannie Mae and  Freddie  Mac equity  securities.  We  primarily  invest in: U.S.
agency  obligations;  collateralized  mortgage  obligations and  mortgage-backed
securities;  municipal  obligations;  and equity  investments.  With  respect to
municipal obligations,  our investment policy provides that all municipal issues
must be rated  investment  grade or higher to qualify for its portfolio.  If any
such municipal issues in our investment  portfolio are  subsequently  downgraded
below the  minimum  requirements,  it is our  general  policy to  liquidate  the
investment.

Deposit Activities and Other Sources of Funds

         General.  Deposits  and loan  repayments  are the major  sources of our
funds  for  lending  and  other  investment  purposes.  Loan  repayments  are  a
relatively  stable source of funds,  while deposit inflows and outflows and loan
prepayments  are  significantly  influenced by general  interest rates and money
market conditions.

         Deposit Accounts.  Substantially all of our depositors are residents of
the State of  Connecticut.  Deposits are  attracted  from within our market area
through the offering of a broad selection of deposit instruments,  including non
interest-bearing  demand accounts (such as checking accounts),  interest-bearing
demand  accounts (such as NOW and money market  accounts),  passbook and savings
accounts and  certificates of deposit.  At March 31, 2007, core deposits,  which
consist of savings,  demand,  NOW and money market accounts,  comprised 50.4% of
our deposits.  We do not currently utilize brokered funds. Deposit account terms
vary according to the minimum balance required,  the time periods the funds must
remain on deposit and the interest rate, among other factors. In determining the
terms of our deposit accounts, we consider the rates offered by our competition,
our liquidity needs, profitability to us, matching deposit and loan products and
customer  preferences  and  concerns.  We  generally  review our deposit mix and
pricing weekly.  Our current strategy is to offer competitive  rates, but not to
be the market leader.

         In addition to accounts for individuals, we also offer deposit accounts
designed for the businesses  operating in our market area. Our business  banking
deposit products and services include a non-interest-bearing commercial checking
account,  a NOW account for sole  proprietors  and a commercial  cash management
account  for  larger  businesses.  We have  sought to  increase  our  commercial
deposits through the offering of these products,  particularly to our commercial
borrowers.

         Borrowings.  We utilize  advances  from the  Federal  Home Loan Bank of
Boston and  securities  sold under  agreements to  repurchase to supplement  our
supply of  investable  funds and to meet deposit  withdrawal  requirements.  The
Federal Home Loan Bank functions as a central reserve bank providing  credit for
member

                                       8
<page>

financial institutions. As a member, we are required to own capital stock in the
Federal Home Loan Bank and are  authorized to apply for advances on the security
of such stock and certain of our mortgage  loans and other  assets  (principally
securities  which are  obligations  of, or  guaranteed  by, the United  States),
provided certain standards related to  creditworthiness  have been met. Advances
are made under several different programs, each having its own interest rate and
range of  maturities.  Depending  on the program,  limitations  on the amount of
advances are based either on a fixed percentage of an institution's net worth or
on  the   Federal   Home   Loan   Bank's   assessment   of   the   institution's
creditworthiness.  Under its current credit policies, the Federal Home Loan Bank
generally limits advances to 25% of a member's assets, and short-term borrowings
of less  than one year  may not  exceed  10% of the  institution's  assets.  The
Federal  Home Loan Bank  determines  specific  lines of credit  for each  member
institution.

         Securities  sold under  agreements to repurchase are customer  deposits
that  are  invested  overnight  in U.S.  government  or U.S.  government  agency
securities.   The  customers,   predominantly   commercial   customers,   set  a
predetermined balance and deposits in excess of that amount are transferred into
the repurchase account from each customer's  checking account.  The next banking
day, the funds are recredited to their  individual  checking  account along with
interest  earned at market rates.  These types of accounts are often referred to
as sweep accounts.

Financial Services

         We have a  partnership  with a  third-party  registered  broker-dealer,
Infinex  Investments,  Inc.  Infinex  operates an office at Enfield  Federal and
offers customers a complete range of nondeposit  investment products,  including
mutual funds,  debt,  equity and  government  securities,  retirement  accounts,
insurance products and fixed and variable annuities. We receive a portion of the
commissions  generated by Infinex from sales to  customers.  For the years ended
March 31, 2007 and 2006, we received  fees of $41,000 and $4,000,  respectively,
through our relationship with Infinex.

Personnel

         As of March 31, 2007,  we had 60 full-time  employees  and 13 part-time
employees,  none of whom is  represented  by a collective  bargaining  unit.  We
believe our relationship with our employees is good.

                                  Risk Factors

         You  should  consider  carefully  the  following  risk  factors  before
investing in our common stock.

Our increased  emphasis on commercial and construction  lending may expose us to
increased lending risks.

         At March 31, 2007,  our loan portfolio  consisted of $55.9 million,  or
27.9% of multi-family and commercial real estate loans, $7.7 million, or 3.8% of
construction loans and $11.1 million,  or 5.5% of commercial  business loans. We
intend to increase  our  emphasis on these types of loans.  These types of loans
generally  expose a lender to greater risk of non-payment  and loss than one- to
four-family  residential  mortgage  loans  because  repayment of the loans often
depends on the  successful  operation of the property,  the income stream of the
borrowers  and,  for  construction  loans,  the  accuracy of the estimate of the
property's  value  at  completion  of  construction  and the  estimated  cost of
construction.  Such loans  typically  involve  larger  loan  balances  to single
borrowers  or  groups  of  related  borrowers  compared  to one- to  four-family
residential  mortgage loans.  Commercial  business loans expose us to additional
risks since they  typically are made on the basis of the  borrower's  ability to
make repayments from the cash flow of the borrower's business and are secured by
non-real estate  collateral  that may depreciate  over time. In addition,  since
such loans  generally  entail greater risk than one- to four-family  residential
mortgage  loans,  we may need to increase our  allowance  for loan losses in the
future to account for the likely  increase in probable  incurred  credit  losses
associated  with the growth of such  loans.  Also,  many of our  commercial  and
construction   borrowers   have  more  than  one  loan   outstanding   with  us.
Consequently,  an  adverse  development  with  respect to one loan or one credit
relationship  can expose us to a significantly  greater risk of loss compared to
an  adverse  development  with  respect  to a one-  to  four-family  residential
mortgage loan.

                                       9
<page>

Certain interest rate movements may hurt our earnings and asset value.

         Interest rates have recently been at historically low levels.  However,
since June 30, 2004, the U.S.  Federal  Reserve has increased its target for the
federal funds rate seventeen times, from 1.00% to 5.25%.  While these short-term
market  interest  rates  (which  we use as a guide to price our  deposits)  have
increased,  longer-term  market interest rates (which we use as a guide to price
our longer-term  loans) have not. Although this "flattening" of the market yield
curve has not had a negative impact on our interest rate spread and net interest
margin to date, if short-term  interest  rates continue to rise, and if rates on
our deposits and borrowings continue to reprice upwards faster than the rates on
our long-term  loans and  investments,  we would  experience  compression of our
interest rate spread and net interest margin, which would have a negative effect
on our profitability.

         Changes in interest rates also affect the value of our interest-earning
assets,  and in particular our  securities  portfolio.  Generally,  the value of
fixed-rate  securities  fluctuates  inversely  with  changes in interest  rates.
Unrealized  gains and losses on securities  available for sale are reported as a
separate  component  of  equity,  net of tax.  Decreases  in the  fair  value of
securities  available for sale  resulting from increases in interest rates could
have an adverse effect on stockholders' equity.


Our  inability to  successfully  complete  our pending  merger  transaction  and
integrate the new company could hurt our earnings.

         Our pending  acquisition  of First Valley  Bancorp,  Inc.  involves the
integration of two companies that have previously  operated  independently.  The
difficulties of combining the operations of the two companies include:

         o        integrating personnel with diverse business backgrounds;

         o        combining different corporate cultures; and

         o        retaining key employees.

         The process of integrating  operations  could cause an interruption of,
or loss of  momentum  in, the  activities  of the  business  and the loss of key
personnel.  The integration of the two companies will require the experience and
expertise of certain key  employees of First Valley  Bancorp who are expected to
be retained by us. We may not be successful in retaining these employees for the
time  period   necessary  to  successfully   integrate  First  Valley  Bancorp's
operations with those of ours. The diversion of  management's  attention and any
delays  or  difficulties  encountered  in  connection  with the  merger  and the
integration of the two companies' operations could have an adverse effect on our
business and results of operation following the merger.


Strong  competition  within our market  area  could  hurt our  profits  and slow
growth.

         We  face  intense  competition  both in  making  loans  and  attracting
deposits.  This  competition has made it more difficult for us to make new loans
and has occasionally  forced us to offer higher deposit rates. Price competition
for loans and  deposits  might result in us earning less on our loans and paying
more on our deposits, which reduces net interest income. As of June 30, 2006, we
held 0.8% of the deposits in Hartford County,  which was the 14th largest market
share of deposits out of the 28 financial  institutions  in the county.  Some of
the institutions with which we compete have substantially  greater resources and
lending  limits than we have and may offer  services that we do not provide.  We
expect  competition  to  increase  in the  future  as a result  of  legislative,
regulatory and  technological  changes and the continuing trend of consolidation
in the financial services industry. Our profitability depends upon our continued
ability to compete successfully in our market area.

If we do not achieve  profitability  on our new  branches,  they may  negatively
impact our earnings.

         We opened  our East  Windsor  branch  office on October 3, 2005 and our
Ellington  branch  on  April  17,  2006.  Numerous  factors  contribute  to  the
performance of a new branch,  such as a suitable location,  qualified  personnel
and

                                       10
<page>

an effective marketing strategy. Additionally, it takes time for a new branch to
generate significant deposits and make sufficient loans to produce enough income
to offset  expenses,  some of which,  like salaries and occupancy  expense,  are
relatively  fixed costs.  We expect that it may take a period of time before the
new branch offices can become  profitable.  During this period,  operating these
new branch offices may negatively impact our net income.

A downturn in the local  economy or a decline in real estate  values  could hurt
our profits.

         Nearly all of our real  estate  loans are secured by real estate in the
Hartford metropolitan area. As a result of this concentration, a downturn in the
local economy could cause significant  increases in non-performing  loans, which
would hurt our profits.  Additionally, a decrease in asset quality could require
additions to our allowance for loan losses through increased provisions for loan
losses,  which  would  hurt our  profits.  In  recent  years,  there  have  been
significant  increases in real estate  values in our market area. As a result of
rising home prices, our loans have been well  collateralized.  A decline in real
estate  values  could cause some of our  mortgage  loans to become  inadequately
collateralized, which would expose us to a greater risk of loss.

The loss of our President and Chief Executive Officer could hurt our operations.

         We rely heavily on our President and Chief Executive Officer,  David J.
O'Connor.  The loss of Mr.  O'Connor could have an adverse effect on us because,
as a small community bank, Mr.  O'Connor has more  responsibility  than would be
typical at a larger financial institution with more employees. In addition, as a
small  community  bank,  we have  fewer  management-level  personnel  who are in
position to succeed and assume the responsibilities of Mr. O'Connor.

We operate in a highly regulated environment and we may be adversely affected by
changes in laws and regulations.

         Enfield  Federal is subject to extensive  regulation,  supervision  and
examination by the Office of Thrift Supervision,  its chartering authority,  and
by the Federal Deposit Insurance  Corporation,  as insurer of its deposits.  New
England  Bancshares is subject to regulation  and  supervision  by the Office of
Thrift  Supervision.  Such regulation and  supervision  govern the activities in
which an  institution  and its  holding  company may  engage,  and are  intended
primarily for the  protection of the insurance  fund and for the  depositors and
borrowers of Enfield  Federal.  The regulation and  supervision by the Office of
Thrift  Supervision  and  the  Federal  Deposit  Insurance  Corporation  are not
intended to protect the interests of investors in New England  Bancshares common
stock. Regulatory authorities have extensive discretion in their supervisory and
enforcement  activities,   including  the  imposition  of  restrictions  on  our
operations,  the  classification of our assets and determination of the level of
our  allowance for loan losses.  Any change in such  regulation  and  oversight,
whether  in  the  form  of  regulatory  policy,   regulations,   legislation  or
supervisory action, may have a material impact on our operations.

Our low return on equity after the conversion may negatively impact the value of
our common stock.

         Return on equity, which equals net income divided by average equity, is
a ratio  used by many  investors  to compare  the  performance  of a  particular
company with other  companies.  For the year ended March 31, 2007, our return on
average equity was 1.70%.  Over time, we intend to use the net proceeds from our
recent stock  offering to increase  earnings per share and book value per share,
without  assuming undue risk, with the goal of achieving a return on equity that
is competitive with other publicly held companies. This goal could take a number
of  years  to  achieve,  and we  cannot  assure  you  that it will be  attained.
Consequently,  you should not expect a competitive  return on equity in the near
future.  Failure to achieve a competitive return on equity might make our common
stock  unattractive  to some investors and might cause our common stock to trade
at lower prices than comparable companies with higher returns on equity.

There may be a limited  market for our common stock,  which may offset our stock
price.

         Although our stock is listed on the Nasdaq Global  Market,  there is no
guarantee that our shares will be regularly  traded. If an active trading market
for our common stock does not  develop,  you may not be able to sell your shares
of common stock on short notice, and the sale of a large number of shares at one
time could temporarily

                                       11
<page>

depress the market  price.  There also may be a wide spread  between the bid and
ask price for our common stock.  When there is a wide spread between the bid and
ask price,  the price at which you may be able to sell our  common  stock may be
significantly lower than the price at which you could buy it at that time.


                           REGULATION AND SUPERVISION

General

         As a savings  and loan  holding  company,  New  England  Bancshares  is
required by federal law to file reports  with and  otherwise  comply  with,  the
rules and regulations, of the Office of Thrift Supervision.  Enfield Federal, as
a federal savings association,  is subject to extensive regulation,  examination
and  supervision  by the Office of Thrift  Supervision,  as its primary  federal
regulator,  and  the  Federal  Deposit  Insurance  Corporation,  as its  deposit
insurer.  However,  after our acquisition of First Valley  Bancorp,  New England
Bancshares  will become a bank  holding  company and be required to file reports
with and  otherwise  comply  with,  the rules and  regulations,  of the  Federal
Reserve Board. Enfield Federal is a member of the Federal Home Loan Bank System.
Enfield Federal must file reports with the Office of Thrift  Supervision and the
Federal Deposit  Insurance  Corporation  concerning its activities and financial
condition in addition to obtaining  regulatory  approvals  before  entering into
certain  transactions  such as mergers with, or  acquisitions  of, other savings
institutions.  The  Office of Thrift  Supervision  and/or  the  Federal  Deposit
Insurance  Corporation  conduct periodic  examinations to test Enfield Federal's
safety and soundness and compliance with various regulatory  requirements.  This
regulation and supervision  establishes a comprehensive  framework of activities
in which an institution can engage and is intended  primarily for the protection
of the insurance fund and  depositors.  The regulatory  structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement  activities and examination  policies,  including  policies with
respect to the  classification  of assets and the establishment of adequate loan
loss  reserves  for  regulatory   purposes.   Any  change  in  such   regulatory
requirements  and  policies,  whether by the Office of Thrift  Supervision,  the
Federal  Deposit  Insurance  Corporation,  the  Federal  Reserve  Board  or  the
Congress,  could  have a  material  adverse  impact on New  England  Bancshares,
Enfield Federal and their operations.

         Certain of the  applicable  regulatory  requirements  are  referred  to
below.  This description of statutory  provisions and regulations  applicable to
savings  institutions  and their  holding  companies  does not  purport  to be a
complete  description of such statutes and  regulations  and their effect on New
England  Bancshares  and Enfield  Federal and is  qualified  in its  entirety by
reference to the actual statutes and regulations involved.

Federal Banking Regulation

         Business Activities. The activities of federal savings associations are
governed by federal law and  regulations.  These laws and regulations  delineate
the  nature and  extent of the  activities  in which  federal  associations  may
engage. In particular, certain lending authority for federal associations, e.g.,
commercial,  non-residential  real property loans and consumer loans, is limited
to a specified percentage of the institution's capital or assets.

         Loans-to-One-Borrower Limitations. Enfield Federal is generally subject
to the same limits on loans to one borrower as a national  bank.  With specified
exceptions,  Enfield  Federal's  total loans or extensions of credit to a single
borrower cannot exceed 15% of Enfield Federal's  unimpaired capital and surplus.
Enfield Federal may lend additional  amounts up to 10% of its unimpaired capital
and  surplus,  if the  loans  or  extensions  of  credit  are  fully-secured  by
readily-marketable collateral. At March 31, 2007, Enfield Federal's loans-to-one
borrower  limitation was $6.5 million and Enfield  Federal's  largest  aggregate
outstanding  balance of loans to one  borrower  was $5.8  million.  This  amount
included three  commercial real estate loans,  one commercial line of credit and
one residential mortgage loan.

                                       12
<page>

         QTL Test.  Under  federal  law,  Enfield  Federal  must comply with the
qualified thrift lender,  or "QTL" test. Under the QTL test,  Enfield Federal is
required  to  maintain  at  least  65%  of its  "portfolio  assets"  in  certain
"qualified  thrift  investments"  in at least  nine  months  of the most  recent
12-month period.  "Portfolio assets" means, in general,  Enfield Federal's total
assets less the sum of:

         (1)      specified liquid assets up to 20% of total assets;

         (2)      goodwill and other intangible assets; and

         (3)      the  value  of  property  used to  conduct  Enfield  Federal's
                  business.

         "Qualified thrift investments" includes various types of loans made for
residential  and  housing  purposes,   investments  related  to  such  purposes,
including  certain  mortgage-backed  and  related  securities,   and  loans  for
personal,  family,  household and certain other purposes up to a limit of 20% of
Enfield Federal's  portfolio assets.  Recent legislation  broadened the scope of
"qualified thrift  investments" to include 100% of an institution's  credit card
loans,  education  loans and small  business  loans.  Enfield  Federal  may also
satisfy the QTL test by qualifying as a "domestic building and loan association"
as defined in the Internal Revenue Code of 1986 (the "Code").

         If Enfield  Federal  fails the QTL test it must  either  operate  under
certain  restrictions  on its  activities or convert to a bank charter.  Enfield
Federal met the QTL test at March 31, 2007,  and in each of the prior 12 months,
and, therefore, qualifies as a thrift lender.

         Capital Requirements.  Office of Thrift Supervision regulations require
Enfield Federal to meet three minimum capital standards:

         (1)      a tangible capital ratio  requirement of 1.5% of total assets,
                  as   adjusted   under  the   Office   of  Thrift   Supervision
                  regulations;

         (2)      a leverage ratio requirement of 3% of core capital to adjusted
                  total assets,  if a savings  association has been assigned the
                  highest  composite  rating  of 1 under the  Uniform  Financial
                  Institutions  Ratings  System (the  minimum  leverage  capital
                  ratio for any other depository  institution that does not have
                  a  composite  examination  rating of 1 is 4%,  unless a higher
                  leverage   capital  ratio  is  warranted  by  the   particular
                  circumstances  or risk profile of the depository  institution)
                  and is not  anticipating or expecting  significant  growth and
                  have well-diversified risks; and

         (3)      a  risk-based  capital  ratio  requirement  of 8% of core  and
                  supplementary  capital to total risk-weighted  assets of which
                  at least half must be core capital.

         In  determining  compliance  with the risk-based  capital  requirement,
Enfield Federal must compute its risk-weighted  assets by multiplying its assets
and certain  off-balance  sheet items by  risk-weights,  which range from 0% for
cash and obligations  issued by the United States  Government or its agencies to
100% for  consumer  and  commercial  loans,  as assigned by the Office of Thrift
Supervision  capital  regulation  based on the risks  that the  Office of Thrift
Supervision believes are inherent in the type of asset.

         Tangible capital is defined,  generally, as common stockholders' equity
(including retained earnings),  certain non-cumulative perpetual preferred stock
and  related  surplus  and  minority  interests  in  equity  accounts  of  fully
consolidated  subsidiaries,   less  intangibles  (other  than  certain  mortgage
servicing  rights)  and  investments  in and loans to  subsidiaries  engaged  in
activities  not  permissible  for a  national  bank.  Core  capital  is  defined
similarly to tangible capital, but core capital also includes certain qualifying
credit card relationships.  Supplementary  capital currently includes cumulative
and  other  perpetual  preferred  stock,   mandatory   convertible   securities,
subordinated  debt and  intermediate  preferred stock and the allowance for loan
and  lease   losses.   In   addition,   up  to  45%  of   unrealized   gains  on
available-for-sale  equity securities with a readily determinable fair value may
be included in  supplementary  capital.  The allowance for loan and lease losses
includable  in  supplementary  capital  is  limited  to a  maximum  of  1.25% of
risk-weighted  assets,  and the  amount  of  supplementary  capital  that may be
included as total capital cannot exceed the amount of core capital.

                                       13
<page>

         The  Office of  Thrift  Supervision  also has  authority  to  establish
individual   minimum   capital   requirements   in  appropriate   cases  upon  a
determination that an institution's capital level is or may become inadequate in
light of the particular  circumstances.  At March 31, 2007,  Enfield Federal met
each of its capital requirements.

         The following  table  presents the  Association's  capital  position at
March 31, 2007.

                                                              OTS Minimum
                                                         Capital Requirements
                                                         --------------------
                                     Actual     Ratio     Actual      Ratio
                                    ---------  --------  ---------   --------
     Tangible...................     $41,476    14.66%    $ 4,243      1.5%
     Core (Leverage)............     $41,476    14.66%    $11,315      4.0%
     Risk-based.................     $43,350    25.26%    $13,730      8.0%

         Standards For Safety and  Soundness.  The Office of Thrift  Supervision
has adopted a set of  guidelines  prescribing  safety and  soundness  standards.
These guidelines  establish the safety and soundness  standards that the federal
banking  agencies  use to identify  and address  problems at insured  depository
institutions   before  capital  becomes  impaired.   If  the  Office  of  Thrift
Supervision determines that an institution fails to meet any standard prescribed
by the  guidelines,  it may require the  institution  to submit and implement an
acceptable plan to achieve compliance with the standard.

         Limitation  on  Capital  Distributions.  Office of  Thrift  Supervision
regulations  impose  limitations  upon all  capital  distributions  by a savings
institution,  including  cash  dividends,  payments to repurchase its shares and
payments to stockholders of another institution in a cash-out merger.  Under the
regulations,  an  application  to and the prior approval of the Office of Thrift
Supervision is required  prior to any capital  distribution  if the  institution
does not meet the criteria  for  "expedited  treatment"  of  applications  under
Office of Thrift Supervision regulations (i.e., generally,  examination ratings,
including safety and soundness,  compliance and Community  Reinvestment  Act, in
the two top categories),  the total capital  distributions for the calendar year
exceed net income for that year plus the amount of  retained  net income for the
preceding two years,  the institution  would be  undercapitalized  following the
distribution  or the  distribution  would  otherwise  be  contrary to a statute,
regulation or agreement with Office of Thrift Supervision.  If an application is
not  required,  the  institution  must still  provide  prior notice to Office of
Thrift Supervision of the capital distribution if the institution,  like Enfield
Federal, is a subsidiary of a holding company. If Enfield Federal's capital fell
below its regulatory  requirements or the Office of Thrift Supervision  notified
it that it was in need of  increased  supervision,  its ability to make  capital
distributions could be restricted. In addition, the Office of Thrift Supervision
could prohibit a proposed capital  distribution by any institution,  which would
otherwise be permitted by the  regulation,  if the Office of Thrift  Supervision
determines  that  such  distribution  would  constitute  an  unsafe  or  unsound
practice.

         Assessments.  Savings  institutions  are required to pay assessments to
the Office of Thrift  Supervision to fund the agency's  operations.  The general
assessments,  paid  on a  semi-annual  basis,  are  computed  upon  the  savings
institution's total assets, including consolidated subsidiaries,  as reported in
the institution's latest quarterly thrift financial report. The assessments paid
by Enfield Federal for the year ended March 31, 2007 totaled $74,000.

         Prompt Corrective  Regulatory  Action. The Office of Thrift Supervision
is  required  to  take  certain  supervisory  actions  against  undercapitalized
institutions,  the severity of which  depends upon the  institution's  degree of
undercapitalization.  Generally, a savings institution that has a ratio of total
capital  to risk  weighted  assets  of less  than  8%,  a ratio of Tier 1 (core)
capital to  risk-weighted  assets of less than 4% or a ratio of core  capital to
total  assets  of less  than 4% (3% or less for  institutions  with the  highest
examination   rating)  is  considered  to  be   "undercapitalized."   A  savings
institution  that has a total  risk-based  capital  ratio less than 6%, a Tier 1
capital  ratio  of less  than 3% or a  leverage  ratio  that is less  than 3% is
considered to be "significantly undercapitalized" and a savings institution that
has a tangible  capital to assets ratio equal to or less than 2% is deemed to be
"critically  undercapitalized."  Subject  to a narrow  exception,  the Office of
Thrift  Supervision  is  required to appoint a receiver  or  conservator  within
specified time frames for an institution that is "critically  undercapitalized."
The regulation also provides that a capital  restoration plan must be filed with
the  Office  of  Thrift  Supervision  within  45  days  of the

                                       14
<page>

date a  savings  institution  receives  notice  that  it is  "undercapitalized,"
"significantly  undercapitalized" or "critically  undercapitalized."  Compliance
with the plan must be guaranteed  by any parent  holding  company.  In addition,
numerous  mandatory  supervisory  actions  become  immediately  applicable to an
undercapitalized   institution,   including,   but  not  limited  to,  increased
monitoring by regulators and restrictions on growth,  capital  distributions and
expansion.  The Office of Thrift Supervision could also take any one of a number
of  discretionary  supervisory  actions,  including  the  issuance  of a capital
directive and the replacement of senior executive officers and directors.

         Enforcement.  The Office of Thrift Supervision has primary  enforcement
responsibility  over savings  institutions and has the authority to bring action
against the  institution  and all  "institution-affiliated  parties,"  including
stockholders,  and any attorneys,  appraisers and  accountants  who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution.  Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of officers or directors,
receivership,   conservatorship  or  termination  of  deposit  insurance.  Civil
penalties cover a wide range of violations and can amount to $25,000 per day, or
$1.0  million  per  day in  especially  egregious  cases.  The  Federal  Deposit
Insurance  Corporation  has the  authority  to  recommend to the Director of the
Office of Thrift  Supervision that enforcement action be taken with respect to a
particular  savings  institution.  If action is not taken by the  Director,  the
Federal  Deposit  Insurance  Corporation has authority to take such action under
certain circumstances. Federal and state law also establishes criminal penalties
for certain violations.

         Insurance of Deposit Accounts.  Deposits of Enfield Federal are insured
by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation.  The
Federal Deposit Insurance  Corporation  determines insurance premiums based on a
number of factors,  primarily the risk of loss that insured institutions pose to
the Deposit  Insurance  Fund.  Recent  legislation  eliminated the minimum 1.25%
reserve ratio for the insurance funds, the mandatory  assessments when the ratio
fall below 1.25% and the prohibition on assessing the highest quality banks when
the ratio is above 1.25%.  The Federal  Deposit  Insurance  Corporation  has the
ability to adjust the new insurance fund's reserve ratio between 1.15% and 1.5%,
depending on projected losses,  economic changes and assessment rates at the end
of a calendar  year.  The  Federal  Deposit  Insurance  Corporation  has adopted
regulations that set assessment rates that took effect at the beginning of 2007.
The new assessment  rates for most banks vary between five cents and seven cents
for every $100 of deposits. A change in insurance premiums could have an adverse
effect on the operating  expenses and results of operations of Enfield  Federal.
We  cannot  predict  what  insurance  assessment  rates  will be in the  future.
Assessment credits have been provided to institutions that paid high premiums in
the past.

         Insurance  of  deposits  may  be  terminated  by  the  Federal  Deposit
Insurance  Corporation upon a finding that the institution has engaged in unsafe
or  unsound  practices,  is  in an  unsafe  or  unsound  condition  to  continue
operations  or has violated  any  applicable  law,  regulation,  rule,  order or
condition imposed by the Federal Deposit Insurance  Corporation or the Office of
Thrift  Supervision.  The  management  of Enfield  Federal  does not know of any
practice,  condition  or  violation  that might lead to  termination  of deposit
insurance.

         Transactions  with  Related  Parties.  Enfield  Federal's  authority to
engage in transactions with its "affiliates" (e.g., any company that controls or
is under common control with an institution,  including New England  Bancshares)
is limited by federal law. In general, these transactions must be on terms which
are  as  favorable  to  Enfield   Federal  as   comparable   transactions   with
non-affiliates.  In addition, certain types of these transactions are restricted
to an aggregate percentage of Enfield Federal's capital. Collateral in specified
amounts must  usually be provided by  affiliates  to receive  loans from Enfield
Federal.  The  purchase  of low  quality  assets from  affiliates  is  generally
prohibited. In addition, the Office of Thrift Supervision regulations prohibit a
savings  association  from lending to any of its  affiliates  that is engaged in
activities  that  are not  permissible  for  bank  holding  companies  and  from
purchasing the securities of any affiliate, other than a subsidiary.

         The Sarbanes-Oxley Act generally  prohibits loans by the Company to its
executive  officers  and  directors.  However,  that  act  contains  a  specific
exception for loans by Enfield  Federal to its executive  officers and directors
in compliance  with federal  banking laws.  Under such laws,  Enfield  Federal's
authority to extend credit to executive officers, directors and 10% stockholders
("insiders"),  as well as entities such persons control, is limited. Among other
things,  these provisions  require that extensions of credit to insiders be made
on terms that are  substantially  the same as, and  follow  credit  underwriting
procedures  that are not less stringent  than,  those  prevailing for comparable

                                       15
<page>

transactions  with  unaffiliated  persons and that do not involve  more than the
normal risk of  repayment or present  other  unfavorable  features.  There is an
exception for loans made pursuant to a benefit or  compensation  program that is
widely  available  to all  employees  of  the  institution  and  does  not  give
preference  to  insiders.  There are also certain  limitations  on the amount of
credit extended to insiders, individually and in the aggregate, which limits are
based,  in part,  on the  amount of  Enfield  Federal's  capital.  In  addition,
extensions  of credit in excess of certain  limits  must be  approved by Enfield
Federal's board of directors.

         Community  Reinvestment  Act.  Under  the  Community  Reinvestment  Act
("CRA"),  as implemented by Office of Thrift  Supervision  regulations,  Enfield
Federal has a  continuing  and  affirmative  obligation  to help meet the credit
needs of its entire community,  including low and moderate income neighborhoods.
The CRA does not establish specific lending requirements or programs for Enfield
Federal nor does it limit its  discretion  to develop the types of products  and
services  that  it  believes  are  best  suited  to  its  particular  community,
consistent with the CRA. The CRA requires the Office of Thrift  Supervision,  in
connection with its examination of Enfield Federal,  to assess Enfield Federal's
record of meeting the credit needs of its  community and to take the record into
account in its evaluation of certain  applications by Enfield  Federal.  The CRA
also requires all  institutions to make public  disclosure of their CRA ratings.
Enfield  Federal  received  a  "Satisfactory"  CRA  rating  in its  most  recent
examination.

         Federal  Home  Loan Bank  System.  Enfield  Federal  is a member of the
Federal Home Loan Bank of Boston,  which is one of the 12 regional  Federal Home
Loan Banks making up the Federal  Home Loan Bank System.  Each Federal Home Loan
Bank provides a central credit facility  primarily for its member  institutions.
Enfield  Federal is required to acquire and hold shares of capital stock in that
Federal Home Loan Bank.  Enfield Federal was in compliance with this requirement
with an  investment in the capital stock of the Federal Home Loan Bank of Boston
at March 31, 2007 of $2.0 million.

         The Federal Home Loan Banks have been required to provide funds for the
resolution of insolvent  thrifts and to contribute funds for affordable  housing
programs.  These  requirements  could  reduce  the amount of  earnings  that the
Federal  Home Loan Banks can pay as  dividends  to their  members and could also
result in the  Federal  Home Loan Banks  imposing a higher  rate of  interest on
advances to their  members.  If dividends  were  reduced,  or interest on future
Federal Home Loan Bank advances increased, Enfield Federal's net interest income
would be affected.

Federal Reserve System

         Under Federal Reserve Board regulations, Enfield Federal is required to
maintain  noninterest-earning  reserves  against its transaction  accounts.  The
Federal Reserve Board regulations  generally require that reserves of 3% must be
maintained  against  aggregate  transaction  accounts of $48.3  million or less,
subject to adjustment by the Federal Reserve Board, and reserves of 10%, subject
to  adjustment  by the Federal  Reserve  Board,  against  that  portion of total
transaction  accounts  in excess of $48.3  million.  The first  $7.8  million of
otherwise  reservable  balances,  subject to adjustment  by the Federal  Reserve
Board,  are  exempted  from the  reserve  requirements.  Enfield  Federal  is in
compliance with these requirements.

Current Holding Company Regulation

         New England  Bancshares is a  nondiversified  unitary  savings and loan
holding  company  within the meaning of federal  law.  Under  federal  law,  New
England  Bancshares  may engage only in the financial  activities  permitted for
financial  holding  companies  under the law or for  multiple  savings  and loan
holding  companies as described below. Upon any  non-supervisory  acquisition by
New England Bancshares of another savings association or savings bank that meets
the qualified  thrift lender test and is deemed to be a savings  institution  by
the Office of Thrift Supervision, New England Bancshares would become a multiple
savings and loan  holding  company  (if the  acquired  association  is held as a
separate  subsidiary) and would  generally be limited to activities  permissible
for bank holding  companies  under Section  4(c)(8) of the Bank Holding  Company
Act,  subject to the prior  approval  of the Office of Thrift  Supervision,  and
certain  activities  authorized  by Office of  Thrift  Supervision  regulations.
However,   the  Office  of  Thrift  Supervision  has  issued  an  interpretation
concluding that the multiple savings and loan holding  companies may also engage
in activities permitted for financial holding companies.

                                       16
<page>

         A savings and loan  holding  company is  prohibited  from,  directly or
indirectly,  acquiring  more  than 5% of the  voting  stock of  another  savings
institution or savings and loan holding company  without prior written  approval
of the Office of Thrift Supervision and from acquiring or retaining control of a
depository  institution  that is not  insured by the Federal  Deposit  Insurance
Corporation.  In evaluating applications by holding companies to acquire savings
institutions,  the Office of Thrift  Supervision  considers  the  financial  and
managerial  resources  and  future  prospects  of the  company  and  institution
involved,  the effect of the  acquisition  on the risk to the deposit  insurance
funds, the convenience and needs of the community and competitive factors.

         The Office of Thrift  Supervision may not approve any acquisition  that
would result in a multiple savings and loan holding company  controlling savings
institutions in more than one state, subject to two exceptions: (1) the approval
of interstate supervisory acquisitions by savings and loan holding companies and
(2) the acquisition of a savings institution in another state if the laws of the
state of the target savings  institution  specifically permit such acquisitions.
The states vary in the extent to which they permit  interstate  savings and loan
holding company acquisitions.

         Although savings and loan holding  companies are not currently  subject
to specific  capital  requirements  or specific  restrictions  on the payment of
dividends or other capital distributions,  federal regulations do prescribe such
restrictions  on subsidiary  savings  institutions as described  below.  Enfield
Federal must notify the Office of Thrift  Supervision  30 days before  declaring
any dividend to New England Bancshares.  In addition,  the financial impact of a
holding  company on its subsidiary  institution is a matter that is evaluated by
the Office of Thrift Supervision and the agency has authority to order cessation
of  activities or  divestiture  of  subsidiaries  deemed to pose a threat to the
safety and soundness of the institution.

         Acquisition  of Control.  Under the Federal  Change in Bank Control Act
("CIBCA"), a notice must be submitted to the Office of Thrift Supervision if any
person  (including  a company),  or group  acting in  concert,  seeks to acquire
"control"  of a savings  and loan  holding  company or savings  association.  An
acquisition  of "control" can occur upon the  acquisition  of 10% or more of the
voting stock of a savings and loan holding company or savings  association or as
otherwise defined by Office of Thrift  Supervision.  Under the CIBCA, the Office
of Thrift  Supervision  has 60 days from the filing of a complete notice to act,
taking  into  consideration   certain  factors,   including  the  financial  and
managerial  resources  of  the  acquirer  and  the  anti-trust  effects  of  the
acquisition.  Any  company  that so  acquires  control  would then be subject to
regulation as a savings and loan holding company.

Holding Company Regulation After the Merger

         After the  completion  of the merger,  New England  Bancshares  will be
subject  to  examination,  regulation,  and  periodic  reporting  under the Bank
Holding Company Act of 1956, as amended,  as administered by the Federal Reserve
Board.  New England  Bancshares is required to obtain the prior  approval of the
Federal Reserve Board to acquire all, or substantially all, of the assets of any
bank or bank holding  company.  Prior Federal  Reserve Board  approval  would be
required for New England  Bancshares to acquire direct or indirect  ownership or
control of any voting  securities of any bank or bank holding  company if, after
such acquisition,  it would, directly or indirectly, own or control more than 5%
of any class of voting shares of the bank or bank holding  company.  In addition
to the approval of the Federal Reserve Board, before any bank acquisition can be
completed,  prior  approval  may also be  required  to be  obtained  from  other
agencies having supervisory jurisdiction over the bank to be acquired.

         A bank holding  company is generally  prohibited  from  engaging in, or
acquiring,  direct or indirect control of more than 5% of the voting  securities
of  any  company  engaged  in  non-banking  activities.  One  of  the  principal
exceptions to this  prohibition is for activities  found by the Federal  Reserve
Board to be so closely related to banking or managing or controlling banks as to
be a proper incident thereto.  Some of the principal activities that the Federal
Reserve Board has  determined by regulation to be so closely  related to banking
are: (i) making or servicing  loans;  (ii)  performing  certain data  processing
services; (iii) providing discount brokerage services; (iv) acting as fiduciary,
investment or financial  advisor;  (v) leasing  personal or real property;  (vi)
making  investments in  corporations or projects  designed  primarily to promote
community welfare; and (vii) acquiring a savings and loan association.

         The  Gramm-Leach-Bliley  Act of 1999  authorizes a bank holding company
that meets specified  conditions,  including being "well  capitalized" and "well
managed," to opt to become a "financial holding company" and thereby

                                       17
<page>

engage in a broader array of financial  activities  than  previously  permitted.
Such activities can include insurance underwriting and investment banking.

         After completion of the merger,  New England Bancshares will be subject
to the Federal  Reserve  Board's  capital  adequacy  guidelines for bank holding
companies (on a consolidated basis) substantially similar to those of the Office
of Thrift Supervision for Enfield Federal.

         A bank  holding  company  is  generally  required  to give the  Federal
Reserve  Board  prior  written  notice of any  purchase  or  redemption  of then
outstanding  equity  securities if the gross  consideration  for the purchase or
redemption, when combined with the net consideration paid for all such purchases
or  redemptions  during the preceding 12 months,  is equal to 10% or more of the
company's  consolidated net worth. The Federal Reserve Board may disapprove such
a purchase or redemption if it determines that the proposal would  constitute an
unsafe and  unsound  practice,  or would  violate any law,  regulation,  Federal
Reserve  Board  order or  directive,  or any  condition  imposed  by, or written
agreement with, the Federal Reserve Board. The Federal Reserve Board has adopted
an exception to this  approval  requirement  for  well-capitalized  bank holding
companies that meet certain other conditions.

         The Federal Reserve Board has issued a policy  statement  regarding the
payment of dividends by bank holding companies.  In general, the Federal Reserve
Board's  policies  provide  that  dividends  should be paid only out of  current
earnings  and only if the  prospective  rate of earnings  retention  by the bank
holding company appears consistent with the organization's  capital needs, asset
quality and overall  financial  condition.  The Federal Reserve Board's policies
also require that a bank holding company serve as a source of financial strength
to its subsidiary banks by standing ready to use available  resources to provide
adequate  capital  funds to those banks during  periods of  financial  stress or
adversity and by  maintaining  the  financial  flexibility  and  capital-raising
capacity to obtain additional resources for assisting its subsidiary banks where
necessary.  Under the  prompt  corrective  action  laws,  the  ability of a bank
holding  company to pay dividends may be restricted if a subsidiary bank becomes
undercapitalized.  These  regulatory  policies  could  affect the ability of New
England   Bancshares   to  pay   dividends  or   otherwise   engage  in  capital
distributions.

         Under the Federal Deposit  Insurance Act,  depository  institutions are
liable to the  Federal  Deposit  Insurance  Corporation  for losses  suffered or
anticipated by the Federal Deposit Insurance  Corporation in connection with the
default  of a  commonly  controlled  depository  institution  or any  assistance
provided by the Federal Deposit Insurance  Corporation to such an institution in
danger of default.

         New  England  Bancshares  and Enfield  Federal  will be affected by the
monetary  and  fiscal  policies  of  various   agencies  of  the  United  States
Government, including the Federal Reserve System. In view of changing conditions
in  the  national  economy  and in  the  money  markets,  it is  impossible  for
management to accurately predict future changes in monetary policy or the effect
of such changes on the business or financial condition of New England Bancshares
or Enfield Federal.

         The status of New  England  Bancshares  as a  registered  bank  holding
company  under the Bank  Holding  Company  Act will not  exempt it from  certain
federal and state laws and  regulations  applicable to  corporations  generally,
including,  without  limitation,  certain  provisions of the federal  securities
laws.

                           FEDERAL AND STATE TAXATION

Federal Taxation

         General.  New England  Bancshares  and  Enfield  Federal  report  their
consolidated  taxable  income on a fiscal year basis  ending March 31, using the
accrual method of accounting  and are subject to federal income  taxation in the
same manner as other  corporations.  The following  discussion of tax matters is
intended  only  as a  summary  and  does  not  purport  to  be  a  comprehensive
description  of the tax rules  applicable to New England  Bancshares and Enfield
Federal.  The Company is not currently  under audit nor has it ever been audited
by the Internal Revenue Service.

                                       18
<page>

         Distributions.  To the  extent  that the  Company  makes  "non-dividend
distributions" to stockholders,  such distributions will be considered to result
in  distributions  from its unrecaptured tax bad debt reserve as of December 31,
1987  (the  "base  year  reserve"),  to the  extent  thereof  and then  from the
Company's  supplemental  reserve for losses on loans, and an amount based on the
amount  distributed  will be  included  in the  Company's  income.  Non-dividend
distributions  include  distributions  in excess of the  Company's  current  and
accumulated  earnings  and profits,  distributions  in  redemption  of stock and
distributions  in partial or  complete  liquidation.  Dividends  paid out of the
Company's  current or  accumulated  earnings and profits will not be included in
the Company's income.

         The  amount  of   additional   income   created  from  a   non-dividend
distribution  is equal to the lesser of the base year  reserve and  supplemental
reserve  for  losses  on  loans  or an  amount  that,  when  reduced  by the tax
attributable to the income, is equal to the amount of the distribution. Thus, in
some  situations,   approximately   one  and  one-half  times  the  non-dividend
distribution  would be  includable  in  gross  income  for  federal  income  tax
purposes, assuming a 34% federal corporate income tax rate. The Company does not
intend to pay dividends that would result in the recapture of any portion of the
bad debt reserves.

         Corporate   Alternative   Minimum  Tax.  The  Code  imposes  a  tax  on
alternative  minimum  taxable  income at a rate of 20%. Only 90% of  alternative
minimum  taxable income can be offset by  alternative  minimum tax net operating
loss  carryovers of which the Company  currently has none.  Alternative  minimum
taxable  income is also  adjusted by  determining  the tax  treatment of certain
items in a manner that negates the deferral of income resulting from the regular
tax treatment of those items. Alternative minimum tax is due when it exceeds the
regular income tax. The Company has not had a liability for a tax on alternative
minimum taxable income during the past five years.

         Elimination of Dividends.  New England  Bancshares may exclude from its
income 100% of dividends  received from Enfield  Federal as a member of the same
affiliated group of corporations.

State Taxation

         New England  Bancshares and Enfield Federal file Connecticut income tax
returns on a consolidated basis. Generally, the income of financial institutions
in Connecticut,  which is calculated based on federal taxable income, subject to
certain adjustments, is subject to Connecticut tax. The Company is not currently
under audit with respect to its Connecticut income tax returns and its state tax
returns have not been audited for the past five years.


                                       19
<page>

ITEM 2.  DESCRIPTION OF PROPERTY

         The Company currently  conducts its business through eight full-service
banking  offices  and one  administrative  office.  The net  book  value  of the
Company's  properties  or leasehold  improvements  was $3.2 million at March 31,
2007.

                                                        Original       Date of
                                          Leased or    Year Leased      Lease
Location                                    Owned      or Acquired    Expiration
                                          ---------    -----------    ----------

Executive/Branch Office:
855 Enfield Street
Enfield, Connecticut...................     Leased        2006           2031

Branch Offices:

268 Hazard Avenue
Enfield, Connecticut...................     Owned         1962             --

112 Mountain Road
Suffield, Connecticut..................     Leased        1988           2008

23 Main Street
Manchester, Connecticut................     Owned         2002             --

124 Main Street
Broad Brook, Connecticut...............     Owned         2003             --

20 Main Street
Windsor Locks, Connecticut.............     Leased        2002          2012(1)

One Shoham Road
East Windsor, Connecticut..............     Leased        2005          2015(2)

287 Somers Road
Ellington, Connecticut.................     Owned         2005             --


--------------------------------------------------------------------------------

(1) We have an option to renew this lease for one additional five-year term.
(2) We have an option to renew this lease for two additional seven-year terms.


ITEM 3.  LEGAL PROCEEDINGS

         Periodically,  there have been various  claims and  lawsuits  involving
Enfield Federal,  such as claims to enforce liens,  condemnation  proceedings on
properties in which Enfield Federal holds security  interests,  claims involving
the making and  servicing of real  property  loans and other issues  incident to
Enfield Federal's  business.  In the opinion of management,  after  consultation
with the  Company's  legal  counsel,  no such  pending  claims or  lawsuits  are
expected  to have a  material  adverse  effect  on the  financial  condition  or
operations of the Company,  taken as a whole.  The Company is not a party to any
material pending legal proceedings.

                                       20
<page>


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the year ended March 31, 2007.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

         Beginning on December 28, 2005,  the Company's  common stock was quoted
on the Nasdaq  Global  Market  under the symbol  "NEBS."  Before that date,  the
Company's  common  stock was quoted on the OTC  Bulletin  Board under the symbol
"NEBS."  According  to the  records  of its  transfer  agent,  the  Company  had
approximately  743  stockholders  of record as of June 2, 2007. This number does
not reflect  stockholders  who hold their shares in "street name." The following
table sets forth the high and low bid information for the Company's common stock
for each of the fiscal quarters in the two-year period ended March 31, 2007. The
stock  prices and  dividends  have been  adjusted to reflect  that each share of
former New England  Bancshares  common stock was  exchanged for 2.3683 shares of
current New England  Bancshares  common stock in  connection  with the Company's
second-step conversion on December 28, 2005.


                                          High        Low     Dividends
                                         ------     ------    ---------
        Fiscal 2007:
            Fourth Quarter ...........   $13.65     $12.85     $ 0.03
            Third Quarter ............    13.30      12.50       0.03
            Second Quarter ...........    13.05      11.41       0.03
            First Quarter ............    11.66      10.77       0.03
        Fiscal 2006:
            Fourth Quarter ...........   $10.90     $10.47     $ 0.03
            Third Quarter ............    11.40      10.24       0.02
            Second Quarter ...........    11.65       6.61       0.02
            First Quarter ............     7.52       6.19       0.02

         The  Company did not  repurchase  any of its common  shares  during the
quarter ended March 31, 2007.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The  objective of this section is to help  understand  our views on our
results of operations and financial  condition.  You should read this discussion
in  conjunction  with the  consolidated  financial  statements  and notes to the
consolidated  financial  statements  that  appear  under Part II, Item 7 of this
annual report.


Overview

         Income.  Our  primary  source of  pre-tax  income is net  interest  and
dividend  income.  Net interest and dividend  income is the  difference  between
interest and dividend income,  which is the income that we earn on our loans and
investments,  and interest  expense,  which is the  interest  that we pay on our
deposits and  borrowings.  To a much lesser extent,  we also  recognize  pre-tax
income  from  service  charge  income - mostly from  service  charges on deposit
accounts,  from the  increase in cash  surrender  value of our  bank-owned  life
insurance and from the sale of securities.

         Allowance for Loan Losses. The allowance for loan losses is a valuation
allowance for probable losses  inherent in the loan  portfolio.  We evaluate the
need to establish  allowances  against losses on loans on a monthly basis.  When
additional  allowances are necessary,  a provision for loan losses is charged to
earnings.

                                       21
<page>

         Expenses.  The expenses we incur in operating  our business  consist of
salaries and employee  benefits  expenses,  occupancy  and  equipment  expenses,
advertising and promotion expenses,  professional fees, data processing expense,
stationery and supplies expense,  amortization of identifiable intangible assets
and other miscellaneous expenses.

         Salaries  and  employee  benefits  expenses  consist  primarily  of the
salaries and wages paid to our employees,  payroll taxes and expenses for health
insurance,  retirement  plans  and other  employee  benefits.  It also  includes
expenses  related to our employee  stock  ownership  plan and  restricted  stock
awards granted under our stock-based  incentive  plan.  Expense for the employee
stock  ownership  plan is  based  on the  average  market  value  of the  shares
committed to be released.  An equal number of shares is released  each year over
terms of the two loans from New  England  Bancshares  that were used to fund the
employee stock ownership plan's purchase of shares in the stock offering in both
the  mutual  holding  company  reorganization  and the  second-step  conversion.
Expense for shares of restricted  stock awards is based on the fair market value
of the  shares  on the date of  grant.  Compensation  and  related  expenses  is
recognized on a straight-line  basis over the vesting period. We began expensing
stock  options in fiscal 2007 and is included in salaries and employee  benefits
expenses and the consolidated statements of income.

         Occupancy  and  equipment  expenses,  which are the fixed and  variable
costs of land, building and equipment, consist primarily of lease payments, real
estate  taxes,   depreciation   charges,   furniture  and  equipment   expenses,
maintenance  and costs of utilities.  Depreciation  of premises and equipment is
computed using the straight-line method based on the useful lives of the related
assets, which range from ten to 50 years for buildings and premises and three to
20 years for  furniture,  fixtures and  equipment.  Leasehold  improvements  are
amortized over the shorter of the useful life of the asset or term of the lease.

         Advertising  and  promotion   expenses   include   expenses  for  print
advertisements, promotions and premium items.

         Professional  fees  primarily  include  fees  paid  to our  independent
auditors,  our attorneys,  our internal  auditor and any  consultants we employ,
such as to review our loan or investment portfolios.

         Data  processing  expenses  include fees paid to our  third-party  data
processing service and ATM expense.

         Stationery  and  supplies  expense  consists  of  expenses  for  office
supplies.

         Amortization  of  identifiable   intangible   assets  consists  of  the
amortization,  on a straight-line  basis over a ten-year period, of the $886,000
core deposit  intangible that was incurred in connection with our acquisition of
Windsor Locks Community Bank, FSL in December 2003.

         Other expenses include federal insurance  deposit premiums,  charitable
contributions,   regulatory   assessments,   telephone,   insurance   and  other
miscellaneous operating expenses.

Critical Accounting Policies

         We consider  accounting  policies involving  significant  judgments and
assumptions  by management  that have,  or could have, a material  impact on the
carrying value of certain assets or income to be critical  accounting  policies.
We consider  accounting  policies  relating to the allowance for loan losses and
goodwill and other intangibles to be critical accounting policies.

         Allowance for Loan Losses.  The allowance for loan losses is the amount
estimated  by  management  as  necessary  to cover  losses  inherent in the loan
portfolio at the balance sheet date.  The allowance is  established  through the
provision for loan losses, which is charged to income. Determining the amount of
the  allowance for loan losses  necessarily  involves a high degree of judgment.
Among the material  estimates  required to establish  the  allowance  are:  loss
exposure  at  default;  the amount and timing of future  cash flows on  impacted
loans;

                                       22
<page>

the value of collateral;  and determination of loss factors to be applied to the
various  elements of the portfolio.  All of these  estimates are  susceptible to
significant change.

         Management  reviews the level of the  allowance on a monthly  basis and
establishes  the  provision  for  loan  losses  based  on an  evaluation  of the
portfolio,  past loss experience,  economic  conditions and business  conditions
affecting our primary market area, credit quality trends, collateral value, loan
volumes and concentrations, seasoning of the loan portfolio, the duration of the
current business cycle,  bank regulatory  examination  results and other factors
related to the collectibility of the loan portfolio. Although we believe that we
use the best  information  available to establish the allowance for loan losses,
future  additions to the  allowance  may be necessary if certain  future  events
occur that cause actual  results to differ from the  assumptions  used in making
the  evaluation.  For  example,  a downturn  in the local  economy  could  cause
increases in non-performing loans. Additionally, a decline in real estate values
could cause some of our loans to become inadequately  collateralized.  In either
case,  this may require us to increase our  provisions  for loan  losses,  which
would negatively impact earnings.  Further, the Office of Thrift Supervision, as
an integral part of its examination process,  periodically reviews our allowance
for loan  losses.  Such agency may require us to  recognize  adjustments  to the
allowance based on its judgments about  information  available to it at the time
of its  examination.  An  increase to the  allowance  required to be made by the
Office of Thrift Supervision would negatively impact our earnings. Additionally,
a large loss could  deplete the allowance  and require  increased  provisions to
replenish the allowance, which would negatively affect earnings. See notes 2 and
4 to the notes to consolidated  financial statements included in Part II, Item 7
of this annual report.

         Goodwill and Other  Intangibles.  We record all assets and  liabilities
acquired in purchase acquisitions,  including goodwill and other intangibles, at
fair value as required by Statement of Financial  Accounting  Standards No. 141.
Goodwill  is  subject,  at a  minimum,  to annual  tests for  impairment.  Other
intangible  assets  are  amortized  over  their  estimated  useful  lives  using
straight-line and accelerated  methods,  and are subject to impairment if events
or circumstances  indicate a possible  inability to realize the carrying amount.
The initial goodwill and other intangibles  recorded,  and subsequent impairment
analysis,  requires us to make subjective  judgments concerning estimates of how
the  acquired  assets will  perform in the future.  Events and factors  that may
significantly  affect the estimates include,  among others,  customer attrition,
changes in revenue grown trends,  specific  industry  conditions  and changes in
competition.

Operating Strategy

         Our   mission  is  to  operate   and   further   expand  a   profitable
community-oriented  financial institution.  We plan to achieve this by executing
our strategy of:

         o        pursuing opportunities to increase multi-family and commercial
                  real  estate  and  commercial  business  lending in our market
                  area;

         o        continuing to emphasize the origination of one- to four-family
                  residential real estate loans;

         o        expanding  our  delivery   system  through  a  combination  of
                  increased uses of technology and additional branch facilities;

         o        aggressively attracting core deposits;

         o        managing  our net interest  margin and net interest  spread by
                  having a greater percentage of our assets in loans, especially
                  higher-yielding  loans,  which  generally  have a higher yield
                  than securities; and

         o        managing  interest rate risk by emphasizing the origination of
                  adjustable-rate or shorter duration loans.

                                       23
<page>

         Pursue opportunities to increase  multi-family,  commercial real estate
and commercial business lending in our market area

         Multi-family,  commercial  real estate and  commercial  business  loans
provide us with the  opportunity  to earn more income  because they tend to have
higher interest rates than residential mortgage loans. In addition,  these loans
are  beneficial  for interest rate risk  management  because they typically have
shorter terms and  adjustable  interest  rates.  Multi-family,  commercial  real
estate and commercial  business loans  increased $19.8 million and $13.0 million
for the years ended March 31, 2007 and 2006, respectively, and at March 31, 2007
comprised  approximately  33.4% of total loans.  There are many multi-family and
commercial  properties and  businesses  located in our market area, and with the
additional  capital we raised in the  offering we may pursue the larger  lending
relationships associated with these opportunities, while continuing to originate
any  such  loans  in  accordance  with  what we  believe  are  our  conservative
underwriting  guidelines.  We  have  added  expertise  in  our  commercial  loan
department in recent years.  Additionally,  we may employ additional  commercial
lenders in the future to help increase our multi-family and commercial lending.

         However, these types of loans generally expose a lender to greater risk
of  non-payment  and loss than one- to  four-family  residential  mortgage loans
because repayment of the loans often depends on the successful  operation of the
property and the income stream of the borrowers.  Such loans  typically  involve
larger loan balances to single borrowers or groups of related borrowers compared
to one- to four-family  residential  mortgage loans.  Commercial  business loans
expose us to additional  risks since they typically are made on the basis of the
borrower's  ability  to make  repayments  from the cash  flow of the  borrower's
business and are secured by non-real estate  collateral that may depreciate over
time. In addition,  since such loans generally  entail greater risk than one- to
four-family  residential  mortgage  loans, we may need to increase our allowance
for loan  losses in the future to account  for the likely  increase  in probable
incurred credit losses  associated with the growth of such loans.  Also, many of
our  commercial   borrowers  have  more  than  one  loan  outstanding  with  us.
Consequently,  an  adverse  development  with  respect to one loan or one credit
relationship  can expose us to a significantly  greater risk of loss compared to
an  adverse  development  with  respect  to a one-  to  four-family  residential
mortgage loan.

         Continue  to  emphasize  the   origination   of  one-  to   four-family
residential real estate loans

         Our primary lending activity is the origination of residential mortgage
loans secured by homes in our market area. We intend to continue emphasizing the
origination  of residential  mortgage  loans going  forward.  At March 31, 2007,
61.4% of our total loans were one- to four-family residential real estate loans.
We believe  that our  emphasis on  residential  lending,  which  carries a lower
credit risk, contributes to our high asset quality.

         Expand our delivery  system  through a combination of increased uses of
technology and additional branch facilities

         We intend to expand the ways in which we reach and serve our customers.
We implemented  internet  banking in fiscal 2003,  which allows our customers to
access their  accounts and pay bills  online.  In fiscal 2006,  we introduced an
enhancement  to our website to enable  customers to obtain loan  information  to
apply for a residential  or commercial  loan online.  Also, we opened new branch
offices in East Windsor, Connecticut in October 2005 and Ellington,  Connecticut
in April 2006.  We intend to pursue  expansion in our market area in the future,
whether through de novo branching or acquisition.  However,  we have not entered
into any binding commitments regarding our expansion plans.

         Aggressively attract core deposits

         Core deposits  (accounts other than certificates of deposit)  comprised
50.4% of our total  deposits at March 31, 2007. We value core  deposits  because
they represent  longer-term  customer  relationships and a lower cost of funding
compared to certificates of deposit.  We aggressively seek core deposits through
competitive  pricing and targeted  advertising.  In addition,  we offer business
checking  accounts for our commercial  customers.  We also hope to increase core
deposits by pursuing  expansion inside and outside of our market area through de
novo branching.

                                       24
<page>

         Manage net interest  margin and net interest spread by having a greater
percentage  of our  assets in loans,  especially  higher-yielding  loans,  which
generally have a higher yield than securities

         We intend  to  continue  to  manage  our net  interest  margin  and net
interest  spread by  seeking  to  increase  lending  levels  and by  originating
higher-yielding  loans. Loans secured by multi-family and commercial real estate
and commercial  business loans are generally larger and involve a greater degree
of risk  than  one-to  four-family  residential  mortgage  loans.  Consequently,
multi-family and commercial real estate and commercial  business loans typically
have higher  yields,  which  increase our net  interest  margin and net interest
spread. In addition, the Bank has started, and expects to continue, to sell one-
to  four-family  mortgage  loans in an effort to increase  yields on the overall
loan portfolio.

         Manage   interest  rate  risk  by   emphasizing   the   origination  of
adjustable-rate or shorter duration loans

         We manage our interest rate sensitivity to minimize the adverse effects
of changes in the interest rate  environment.  Deposit accounts  typically react
more quickly to changes in market interest rates than longer-term  loans because
of the shorter maturities of deposits.  As a result, sharp increases in interest
rates may adversely  affect our earnings  while  decreases in interest rates may
beneficially  affect our  earnings.  To reduce the  potential  volatility of our
earnings,  we have sought to: (1) improve the match  between asset and liability
maturities and rates, while maintaining an acceptable  interest rate spread; and
(2)  decrease  the  maturities  of our  assets,  in part by the  origination  of
adjustable-rate  and shorter-term loans. To this end the Company started to sell
some of its long term fixed rate one- to four-family mortgage loans.


Balance Sheet Analysis

         Loans. Our primary lending activity is the origination of loans secured
by real estate.  We originate  real estate loans secured by one- to  four-family
residential  real estate,  and to a lesser extent,  secured by multi-family  and
commercial  real estate.  At March 31, 2007,  real estate loans  totaled  $186.6
million, or 93.1% of total loans, compared to $145.3 million, or 96.8%, of total
loans at March 31, 2006.

         The  largest  segment of our real estate  loans is one- to  four-family
residential   real  estate  loans.  At  March  31,  2007,  one-  to  four-family
residential real estate loans totaled $123.0 million, which represented 65.9% of
real estate  loans and 61.4% of total loans  compared to $94.8  million at March
31, 2006, which represented 65.2% of real estate loans and 63.1% of total loans.
One- to four-family  residential  real estate loans increased $28.3 million,  or
29.9%, for the year ended March 31, 2007 due to the prevailing low interest rate
environment,   competitive   pricing  and  the  purchase  of  $14.0  million  of
participations,  partially  offset by the sale of $2.3 million in long-term one-
to four-family loans to manage interest rate risk.

         Multi-family  and commercial real estate loans totaled $55.9 million at
March 31, 2007, which  represented 30.0% of real estate loans and 27.9% of total
loans,  compared to $43.3 million at March 31, 2006, which  represented 29.8% of
real estate loans and 28.8% of total loans.  Multi-family  and  commercial  real
estate loans  increased  $12.6 million,  or 29.1%,  for the year ended March 31,
2007 due to the continued emphasis of this type of lending.

         We originate construction loans secured by residential and multi-family
and commercial  real estate.  This  portfolio  totaled $7.7 million at March 31,
2007, which  represented 3.8% of total loans,  compared to $7.2 million at March
31, 2006, which  represented 4.8% of total loans.  Construction  loans increased
$470,000,  or 6.5%,  for the year  ended  March 31,  2007  primarily  due to the
Company funding additional  construction projects and purchasing $2.0 million in
loan  participations,  partially offset by the loans on such projects converting
to permanent financing.

         We also originate  commercial business loans secured by business assets
other than real  estate,  such as business  equipment,  inventory  and  accounts
receivable  and  letters of credit.  Commercial  business  loans  totaled  $11.1
million at March 31, 2007, which  represented  5.5% of total loans,  compared to
$3.8  million  at  March  31,  2006,  which  represented  2.6% of  total  loans.
Commercial  business loans increased $7.2 million,  or 188.1% for the

                                       25
<page>

year ended March 31, 2007  primarily  due to continued  emphasis of this type of
lending and $2.3 million in loan participations.

         We originate a variety of consumer  loans,  including  loans secured by
mobile homes,  automobiles and passbook or certificate accounts.  Consumer loans
totaled $2.8 million and  represented  1.4% of total loans at March 31, 2007 and
$1.0 million at March 31, 2006 which represented 0.7% of total loans.





                                       26
<page>

         The following table sets forth the composition of our loan portfolio at
the dates indicated.

<table>
<caption>
                                                                            At March 31,
                                 ---------------------------------------------------------------------------------------------------
                                       2007                2006                 2005                2004                2003
                                 -----------------   -----------------   ------------------   -----------------   ------------------
                                           Percent             Percent              Percent             Percent              Percent
                                              Of                  Of                   Of                  Of                  Of
                                  Amount    Total     Amount    Total     Amount     Total     Amount    Total     Amount     Total
                                 --------   ------   --------   ------   ---------   ------   --------   ------   --------   ------

                                 <c>       <c>       <c>       <c>       <c>        <c>      <c>        <c>       <c>       <c>
                                                                       (Dollars in thousands)
Mortgage loans:
   Residential loans:
      One- to four-family (1) .  $123,039    61.38%  $ 94,754    63.11%  $  88,774    66.08%  $ 80,999    65.82%  $ 63,726    67.17%
      Multi-family ............     5,778     2.88      5,850     3.90       6,621     4.93      6,789     5.52      5,256     5.54
   Commercial real estate .....    50,126    25.01     37,453    24.95      22,166    16.50     17,475    14.20     13,378    14.10
   Construction loans .........     7,678     3.83      7,208     4.80      10,309     7.68     10,324     8.39      4,625     4.87
                                 --------   ------   --------   ------   ---------   ------   --------   ------   --------   ------
         Total mortgage loans .   186,621    93.10    145,265    96.76     127,870    95.19    115,587    93.93               91.68
Consumer loans ................     2,776     1.38      1,023     0.68       1,132     0.84      1,467     1.19      1,629     1.72
Commercial loans ..............    11,058     5.52      3,838     2.56       5,332     3.97      6,004     4.88      6,262     6.60
                                 --------   ------   --------   ------   ---------   ------   --------   ------   --------   ------
         Total loans ..........   200,455   100.00%   150,126   100.00%    134,334   100.00%   123,058   100.00%    94,876   100.00%
                                            ======              ======               ======              ======              ======

Deferred loan origination fees,
  net.. .......................      (133)               (377)                (340)               (353)               (287)
Allowance for loan losses .....    (1,875)             (1,636)              (1,437)             (1,301)             (1,008)
                                   ------              ------               ------              ------              ------
   Total loans, net ...........  $198,447            $148,113            $ 132,557            $121,404            $ 93,581
                                 ========            ========            =========            ========            ========
</table>

--------------------------------------------------------------------------------

(1)  Includes $17.6 million,  $13.9 million, $9.6 million, $8.4 million and $7.5
     million of home equity loans and lines of credit at March 31,  2007,  2006,
     2005, 2004 and 2003, respectively.


                                       27
<page>

         The following  table sets forth certain  information  at March 31, 2007
regarding  the dollar  amount of  principal  repayments  becoming due during the
periods  indicated.  The table does not include any estimate of prepayments that
significantly  shorten  the  average  life of our loans and may cause our actual
repayment  experience  to differ from that shown  below.  Demand loans having no
stated  schedule of repayments and no stated maturity are reported as due in one
year or less.

<table>
<caption>
                                                One- to                Commercial
                                                 Four-       Multi-       Real                                               Total
                                                 Family      Family      Estate    Construction   Consumer   Commercial      Loans
                                               ----------  ----------  ----------  ------------  ----------  -----------  ----------

                                                <c>          <c>        <c>         <c>            <c>            <c>     <c>
                                                                                  (In thousands)
Amounts due in:
   One year or less .........................  $      792  $      311  $    3,486  $      5,276  $      303  $     1,643  $   11,811
   More than one year to three years.. ......         473          --         246         2,402         453        3,603       7,177
   More than three years to five years ......       1,710          --       1,551            --         638        1,528       5,427
   More than five years to ten years.. ......      10,100         467       9,603            --          67        3,753      23,990
   More than ten years to fifteen years .....      19,966       2,485       5,552            --         301           96      28,400
   More than fifteen years ..................      89,998       2,515      29,688            --       1,014          435     123,650
                                               ----------  ----------  ----------  ------------  ----------  -----------  ----------
      Total amount due ......................  $  123,039  $    5,778  $   50,126  $      7,678  $    2,776  $    11,058  $  200,455
                                               ==========  ==========  ==========  ============  ==========  ===========  ==========
</table>

         The following  table sets forth the dollar amount of all loans at March
31, 2007 that are due after March 31, 2008 and have either fixed  interest rates
or floating or  adjustable  interest  rates.  The  amounts  shown below  exclude
applicable  loans in process,  unearned  interest on consumer loans and deferred
loan fees.

                                                Due After March 31, 2008
                                          ------------------------------------

                                                      Floating or
                                            Fixed      Adjustable
                                            Rates        Rates         Total
                                          ----------   ----------   ----------
                                                     (In thousands)
Mortgage loans:
   Residential loans:
      One- to four-family .............   $  105,223   $   17,024   $  122,247
      Multi-family ....................        1,593        3,874        5,467
   Commercial real estate .............       21,485       25,155       46,640
   Construction loans .................        2,402           --        2,402
                                          ----------   ----------   ----------
         Total mortgage loans .........      130,703       46,053      176,756
Consumer loans ........................        2,473           --        2,473
Commercial loans ......................        8,135        1,280        9,415
                                          ----------   ----------   ----------
               Total loans ............   $  141,311   $   47,333   $  188,644
                                          ==========   ==========   ==========

                                       28
<page>

         The following table shows loan activity during the periods indicated.
<table>
<caption>
                                                  For the Fiscal Year Ended March 31,
                                                  -----------------------------------
                                                    2007          2006        2005
                                                  ---------    ---------    ---------

                                                  <c>          <c>           <c>
                                                             (In thousands)
Beginning balance, loans, net .................   $ 148,113    $ 132,557    $ 121,404
                                                  ---------    ---------    ---------
   Originations:
      Mortgage loans:
         Residential loans:
            One- to four-family ...............      28,836       19,543       19,232
            Multi-family ......................         642          563          704
         Commercial real estate ...............      19,161       10,921        5,289
         Construction loans ...................      12,505        8,984       17,809
                                                  ---------    ---------    ---------
               Total mortgage loans ...........      61,144       40,011       43,034
      Consumer loans ..........................       2,290          553          382
      Commercial loans ........................      11,170        1,297        1,872
                                                  ---------    ---------    ---------
               Total loan originations ........      74,604       41,861       45,288
Loans sold
                                                     (3,816)          --           --
Loan participations purchased .................      18,268        4,127        1,786

Deduct:
       Principal loan repayments and other, net     (36,711)     (30,421)     (35,926)
       Loan charge-offs, net of recoveries ....          (3)         (11)           5
                                                  ---------    ---------    ---------
Ending balance, loans, net ....................   $ 200,455    $ 148,113    $ 132,557
                                                  =========    =========    =========
</table>

         Securities.   Our  securities  portfolio  consists  primarily  of  U.S.
government  and  agency  securities,   mortgage-backed  securities,   marketable
equitable  securities,  municipal securities and, to a lesser extent,  corporate
debt  securities.  Although  corporate debt securities and municipal  securities
generally have greater credit risk than U.S. Treasury and government securities,
they  generally  have  higher  yields  than  government  securities  of  similar
duration.  Securities  decreased $2.8 million,  or 5.4%, in year ended March 31,
2007 as we  liquidated  some  securities,  primarily  municipal  securities  and
marketable  equity  securities,  to fund the Company's  loan growth.  All of our
mortgage-backed securities were issued by Ginnie Mae, Fannie Mae or Freddie Mac.

         The following  table sets forth the carrying  values and fair values of
our securities portfolio at the dates indicated.

<table>
<caption>
                                                                                  At March 31,
                                                   --------------------------------------------------------------------------
                                                            2007                      2006                      2005
                                                   ----------------------    ----------------------    ----------------------
                                                   Amortized      Fair       Amortized      Fair       Amortized      Fair
                                                     Cost         Value        Cost         Value        Cost         Value
                                                   --------------------------------------------------------------------------

                                                    <c>          <c>          <c>          <c>         <c>          <c>
                                                                                 (In thousands)
Investments in available-for-sale securities:
      U.S. government and federal agencies .....   $  23,774    $  23,575    $  25,666    $  25,125    $  21,129    $  20,719
      Municipal securities .....................       7,493        7,405        8,199        8,099        5,995        5,897
      Corporate debt securities ................         100          101          101          102          546          559
      Mortgage-backed securities ...............      12,030       11,941       12,689       12,530       12,963       12,893
      Marketable equity securities .............       7,224        7,034        9,403        9,207       12,952       12,834
                                                   ---------    ---------    ---------    ---------    ---------    ---------
            Total ..............................      50,621       50,056       56,058       55,063       53,585       52,902
      Money market mutual funds included in cash
        and cash equivalents ...................        (587)        (587)      (2,766)      (2,766)      (6,317)      (6,317)
                                                   ---------    ---------    ---------    ---------    ---------    ---------
           Total ...............................   $  50,034    $  49,469    $  53,292    $  52,297    $  47,268    $  46,585
                                                   =========    =========    =========    =========    =========    =========
</table>

                                       29
<page>

         The  aggregate  amortized  cost basis and fair value of  securities  of
issuers  (other than the U.S.  Government  or an agency of the U.S.  Government)
which exceeded 10% of stockholders' equity were as follows as of March 31, 2007:

                                               Amortized
                                                  Cost              Fair
                                                 Basis              Value
                                             --------------      -----------
                                                       (In thousands)
               Issuer
         ------------------------
         Asset Management Fund                   $6,637             $6,447


         The following table sets forth our securities:

<table>
<caption>
                                                           At and For the Fiscal Year Ended March 31,
                                                           -----------------------------------------
                                                               2007          2006          2005
                                                            ----------    ----------    ----------

                                                             <c>           <c>           <c>
                                                                        (In thousands)
Mortgage-related securities:
     Mortgage-related securities, beginning of period (1)   $   12,530    $   12,893    $   18,372
     Purchases ..........................................        2,609         6,160         8,854

     Sales                                                          --          (368)       (1,880)

     Repayments and prepayments .........................       (3,224)       (5,963)      (12,221)

     Decrease in net premium ............................          (44)         (101)          (37)

     Increase (decrease) in net unrealized gain .........           70           (91)         (195)
                                                            ----------    ----------    ----------

         Net decrease in mortgage-related securities ....         (589)         (363)       (5,479)
                                                            ----------    ----------    ----------
     Mortgage-related securities, end of period (1) .....   $   11,941    $   12,530    $   12,893
                                                            ==========    ==========    ==========

Investment securities:
     Investment securities, beginning of period (1) .....   $   39,767    $   33,692    $   23,937
     Purchases ..........................................       15,218        11,161        18,073

     Sales ..............................................      (14,842)       (4,199)       (4,686)

     Maturities .........................................       (2,996)         (630)       (2,808)

     Increase (decrease) in net premium .................           21           (35)         (104)

     Increase (decrease) in net unrealized gain .........          360          (222)         (720)
                                                            ----------    ----------    ----------
         Net increase in investment securities ..........       (2,239)        6,075         9,755
                                                            ----------    ----------    ----------
     Investment securities, end of period (1) ...........   $   37,528    $   39,767    $   33,692
                                                            ==========    ==========    ==========
</table>

------------------------
(1)   At fair value

         The  following  table sets forth the  maturities  and weighted  average
yields  of  securities  at March  31,  2007.  Weighted  average  yields  are not
presented on a tax-equivalent basis.

                                       30
<page>
<table>
<caption>
                                       Within One Year  One To Five Years  Five To Ten Years   After Ten Years         Total
                                     -----------------  -----------------  -----------------  -----------------  -----------------
                                               Weighted           Weighted           Weighted           Weighted           Weighted
                                    Carrying   Average  Carrying  Average  Carrying  Average  Carrying  Average  Carrying  Average
                                      Value     Yield    Value     Yield    Value     Yield    Value     Yield    Value     Yield
                                     -------   -------  -------   ------   -------   -------  -------   -------   ------   -------

                                     <c>        <c>     <c>     <c>      <c>       <c>      <c>       <c>      <c>       <c>
                                                                        (Dollars in thousands)
Available-for-sale securities:
     U.S. Government and
         Federal agencies .........  $    98     4.06%  $ 3,000     3.91%  $10,219     4.84%  $10,258     5.53%  $23,575     5.02%
     Municipal securities .........       --       --       534     3.32     3,332     3.60     3,539     4.25     7,405     3.89
     Corporate debt securities ....       --       --        --       --       101     6.41        --       --       101     6.41
     Mortgage-backed securities ...       --       --       130     5.83       325     5.62    11,486     5.60    11,941     5.60
                                     -------            -------            -------            -------            -------
         Total ....................  $    98     4.06%  $ 3,664     3.89%  $13,977     4.57%  $25,283     5.38%  $43,022     4.99%
                                     =======            =======            =======            =======            =======
</table>
         Deposits.  Our primary source of funds is our deposit  accounts,  which
are comprised of demand  deposits,  savings  accounts and time  deposits.  These
deposits  are  provided  primarily  by  individuals  and,  to a  lesser  extent,
commercial  customers,  within our market area. We do not currently use brokered
deposits as a source of funding.  Deposits increased $12.6 million, or 7.5%, for
the year ended  March 31,  2007 due  primarily  to an  increase in NOW and money
market  accounts,  certificates of deposit and  non-interest  bearing  accounts,
partially offset by a decrease in savings accounts. The increase in certificates
of  deposit,  and NOW and money  market  accounts  and the  decrease  in savings
accounts  was  primarily  due to  disintermediation,  as rates on other types of
investments  (CDs and money market accounts) have increased  substantially  over
the past one to two years resulting in customers have been moving funds from the
generally lower rates of savings accounts.

         The following table sets forth the balances of our deposit  products at
the dates indicated.
                                                     At March 31,
                                                 -------------------
                                                   2007        2006
                                                 --------   --------
                                                    (In thousands)
           Non-interest bearing accounts .....   $ 16,075   $ 14,146
           NOW and money market accounts .....     35,305     22,913
           Savings accounts ..................     40,184     48,431
           Certificates of deposit ...........     90,111     83,554
                                                 --------   --------
                Total ........................   $181,675   $169,044
                                                 ========   ========

         The  following  table  indicates  the amount of jumbo  certificates  of
deposit  by  time  remaining  until  maturity  as  of  March  31,  2007.   Jumbo
certificates of deposit require minimum deposits of $100,000.

                                                              Weighted
Maturity Period                                  Amount     Average Rate
---------------                                ----------   ------------
                                                (Dollars in thousands)

         Three months or less ..............   $    4,887         4.66%
         Over three through six months .....        5,199         4.53
         Over six through twelve months ....        4,948         4.22
         Over twelve months ................        6,061         3.97
                                               ----------
                  Total ....................   $   21,095         4.33%
                                               ==========

         The following table sets forth the time deposits classified by rates at
the dates indicated.
                                                  At March 31,
                                           ---------------------------
                                             2007     2006       2005
                                           -------   -------   -------
                                                (In thousands)
          Certificate accounts:
             0.00 to 2.00% .............   $   756   $ 5,858   $40,600
             2.01 to 3.00% .............     6,332    25,820     9,620
             3.01 to 4.00% .............    29,176    29,634    19,224
             4.01 to 5.00% .............    51,130    21,797     7,822
             5.01 to 6.00% .............     2,717       372       398
             6.01 to 7.00% .............        --        --     3,462
             7.01 to 8.00% .............        --        --       116
             Fair value adjustment .....        --        73       168
                                           -------   -------   -------
                Total ..................   $90,111   $83,554   $81,410
                                           =======   =======   =======

                                       31
<page>

         The  following  table  sets forth the  amount  and  maturities  of time
deposits classified by rates at March 31, 2007.

<table>
<caption>
                                               Amount Due
                        ---------------------------------------------------------
                                                                                                    Percent of
                                           One           Two to          Over                         Total
                         Less than        to Two         Three          Three                      Certificate
                          One Year        Years          Years          Years          Total         Accounts
                        ------------   ------------   ------------   ------------   ------------   ------------

                          <c>               <c>          <c>            <c>           <c>              <c>
                                                            (In thousands)
Certificate accounts:
     0 to 2.00% .....   $        756   $         --   $         --   $         --   $        756            0.9%
   2.01 to 3.00% ....          6,194            132             --              7          6,333            7.0
   3.01 to 4.00% ....         13,165         13,775          2,245            186         29,371           32.6
   4.01 to 5.00% ....         42,624            900          3,190          4,220         50,934           56.5
   5.01 to 6.00% ....          2,557            104             --             56          2,717            3.0
                        ------------   ------------   ------------   ------------   ------------   ------------
     Total ..........         65,296   $     14,911   $      5,435   $      4,469   $     90,111          100.0%
                        ============   ============   ============   ============   ============   ============
</table>

         The  following  table sets forth the deposit  activity  for the periods
indicated.

                                             For the Fiscal Year Ended March 31,
                                             ----------------------------------
                                                 2007       2006       2005
                                               --------   --------   --------
                                                       (In thousands)

Net deposits (withdrawals) ..................  $  8,427   $  3,203   $ (2,334)
Interest credited on deposit accounts (1) ...     4,204      2,850      2,535
                                               --------   --------   --------
Total increase in deposit accounts ..........    12,631      6,053        201
                                               ========   ========   ========

------------------------

(1) Includes amortization of fair value adjustment.

         Borrowings.  We use  advances  from  the  Federal  Home  Loan  Bank  to
supplement  our supply of funds for loans and  investments  and to meet  deposit
withdrawal requirements.

         The  following  table  sets forth  certain  information  regarding  our
borrowed funds:

<table>
<caption>
                                                                            At or For the Years
                                                                              Ended March 31,
                                                                       -----------------------------
                                                                         2007      2006        2005
                                                                       -------    -------    -------

                                                                       <c>        <c>        <c>
                                                                           (Dollars in thousands)

Federal Home Loan Bank advances:
   Average balance outstanding .....................................   $27,465    $20,129    $10,791
   Maximum amount outstanding at any month-end during the period ...    33,587     21,642     15,749
   Balance outstanding at end of period ............................    33,587     21,642     15,620
   Weighted average interest rate during the period ................      4.34%      3.98%      3.69%
   Weighted average interest rate at end of period .................      4.50%      4.00%      3.76%

</table>

                                       32
<page>

Results of Operations for the Years Ended March 31, 2007 and 2006

         Overview.
                                              2007        2006      % Change
                                            --------    --------    --------
                                                  (Dollars in thousands)

         Net income .....................   $    970    $  1,309       (25.9)%
         Return on average assets .......       0.36%       0.57%      (36.8)
                                            --------    --------    --------
         Return on average equity .......       1.70%       3.63%      (53.2)
         Average equity to average assets      21.22%      15.72%       35.0

         Net income  decreased  due  primarily  to an increase  in non  interest
expenses,  partially  offset by an increase in net interest and dividend income.
Net interest  income  increased  primarily as a result of a higher volume of and
yield on interest-earning assets, partially offset by an increase in the cost of
funds.

         Net  Interest  and Dividend  Income.  Net interest and dividend  income
totaled  $9.4  million  for the year ended March 31,  2007,  an increase of $1.3
million or 15.4%.  This resulted mainly from a $39.2 million increase in average
interest-earning  assets during the year. Our interest rate spread  decreased 40
basis points to 3.11% for the year ended March 31, 2007 and net interest  margin
decreased 8 basis points to 3.79% for the same time period.

         Interest and dividend  income  increased $3.2 million,  or 26.8%,  from
$12.0  million  for  fiscal  2006 to $15.2  million  for  fiscal  2007.  Average
interest-earning  assets were $252.5  million  for fiscal  2007,  an increase of
$39.2  million,  or 18.4%,  compared  to $213.3  million  for fiscal  2006.  The
increase in average  interest-earning  assets resulted primarily from the growth
in the loan portfolio and, to a lesser extent, investment securities.  The yield
on  interest-earning  assets  increased  from 5.67% to 6.09% as market  interest
rates continued increasing in fiscal 2007.

         Interest expense  increased $2.0 million,  or 51.0%,  from $3.8 million
for fiscal  2006 to $5.8  million  for  fiscal  2007.  Average  interest-bearing
liabilities grew $17.1 million,  or 9.6%, from $177.4 million for fiscal 2006 to
$194.5  million  for fiscal 2007 due to a $7.6  million  increase in the average
balance of Federal Home Loan Bank advances,  a $6.0 million  increase in average
total deposits and a $3.5 million  increase in the average balance of securities
sold under agreements to repurchase.  The average rate paid on  interest-bearing
liabilities  increased  to 2.98% for fiscal  2007 from 2.16% for fiscal 2006 due
primarily to increased rates paid on  certificates  of deposit,  and to a lesser
extent, money market accounts.

                                       33
<page>
         Average Balances and Yields.  The following table presents  information
regarding  average  balances  of assets  and  liabilities,  as well as the total
dollar amounts of interest  income and dividends  from average  interest-earning
assets and  interest  expense on average  interest-bearing  liabilities  and the
resulting  average  yields  and  costs.  The  yields  and costs for the  periods
indicated are derived by dividing  income or expense by the average  balances of
assets or liabilities,  respectively, for the periods presented. For purposes of
this table, average balances have been calculated using the average of month-end
balances  and  non-accrual  loans are  included  in average  balances;  however,
accrued interest income has been excluded from these loans.
<table>
<caption>
                                                                     For the Fiscal Years Ended March 31,
                                         -------------------------------------------------------------------------------------------
                                                     2007                           2006                           2005
                                         -----------------------------  ----------------------------    ----------------------------
                                                              Average                        Average                         Average
                                         Average               Yield/   Average               Yield/    Average               Yield/
                                         Balance   Interest    Rate     Balance   Interest    Rate      Balance   Interest    Rate
                                         -------   --------   -------   -------   --------   -------    -------   --------   -------

                                       <c>         <c>        <c>      <c>         <c>        <c>     <c>         <c>       <c>
                                                                            (Dollars in thousands)
Assets:
   Federal funds sold, interest-bearing
      deposits and marketable
      equity securities ...............  $18,710    $   966      5.16%   $21,948    $   871      3.97%  $18,725    $   434     2.32%
   Investments in available for sale
      securities, other than mortgage-
      backed and mortgage-related
      securities (1) ..................   44,283      2,179      4.92     35,420      1,597      4.51    30,372      1,289     4.24
   Mortgage-backed and mortgage-related
      securities ......................   12,549        643      5.13     12,774        555      4.35    15,623        604     3.86
   Federal Home Loan Bank stock .......    1,735         95       5.5      1,383         64      4.63     1,025         33     3.25
   Loans, net (2) .....................  (175,238)  (11,483)    (6.55)   (141,802)   (9,001)    (6.35)  (125,567)   (7,943)   (6.33)
                                         -------    -------              -------    -------             -------    -------
            Total interest-earning
            assets ....................  252,515     15,366      6.09    213,327     12,088      5.67   191,312     10,303     5.38
                                                   --------                        --------                       --------
   Noninterest-earning assets .........   11,813                          12,028                         11,975
   Cash surrender value of life
   insurance ..........................    4,138                           3,979                          3,818
                                         --------                        --------                       --------
            Total assets ..............  $268,466                        $229,334                       $207,105
                                         ========                        ========                       ========
Liabilities and Stockholders' Equity:
   Deposits:
      Savings accounts ................  $43,810    $   266      0.61%   $51,371    $   319      0.62%  $55,280    $   337     0.61%
      NOW accounts ....................    7,564         32      0.42      7,413         19      0.26     7,020         17     0.25
      Money market accounts ...........   19,021        651      3.42      9,413        180      1.91     6,532         65     0.99
      Certificate accounts ............   86,174      3,255      3.78     82,414      2,332      2.83    83,161      2,115     2.54
                                         -------    -------              -------    -------             -------    -------
            Total deposits ............  156,569      4,204      2.68    150,611      2,850      1.89   151,993      2,534     1.67
   Federal Home Loan Bank advances ....   27,721      1,204      4.34     20,129        801      3.98    10,791        398     3.69
   Advanced payments by borrowers for
      taxes and  insurance ............      846         10      1.22        876         11      1.26       643          8     1.32
   Securities sold under agreements to
      repurchase ......................    9,335        376      4.03      5,802        175      3.02     2,549         46     1.79
                                         -------    -------              -------    -------             -------    -------
            Total interest-bearing
            liabilities ...............  194,471      5,794      2.98    177,418      3,837      2.16   165,976      2,986      1.8
                                                   --------                        --------                       --------
   Demand deposits ....................   15,294                          14,440                         12,284
   Other liabilities ..................    1,741                           1,425                            935
            Total liabilities .........  211,506                         193,283                        179,195
   Stockholders' Equity ...............   56,960                          36,051                         27,910
                                         --------                        --------                       --------
            Total liabilities and
            stockholders' equity ......  $268,466                        $229,334                       $207,105
                                         ========                        ========                       ========
   Net interest income/net interest
      rate spread (3) .................             $ 9,572      3.11%              $ 8,251      3.51%             $ 7,317     3.58%
                                                    =======   =======               =======   =======              =======   ======
   Net interest margin (4) ............                          3.79%                           3.87%                         3.82%
                                                             ========                        ========                       ========
   Ratio of interest-earning assets
      to interest-bearing liabilities .   129.85%                         120.24%                        115.26%
                                         ========                        ========                       ========
</table>
------------------------
(1)  Reported on a tax equivalent basis, using a 34% tax rate.
(2)  Amount is net of deferred loan origination costs,  undisbursed  proceeds of
     construction  loans in  process,  allowance  for loan  losses and  includes
     non-accruing  loans. We record  interest income on non-accruing  loans on a
     cash basis. Loan fees are included in interest income.
(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)  Net  interest  margin  represents  net interest  income as a percentage  of
     average interest-earning assets.
                                       34
<page>

         Rate/Volume  Analysis.  The  following  table sets forth the effects of
changing rates and volumes on our net interest income. The rate column shows the
effects  attributable  to changes in rate  (changes in rate  multiplied by prior
volume).  The volume column shows the effects  attributable to changes in volume
(changes in volume  multiplied by prior rate). The net column represents the sum
of the prior  columns.  For  purposes of this  table,  changes  attributable  to
changes in both rate and volume that cannot be  segregated  have been  allocated
proportionately based on the changes due to rate and the changes due to volume.

<table>
<caption>
                                                                  Fiscal Year Ended                  Fiscal Year Ended
                                                                    March 31, 2007                     March 31, 2006
                                                                     Compared to                        Compared to
                                                                  Fiscal Year Ended                  Fiscal Year Ended
                                                                    March 31, 2006                     March 31, 2005
                                                          -------------------------------------------------------------------
                                                                 Increase (Decrease)                Increase (Decrease)
                                                                       Due to                              Due to
                                                          --------------------------------    -------------------------------
                                                            Rate       Volume       Net        Volume      Rate        Net
                                                          --------    --------    --------    --------   --------    --------

                                                           <c>       <c>         <c>            <c>     <c>         <c>
                                                                                     (In thousands)
Interest-earning assets:
   Federal funds sold, interest-bearing
      deposits and marketable equity securities .......   $    186    $    (91)   $     95    $    352   $     85    $    437
   Investments in available-for-sale securities,
      other than mortgage-backed and
      mortgage-related securities .....................        156         426         582          74        234         308
   Mortgage-backed and mortgage-related
      securities ......................................         97          (9)         88         130       (179)        (49)
   Federal Home Loan Bank stock .......................         13          18          31          17         14          31
   Loans, net (1) .....................................        300       2,182       2,482          27      1,031       1,058
                                                          --------    --------    --------    --------   --------    --------
         Total interest-earning assets ................        752       2,526       3,278         600      1,185       1,785
                                                          --------    --------    --------    --------   --------    --------

Interest-bearing liabilities:
   Savings accounts ...................................         (7)        (46)        (53)          7        (25)        (18)
   NOW accounts .......................................         13          --          13           1          1           2
   Money market accounts ..............................        206         265         471          78         37         115
   Certificate accounts ...............................        812         111         923         235        (18)        217
   Federal Home Loan Bank advances ....................         79         324         403          34        369         403
   Advanced payments by borrowers for taxes
      and insurance ...................................         --          (1)         (1)         --          3           3
   Securities sold under agreements to repurchase .....         71         130         201          45         84         129
                                                          --------    --------    --------    --------   --------    --------
         Total interest-bearing liabilities ...........      1,174         783       1,957         400        451         851
                                                          --------    --------    --------    --------   --------    --------
Increase in net interest income .......................   $   (422)   $  1,743    $  1,321    $    200   $    734    $    934
                                                          ========    ========    ========    ========   ========    ========
</table>

-------------------------------
(1)  Amount is net of deferred loan origination costs,  undisbursed  proceeds of
     construction  loans in  process,  allowance  for loan  losses and  includes
     non-accruing  loans. We record  interest  income on non-accruing  loans. We
     record interest income on non-accruing loans on a cash basis. Loan fees are
     included in interest income.

         Provision for Loan Losses. The provision for loan losses are charges to
earnings  to bring the total  allowance  for  losses  to a level  considered  by
management  as  adequate to provide for  estimated  losses  inherent in the loan
portfolio.  The size of the  provision  for each  year is  dependent  upon  many
factors,  including loan growth, net charge-offs,  changes in the composition of
the loan  portfolio,  delinquencies,  management's  assessment of loan portfolio
quality, the value of collateral and general economic factors.

         We recorded a $242,000  and $210,000  provision  for loan losses in the
years ended March 31, 2007 and 2006, respectively. The increase in the provision
was caused primarily by increased loan growth, primarily in the generally higher
risk  commercial  real estate loan and commercial  loan  categories and a slight
increase in non-accrual loans and classified assets, partially offset by low net
loan charge-offs for fiscal year 2007.

                                       35
<page>

         Although management utilizes its best judgment in providing for losses,
there can be no  assurance  that we will not have to change its  provisions  for
loan  losses in  subsequent  periods.  Management  will  continue to monitor the
allowance  for loan losses and make  additional  provisions  to the allowance as
appropriate.

         An  analysis  of  the  changes  in  the   allowance  for  loan  losses,
non-performing   loans  and   classified   loans  is  presented   under  "--Risk
Management--Analysis  of  Non-Performing  and  Classified  Assets"  and  "--Risk
Management--Analysis and Determination of the Allowance for Loan Losses."

         Non-interest  Income.  The  following  table  shows the  components  of
non-interest income and the percentage changes from 2007 to 2006.

<table>
<caption>

                                                              2007     2006  % Change
                                                              -----   -----  --------

                                                              <c>     <c>   <c>
                                                                 (In thousands)

Service fees on deposit accounts ..........................   $ 519   $ 514     1.0%
Gain on securities and interest-bearing time deposits, net       32      33    (3.0)
Increase in cash surrender value of life insurance policies     154     150     2.7
Other income ..............................................     286     138   107.3
                                                              -----   -----
      Total ...............................................   $ 991   $ 835    18.7
                                                              =====   =====
</table>

        The  increase  in  other  income  was due  primarily  to life  insurance
proceeds and higher  commissions  received from Infinex Financial Group, a third
party registered broker-dealer, due to increased sales in fiscal 2007.

         Non-interest  Expense.  The  following  table shows the  components  of
non-interest expense and the percentage changes from fiscal 2007 to fiscal 2006.

                                                   2007        2006     % Change
                                                 --------    --------   --------
                                                          (In thousands)
Salaries and employee benefits ...............   $  4,930    $  3,842      28.3%
Occupancy and equipment expenses .............      1,670       1,113      50.0
Advertising and promotion ....................        152         216     (29.6)
Professional fees ............................        373         303      23.1
Data processing expense ......................        345         301      14.6
Stationery and supplies ......................         96          91       5.5
Amortization of identifiable intangible assets         88          88        --
Other expense ................................        989         835      18.4
                                                 --------    --------
      Total ..................................   $  8,643    $  6,789      27.3
                                                 ========    ========

Efficiency ratio (1) .........................       83.4%       75.8%

------------------------
      (1)   Computed as non-interest  expense divided by the sum of net interest
            and dividend income and other income.

         During fiscal 2007, the Company opened an additional  branch and toward
the end of fiscal  2006 moved its  headquarters  and main  branch  office into a
newly  constructed  building,  which  caused  increases  in salary and  employee
benefits,  and occupancy and equipment expenses.  Product expansion  initiatives
caused data processing  expense to increase.  Professional fees increased as the
Company hired additional third-parties for the increased compliance regulations.

         Income  Taxes.  Income tax  expense  for the year ended  March 31, 2007
decreased  to $505,000  from  $644,000 in the  previous  year.  The decrease was
primarily  due to the decrease in income  before  taxes.  The effective tax rate
increased  from  33.0% for the year ended  March 31,  2006 to 34.2% for the year
ended  March 31,  2007 as a result of  additional  expenses,  which were not tax
deductible being recorded in fiscal 2007.

                                       36
<page>

Risk Management

         Overview. Managing risk is an essential part of successfully managing a
financial  institution.  Our most  prominent  risk  exposures  are credit  risk,
interest  rate risk and market risk.  Credit risk is the risk of not  collecting
the interest  and/or the principal  balance of a loan or  investment  when it is
due.  Interest  rate risk is the  potential  reduction  of interest  income as a
result of changes in interest  rates.  Market risk arises from  fluctuations  in
interest   rates  that  may  result  in  changes  in  the  values  of  financial
instruments,  such as available-for-sale  securities that are accounted for on a
mark-to-market  basis.  Other risks that we  encounter  are  operational  risks,
liquidity risks and reputation risk.  Operational risks include risks related to
fraud,  regulatory  compliance,   processing  errors,  technology  and  disaster
recovery.  Liquidity  risk is the  possible  inability  to fund  obligations  to
depositors,  lenders or  borrowers.  Reputation  risk is the risk that  negative
publicity or press,  whether true or not,  could cause a decline in our customer
base or revenue.

         Credit Risk Management. Our strategy for credit risk management focuses
on having  well-defined  credit policies and uniform  underwriting  criteria and
providing  prompt  attention  to potential  problem  loans.  Our  strategy  also
emphasizes the origination of one- to four-family residential real estate loans,
which  typically  have lower  default  rates  than other  types of loans and are
secured by collateral that generally tends to appreciate in value.

         When a borrower fails to make a required loan payment, we take a number
of steps to have the  borrower  cure the  delinquency  and  restore  the loan to
current status.  We make initial contact with the borrower when the loan becomes
15 days past due.  If payment is not  received  by the 30th day of  delinquency,
additional letters and phone calls generally are made. Typically,  when the loan
becomes 60 days past due, we send a letter  notifying  the borrower that we will
commence foreclosure proceedings if the loan is not paid in full within 30 days.
Generally,  loan workout  arrangements  are made with the borrower at this time;
however,  if an arrangement cannot be structured before the loan becomes 90 days
past  due,  we will  send a formal  demand  letter  and,  once  the time  period
specified in that letter expires,  commence foreclosure  proceedings against any
real  property  that  secures  the loan or attempt  to  repossess  any  personal
property that secures a consumer loan. If a foreclosure action is instituted and
the  loan  is not  brought  current,  paid  in full  or  refinanced  before  the
foreclosure  sale,  the real  property  securing  the loan  generally is sold at
foreclosure.

         Management  informs the  executive  committee of the board of directors
monthly  of the  amount  of loans  delinquent  more  than 90 days,  all loans in
foreclosure and all foreclosed and repossessed property that we own.

         Analysis  of   Non-performing   and  Classified   Assets.  We  consider
repossessed  assets  and  loans  that  are  90  days  or  more  past  due  to be
non-performing  assets.  When a loan  becomes  90 days  delinquent,  the loan is
placed on non-accrual status at which time the accrual of interest ceases and an
allowance for any  uncollectible  accrued  interest is  established  and charged
against  operations.  Typically,  payments  received on a  non-accrual  loan are
applied to the  outstanding  principal and interest as determined at the time of
collection of the loan.

         Real  estate  that  we  acquire  as  a  result  of  foreclosure  or  by
deed-in-lieu  of foreclosure is classified as foreclosed real estate until it is
sold.  When  property is  acquired,  it is recorded at the lower of the recorded
investment in the loan or at fair value.  Thereafter,  we carry  foreclosed real
estate at fair value, net of estimated selling costs. Holding costs and declines
in fair value  after  acquisition  of the  property  result in  charges  against
income.

         Non-performing  assets totaled  $824,000,  or 0.29% of total assets, at
March 31,  2007,  which was an increase of  $224,000,  or 37.3%,  from March 31,
2006.  Non-accrual loans accounted for all of non-performing assets at March 31,
2007 and March 31, 2006. At March 31, 2007,  non-accrual  loans consisted of six
one- to  four-family  residential  real estate  loans  compared to three one- to
four-family  residential  real  estate  loans  and  three  commercial  loans  on
non-accrual status at March 31, 2006.

                                       37
<page>

         The  following   table  provides   information   with  respect  to  our
non-performing assets at the dates indicated.  We did not have any troubled debt
restructurings at the dates presented.

<table>
<caption>
                                                                           At March 31,
                                                      --------------------------------------------------------
                                                        2007        2006        2005        2004        2003
                                                      --------    --------    --------    --------    --------

                                                       <c>         <c>         <c>         <c>         <c>
                                                                       (Dollars in thousands)
Non-accruing loans:
   Mortgage loans:
      Residential loans:
           One- to four-family ....................   $    824    $    331    $    464    $    182    $     81
           Multi-family ...........................         --          --          --          72          --
      Commercial real estate ......................         --          --          --         155         159
                                                      --------    --------    --------    --------    --------
         Total mortgage loans .....................        824         331         464         409         240
   Consumer loans .................................         --          --          --          --          --
   Commercial loans ...............................         --         269          --         528          --
                                                      --------    --------    --------    --------    --------
            Total nonaccrual loans ................        824         600         464         937         240
Other real estate owned ...........................         --          --          --          --          --
                                                      --------    --------    --------    --------    --------
            Total nonperforming assets ............   $    824    $    600    $    464    $    937    $    240
                                                      ========    ========    ========    ========    ========
Impaired loans ....................................   $     --    $     --    $     --    $    755    $    159
Accruing loans 90 days or more past due ...........         --          --          --         411           5
Allowance for loan losses as a percent of loans (1)       0.94%       1.09%       1.07%       1.06%       1.07%
Allowance for loan losses as a percent
   of nonperforming loans (2) .....................     227.55%     272.67%     309.70%     138.85%     420.00%
Nonperforming loans as a percent of loans (1)(2) ..       0.41%       0.40%       0.35%       0.76%       0.25%
Nonperforming assets as a percent of total assets .       0.29%       0.23%       0.22%       0.46%       0.15%

</table>

-----------------------------
(1)  Loans are presented before allowance for loan losses.
(2)  Non-performing  loans  consist  of all  loans 90 days or more  past due and
     other loans which have been  identified  by Enfield  Federal as  presenting
     uncertainty with respect to the collectibility of interest or principal.

         Other than  disclosed in the above table,  there were no other loans at
March 31,  2007 that  management  has  serious  doubts  about the ability of the
borrowers to comply with the present repayment terms.

         Interest  income that would have been recorded for the year ended March
31, 2007 had non-accruing  loans been current  according to their original terms
amounted to $11,000, none of which was recognized in interest income.

         Federal  regulations  require us to review and classify our assets on a
regular basis. In addition,  the Office of Thrift  Supervision has the authority
to identify  problem assets and, if appropriate,  require them to be classified.
There are three  classifications for problem assets:  substandard,  doubtful and
loss.  "Substandard  assets"  must have one or more defined  weaknesses  and are
characterized by the distinct  possibility that we will sustain some loss if the
deficiencies  are not  corrected.  "Doubtful  assets"  have  the  weaknesses  of
substandard assets with the additional  characteristic  that the weaknesses make
collection  or  liquidation  in full on the basis of currently  existing  facts,
conditions and values  questionable  and there is a high possibility of loss. An
asset  classified  "loss" is considered  uncollectible  and of such little value
that  continuance  as  an  asset  of  the  institution  is  not  warranted.  The
regulations also provide for a "special mention"  category,  described as assets
that do not  currently  expose  us to a  sufficient  degree  of risk to  warrant
classification  but do  possess  credit  deficiencies  or  potential  weaknesses
deserving  our close  attention.  When we  classify an asset as  substandard  or
doubtful,  we establish a specific  allowance for loan losses. If we classify an
asset as loss, we charge off an amount equal to 100% of the portion of the asset
classified as loss.

                                       38
<page>

         The  following  table  shows the  aggregate  amounts of our  classified
assets at the dates indicated.

                                        At March 31,
                                      ---------------
                                       2007     2006
                                      ------   ------
                                       (In thousands)
         Special mention assets ...   $3,993   $  478
         Substandard assets .......    1,378      782
         Doubtful assets ..........       --       47
         Loss assets ..............       --       --
                                      ------   ------
            Total classified assets   $5,371   $1,307
                                      ======   ======

         Classified  assets  at March  31,  2007  included  six  loans  totaling
$824,000 that were  considered  non-performing.  Classified  assets at March 31,
2006 included six loans totaling $600,000 that were considered non-performing.

         Classified  assets  increased $4.1 million to $5.4 million at March 31,
2007.  The  increase was caused  primarily by the addition of two related  party
loans to the special mention category totaling $3.8 million; these two loans are
paying as agreed.

         Delinquencies.   The  following   table  provides   information   about
delinquencies in our loan portfolio at the dates indicated.

<table>
<caption>
                                 At March 31, 2007                    At March 31, 2006                  At March 31, 2005
                         ----------------------------------  ----------------------------------  ----------------------------------
                            30-89 Days      90 Days or More     30-89 Days      90 Days or More     30-89 Days      90 Days or More
                         ----------------  ----------------  ----------------  ----------------  ----------------  ----------------
                                 Principal         Principal         Principal         Principal         Principal         Principal
                         Number   Balance  Number   Balance  Number   Balance  Number   Balance  Number   Balance  Number   Balance
                           of       of       of       of       of       of       of       of       of       of       of       of
                          Loans    Loans    Loans    Loans    Loans    Loans    Loans    Loans    Loans    Loans    Loans    Loans
                         -------  -------  -------  -------  -------  -------  -------  -------  -------  -------  -------  -------

                           <c> <c>         <c>       <c>     <c>      <c>      <c>     <c>      <c>      <c>      <c>       <c>
                                                                      (Dollars in Thousands)
Mortgage loans:
   Residential loans:
      One- to four-
       family .........       30  $ 3,403       --  $    --       24  $ 2,086       1   $   284      23   $ 2,038        2  $   420
      Multi-family ....       --       --       --       --       --       --       --       --       --       --       --       --
   Commercial real
       estate .........       --       --       --       --        1      430       --       --        2      102       --       --
   Construction loans .       --       --       --       --       --       --       --       --        1      250       --       --
                         -------  -------  -------  -------  -------  -------  -------  -------  -------  -------  -------  -------
         Total mortgage       30    3,403       --       --       25    2,516        1      284       26    2,390        2      420
loans
Consumer loans ........        3       12       --       --        3       37       --       --        1        3       --       --
Commercial loans ......       --       --       --       --       --       --        3      269       --       --       --       --
                         -------  -------  -------  -------  -------  -------  -------  -------  -------  -------  -------  -------
         Total ........       33  $ 3,415       --       --  $    --  $ 2,553        4  $   553       27  $ 2,393        2  $   420
                         =======  =======  =======  =======  =======  =======  =======  =======  =======  =======  =======  =======
Delinquent loans
  to loans (1) ........              1.70%              --%              1.70%             0.37%             1.78%             0.31%
</table>
------------------
(1) Loans are presented before the allowance for loan losses and net of deferred
    loan origination fees.

         Analysis  and  Determination  of the  Allowance  for  Loan  Losses.  We
maintain an allowance for loan losses to absorb  probable losses inherent in the
existing   portfolio.   When  a  loan,   or  portion   thereof,   is  considered
uncollectible,  it is  charged  against  the  allowance.  Recoveries  of amounts
previously  charged-off are added to the allowance when collected.  The adequacy
of the allowance for loan losses is evaluated on a regular basis by  management.
Based on management's  judgment,  the allowance for loan losses covers all known
losses and inherent  losses in the loan portfolio  March 31, 2007,  2006,  2005,
2004 and 2003.

         Our methodology for assessing the  appropriateness of the allowance for
loan losses consists of specific  allowances for identified  problem loans and a
general valuation allowance on the remainder of the loan portfolio.  Although we
determine  the amount of each element of the  allowance  separately,  the entire
allowance for loan losses is available for the entire portfolio.

         Specific  Allowances  for  Identified  Problem  Loans.  We establish an
allowance  on  identified  problem  loans  based on factors  including,  but not
limited to: (1) the borrower's ability to repay the loan; (2) the type and value
of the  collateral;  (3) the strength of our  collateral  position;  and (4) the
borrower's repayment history.
                                       39
<page>

         General Valuation Allowance on the Remainder of the Portfolio.  We also
establish a general  allowance by applying  loss factors to the remainder of the
loan  portfolio  to capture  the  inherent  losses  associated  with the lending
activity.  This general  valuation  allowance is determined by  segregating  the
loans by loan category and  assigning  loss factors to each  category.  The loss
factors are determined  based on our  historical  loss  experience,  delinquency
trends and management's  evaluation of the collectibility of the loan portfolio.
Based on  management's  judgment,  we may  adjust the loss  factors  due to: (1)
changes in lending  policies  and  procedures;  (2) changes in existing  general
economic and business  conditions  affecting our primary market area; (3) credit
quality trends; (4) collateral value; (5) loan volumes and  concentrations;  (6)
seasoning  of the loan  portfolio;  (7) recent  loss  experience  in  particular
segments of the portfolio;  (8) duration of the current  business cycle; and (9)
bank regulatory  examination results.  Loss factors are reevaluated quarterly to
ensure their relevance in the current real estate environment.

         The  Office  of  Thrift  Supervision,   as  an  integral  part  of  its
examination  process,  periodically  reviews our loan and foreclosed real estate
portfolios and the related allowance for loan losses and valuation allowance for
foreclosed  real  estate.  The Office of Thrift  Supervision  may  require us to
increase the allowance for loan losses or the valuation allowance for foreclosed
real estate  based on their  judgments of  information  available to them at the
time  of  their  examination,   thereby  adversely   affecting  our  results  of
operations.

         At March 31, 2007, our allowance for loan losses  represented  0.94% of
total loans and 227.6% of  non-performing  loans.  The allowance for loan losses
increased  $239,000 from March 31, 2006 to March 31, 2007 due to a provision for
loan losses of $242,000,  offset by net charge-offs of $3,000. The provision for
loan losses for the year ended March 31, 2007 reflected  continued growth of the
loan  portfolio,  particularly  the  increase  in  commercial  real  estate  and
commercial loans,  which carry a higher risk of default than one-to  four-family
residential  real estate loans and a slight  increase in  non-accrual  loans and
classified assets. There was no change in the loss factors used to calculate the
allowance  from  March  31,  2006 to March  31,  2007 and a slight  increase  in
non-accrual   loans  and  classified   assets,   partially  offset  by  low  net
charge-offs.

         The following  table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated.

<table>
<caption>
                                                                                 At March 31,
                                           -----------------------------------------------------------------------------------------
                                                  2007             2006              2005               2004             2003
                                           ----------------- -----------------  ----------------- ----------------  ----------------
                                                  Percent of        Percent of         Percent of                         Percent of
                                                   Loans in          Loans in           Loans in          Loans in         Loans in
                                                     Each              Each               Each              Each             Each
                                                   Category          Category           Category          Category         Category
                                                   to Total          to Total           to Total          to Total         to Total
                                           Amount   Loans    Amount   Loans     Amount   Loans    Amount   Loans    Amount   Loans
                                           ------   ------   ------   ------    ------   ------   ------   ------   ------  ------

                                           <c>     <c>        <c>    <c>        <c>     <c>       <c>     <c>        <c>   <c>
                                                                            (Dollars in thousands)
Mortgage loans:
   Residential loans:
      One- to four-family ...............  $  488    61.38%  $  329    63.11%   $  401    66.08%  $  389    65.82%  $  381   67.17%
      Multi-family ......................      20     2.88      154     3.90        27     4.93      134     5.52      116    5.54
   Commercial real estate ...............   1,033    25.01    1,002    24.95       637    16.50      368    14.20      329   14.10
   Construction loans ...................     156     3.83       84     4.80       235     7.68      180     8.39       50    4.87
Consumer loans ..........................       6     1.38       12     0.68        20     0.84       15     1.19       23    1.72
Commercial loans ........................     172     5.52       55     2.56       117     3.97      215     4.88      109    6.60
                                           ------   ------   ------   ------    ------   ------   ------   ------   ------  ------
         Total allowance for loan losses.  $1,875   100.00%  $1,636   100.00%   $1,437   100.00%  $1,301   100.00%  $1,008  100.00%
                                           ======   ======   ======   ======    ======   ======   ======   ======   ======  ======
</table>

         Although  we  believe  that we use the best  information  available  to
establish the allowance for loan losses, future adjustments to the allowance for
loan  losses may be  necessary  and  results of  operations  could be  adversely
affected if  circumstances  differ  substantially  from the assumptions  used in
making the determinations. Furthermore, while we believe we have established our
allowance  for loan losses in  conformity  with  generally  accepted  accounting
principles,  there can be no assurance  that  regulators,  in reviewing our loan
portfolio,  will not request us to increase our  allowance  for loan losses.  In
addition,  because future events  affecting  borrowers and collateral  cannot be
predicted with certainty,  there can be no assurance that the existing allowance
for loan losses is adequate or that increases  will not be necessary  should the
quality of any loan deteriorate as a result of the factors  discussed above. Any
material  increase in the  allowance  for loan losses may  adversely  affect our
financial condition and results of operations.

                                       40
<page>

         Analysis of Loan Loss  Experience.  The  following  table sets forth an
analysis  of the  allowance  for loan losses for the  periods  indicated.  Where
specific loan loss allowances have been established,  any difference between the
loss  allowance  and the amount of loss realized has been charged or credited to
current income.

<table>
<caption>
                                                                     At or For the Fiscal Year
                                                                         Ended March 31,
                                                      ----------------------------------------------------
                                                       2007       2006        2005        2004       2003
                                                      -------    -------    -------     -------    -------

                                                       <c>        <c>        <c>         <c>        <c>
                                                                     (Dollars in thousands)

Balance at beginning of period ....................   $ 1,636    $ 1,437    $ 1,301     $ 1,008    $   773
Provision for loan losses .........................       242        210        131         240        240
Charge-offs:
   Mortgage loans:
      Residential loans:
         One- to four-family ......................        --         --         --          --         --
         Multi-family .............................        --         --         83          42         --
   Consumer loans .................................         4         17         16          --         12
   Commercial loans ...............................        --         --         --          65         --
                                                      -------    -------    -------     -------    -------
      Total charge-offs ...........................         4         17         99         107         12
                                                      -------    -------    -------     -------    -------
Recoveries:
   Mortgage loans:
      Residential loans:
         One- to four-family ......................        --         --         --          --         --
         Multi-family .............................        --         --         80          --         --
   Consumer loans .................................         1          6          2          --          7
   Commercial loans ...............................        --         --         22          --         --
                                                      -------    -------    -------     -------    -------
      Total Recoveries ............................         1          6        104          --          7
                                                      -------    -------    -------     -------    -------
Net charge-offs (recoveries) ......................         3         11         (5)        107          5
                                                      -------    -------    -------     -------    -------
Allowance obtained through merger .................        --         --         --         160         --
                                                      -------    -------    -------     -------    -------
Balance at end of period ..........................   $ 1,875    $ 1,636    $ 1,437     $ 1,301    $ 1,008
                                                      =======    =======    =======     =======    =======
Ratio of net charge-offs during the period to
   average loans outstanding during the period ....        --%      0.01%        --%       0.10%      0.01%
Allowance for loan losses as a percent of loans (1)      0.94%      1.09%      1.07%       1.06%      1.07%
Allowance for loan losses as a percent of
   nonperforming loans (2) ........................    227.55%    272.67%    309.70%     138.85%    420.00%
</table>

-------------------------------
(1)  Loans are presented before allowance for loan losses.
(2)  Non-performing  loans  consist  of all  loans 90 days or more  past due and
     other  loans  which  have been  identified  by the  Company  as  presenting
     uncertainty with respect to the collectibility of interest or principal.

         During the fiscal year ended March 31,  2004,  we acquired  $160,000 of
allowance for loan losses in connection  with the  acquisition  of Windsor Locks
Community  Bank.  The  loans  acquired  in the  merger  were  primarily  one- to
four-family  loans,  which had a face value of $16.7 million and a fair value of
$16.6 million.  In determining the fair value of the loans, we used a discounted
cash  flow  method  utilizing  the  current  loan  rate  as of the  date  of the
consummation of the merger. The amount of the allowance for loan losses that was
attributable to these loans was calculated  based on the  collectibility  of the
loans, the nature and volume of the loan portfolio,  adverse situations that may
affect  the  borrower's  ability  to repay,  estimated  value of any  underlying
collateral and prevailing economic conditions.

         Interest Rate Risk Management.  We manage the interest rate sensitivity
of our interest-bearing  liabilities and interest-earning assets in an effort to
minimize  the  adverse  effects  of changes in the  interest  rate  environment.
Deposit  accounts  typically  react more  quickly to changes in market  interest
rates than mortgage  loans because of the shorter  maturities of deposits.  As a
result,  sharp  increases in interest  rates may  adversely  affect our earnings
while  decreases in interest  rates may  beneficially  affect our  earnings.  To
reduce the potential  volatility of our earnings,  we have sought to improve the
match between asset and liability  maturities  and rates,  while  maintaining an
acceptable  interest  rate spread.  Also, we attempt to manage our interest rate
risk through:  our investment  portfolio,  an increased  focus on commercial and
multi-family   and  commercial  real  estate  lending,   which

                                       41
<page>

emphasizes the origination of shorter-term adjustable-rate loans; and efforts to
originate  adjustable-rate  residential  mortgage  loans.  In addition,  we have
commenced  a program  of  selling  long  term,  fixed-rate  one- to  four-family
residential  loans in the secondary  market.  We currently do not participate in
hedging programs,  interest rate swaps or other activities  involving the use of
off-balance sheet derivative financial instruments.

         We have an  Asset/Liability  Committee,  which includes members of both
the board of directors and management,  to  communicate,  coordinate and control
all aspects involving asset/liability  management. The committee establishes and
monitors the volume,  maturities,  pricing and mix of assets and funding sources
with the  objective of managing  assets and funding  sources to provide  results
that are consistent with liquidity, growth, risk limits and profitability goals.

         Net Interest Income Simulation  Analysis.  We analyze our interest rate
sensitivity  position to manage the risk associated with interest rate movements
through  the use of  interest  income  simulation.  The  matching  of assets and
liabilities  may be  analyzed by  examining  the extent to which such assets and
liabilities  are  "interest  sensitive."  An  asset or  liability  is said to be
interest  rate  sensitive  within a specific  time  period if it will  mature or
reprice within that time period.

         Our goal is to manage  asset and  liability  positions  to moderate the
effects of interest rate  fluctuations on net interest  income.  Interest income
simulations  are  completed  quarterly  and  presented  to  the  Asset/Liability
Committee.  The  simulations  provide  an  estimate  of the impact of changes in
interest rates on net interest income under a range of assumptions. The numerous
assumptions used in the simulation  process are reviewed by the  Asset/Liability
Committee on a quarterly basis.  Changes to these  assumptions can significantly
affect the results of the simulation.  The simulation  incorporates  assumptions
regarding  the  potential   timing  in  the  repricing  of  certain  assets  and
liabilities  when  market  rates  change  and the  changes  in  spreads  between
different  market  rates.  The  simulation  analysis  incorporates  management's
current  assessment of the risk that pricing margins will change  adversely over
time due to competition or other factors.

         Simulation  analysis  is only an  estimate  of our  interest  rate risk
exposure at a particular  point in time.  We  continually  review the  potential
effect  changes in interest  rates could have on the repayment of rate sensitive
assets and funding requirements of rate sensitive liabilities.

         The table  below  sets  forth an  approximation  of our  exposure  as a
percentage of estimated  net interest  income for the next twelve months and for
the twelve  month  period  thereafter  using  interest  income  simulation.  The
simulation uses projected  repricing of assets and liabilities at March 31, 2007
on the basis of  contractual  maturities,  anticipated  repayments and scheduled
rate  adjustments.  Prepayment  rates can have a significant  impact on interest
income  simulation.  Because of the large percentage of loans we hold, rising or
falling interest rates have a significant impact on the prepayment speeds of our
earning assets that in turn affect the rate sensitivity position.  When interest
rates rise, prepayments tend to slow. When interest rates fall, prepayments tend
to rise. Our asset  sensitivity  would be reduced if  prepayments  slow and vice
versa.  While we believe  such  assumptions  to be  reasonable,  there can be no
assurance  that  assumed   prepayment  rates  will  approximate   actual  future
mortgage-backed security and loan repayment activity.

         The  following  table  reflects  changes in our  estimated net interest
income.

                                                    At March 31, 2007
                                             Percentage Change in Estimated
                                                Net Interest Income Over
                                             ------------------------------
                                                First              Second
                                              12 Months           12 Months
                                             -----------         ----------


    200 basis point increase in rates           (4.18)%            (6.63)%
    200 basis point decrease in rates            1.67              (1.39)

                                       42
<page>

         The changes in rates in the above table is assumed to occur evenly over
the following  twelve months.  Based on the scenario above,  net interest income
would be  adversely  affected in the first twelve  months and the twelve  months
thereafter if rates rose by 200 basis points. In addition,  if rates declined by
200 basis  points net interest  income would be adversely  affected in the first
twelve months and the twelve months thereafter. The above changes are all within
the Bank's internal guidelines for net interest income simulation.

         Net  Portfolio  Value  Simulation  Analysis.  We use an  interest  rate
sensitivity  analysis prepared by the Office of Thrift Supervision to review our
level of  interest  rate risk.  This  analysis  measures  interest  rate risk by
computing  changes  in net  portfolio  value  of our  cash  flows  from  assets,
liabilities  and  off-balance  sheet  items in the  event of a range of  assumed
changes in market  interest  rates.  Net portfolio  value  represents the market
value of  portfolio  equity and is equal to the market value of assets minus the
market value of liabilities,  with adjustments made for off-balance sheet items.
This analysis assesses the risk of loss in market risk sensitive  instruments in
the event of a sudden and  sustained  100 to 300 basis point  increase or 100 to
200 basis point decrease in market interest rates. We measure interest rate risk
by modeling the changes in net  portfolio  value over a variety of interest rate
scenarios. The following table, which is based on information that we provide to
the Office of Thrift Supervision, presents the change in our net portfolio value
at March  31,  2007 that  would  occur in the  event of an  immediate  change in
interest rates based on Office of Thrift Supervision assumptions, with no effect
given to any steps that we might take to counteract that change.

         The fiscal 2007 net portfolio  value change shows a larger decrease for
the 200 and 300 basis point increase scenarios and a larger increase for the 100
and 200 basis point decrease  scenarios compared to fiscal 2006. This was caused
primarily by the movement of funds from generally shorter maturity federal funds
sold and investment securities,  in fiscal 2006, to generally longer term loans,
in fiscal 2007.


                          Net Portfolio Value        Net Portfolio Value as % of
                   --------------------------------   Present Value of Assets
Basis Point ("bp")      (Dollars in thousands)        ------------------------
Change in Rates    $ Amount    $ Change    % Change    NPV Ratio     Change
-----------------  --------   ----------   --------   ----------   -----------
      300 bp        $37,565   $ (15,903)     (30)%       13.84%      (438)bp
      200            43,313     (10,156)     (19)        15.52       (270)
      100            48,446      (5,023)      (9)        16.92       (129)
        0            53,469          --       --         18.22         --
     (100)           56,206       2,737        5         18.81         60
     (200)           56,943       3,475        6         18.84         63

         The Office of Thrift Supervision uses certain  assumptions in assessing
the interest  rate risk of savings  associations.  These  assumptions  relate to
interest rates, loan prepayment rates, deposit decay rates and the market values
of certain assets under differing interest rate scenarios, among others. As with
any method of measuring interest rate risk, certain shortcomings are inherent in
the method of analysis  presented in the foregoing table. For example,  although
certain  assets  and  liabilities  may have  similar  maturities  or  periods to
repricing,  they may react in  different  degrees to changes in market  interest
rates.  Also, the interest rates on certain types of assets and  liabilities may
fluctuate in advance of changes in market interest  rates,  while interest rates
on other types may lag behind changes in market rates.  Further, in the event of
a change in interest  rates,  expected  rates of  prepayments on loans and early
withdrawals from certificates could deviate  significantly from those assumed in
calculating the table.

         Liquidity  Management.  Liquidity  is the  ability to meet  current and
future  financial  obligations of a short-term  nature.  Our primary  sources of
funds  consist of deposit  inflows,  loan  repayments,  maturities  and sales of
investment securities,  borrowings from the Federal Home Loan Bank of Boston and
securities sold under  agreements to repurchase.  While maturities and scheduled
amortization of loans and securities are predictable  sources of funds,  deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition.

                                       43
<page>

         We regularly  adjust our  investments  in liquid  assets based upon our
assessment of (1) expected loan demand,  (2) expected  deposit flows, (3) yields
available on interest-earning  deposits and securities and (4) the objectives of
our  asset/liability  management  program.  Excess  liquid  assets are  invested
generally  in money  market  mutual  funds,  federal  funds  sold and short- and
intermediate-term agency and municipal securities.

         Our  most   liquid   assets   are  cash   and  cash   equivalents   and
interest-bearing  deposits.  The  levels of these  assets are  dependent  on our
operating,  financing, lending and investing activities during any given period.
At March 31, 2007, cash and cash equivalents  totaled $18.6 million.  Securities
classified as available for sale, which provide additional sources of liquidity,
totaled $49.5 million at March 31, 2007. In addition,  at March 31, 2007, we had
the ability to borrow  approximately  $71.3  million  from the Federal Home Loan
Bank of Boston. On that date, we had $33.6 million outstanding.

         At  March  31,  2007,  we  had  $14.7   million  in  loan   commitments
outstanding,  which included $5.7 million in undisbursed  construction loans and
$6.0 in unused lines of credit.  Certificates  of deposit due within one year of
March 31, 2007  totaled  $65.5  million,  or 36.1% of total  deposits.  If these
maturing  deposits  do not  remain  with us, we will be  required  to seek other
sources of funds,  including other  certificates of deposit and lines of credit.
Depending on market  conditions,  we may be required to pay higher rates on such
deposits  or other  borrowings  than we  currently  pay on the  certificates  of
deposit due on or before  March 31,  2008.  We believe,  however,  based on past
experience,  that a  significant  portion of our  certificates  of deposit  will
remain with us. We have the ability to attract and retain  deposits by adjusting
the interest rates offered.

         The following table presents our  contractual  obligations at March 31,
2007.

<table>
<caption>

                                                                    Payments Due by Period
                                           ------------------------------------------------------------------------
                                                           Less than        One to       Three to        More than
                                              Total         One Year     Three Years     Five Years     Five Years
                                           ------------   ------------   ------------   ------------   ------------

                                              <c>               <c>            <c>            <c>          <c>
                                                                        (In thousands)

Long-Term Debt Obligations (1) .........   $     33,587   $      4,001   $      8,224   $     11,405   $      9,957
Operating Lease Obligations ............         11,082            447            851            891          8,893
                                           ------------   ------------   ------------   ------------   ------------
    Total ..............................   $     44,669   $      4,448   $      9,075   $     12,296   $     18,850
                                           ============   ============   ============   ============   ============
</table>

------------------
(1) Consists of Federal Home Loan Bank advances.

         Our primary  investing  activities are the  origination and purchase of
loans and the purchase of securities.  Our primary financing  activities consist
of activity in deposit accounts,  Federal Home Loan Bank advances and securities
sold under  agreements to repurchase.  Deposit flows are affected by the overall
level of interest rates,  the interest rates and products  offered by us and our
local  competitors  and other  factors.  We generally  manage the pricing of our
deposits to be competitive and to increase core deposits and commercial  banking
relationships.  Occasionally,  we offer  promotional  rates on  certain  deposit
products to attract certain deposit products.

                                       44
<page>

         The  following  table  presents  our primary  investing  and  financing
activities during the periods indicated.

                                                     Years Ended March 31,
                                                ------------------------------
                                                  2007       2006       2005
                                                --------   --------   --------
                                                        (In thousands)
Investing activities:
     Loan originations ......................   $ 74,604   $ 41,861   $ 45,288
     Loan participations purchased ..........     18,268      4,127      1,786
     Securities purchases ...................     17,827     17,321     26,927

Financing activities:
     Increase in deposits ...................   $ 12,631   $  6,053   $    201
        Increase in FHLB advances ...........     11,945      6,022      5,694
        Increase in securities sold
           under agreements to repurchase ...      1,852      3,081      3,456

         Capital  Management.  We have  managed our  capital to maintain  strong
protection for depositors  and creditors.  We are subject to various  regulatory
capital requirements administered by the Office of Thrift Supervision, including
a risk-based  capital measure.  The risk-based capital guidelines include both a
definition of capital and a framework for  calculating  risk-weighted  assets by
assigning  balance  sheet  assets  and  off-balance  sheet  items to broad  risk
categories.  At March  31,  2007,  we  exceeded  all of our  regulatory  capital
requirements.  We are considered "well capitalized" under regulatory guidelines.
See  Item  1.  Description  of  Business--"Regulation  and  Supervision--Federal
Banking  Regulation--Capital  Requirements"  and  note  14 of the  notes  to the
consolidated financial statements.

         The  capital  we raised in the  offering  significantly  increased  our
liquidity and capital resources. Over time, our liquidity will be reduced as net
proceeds  from the  stock  offering  are used for  general  corporate  purposes,
including the funding of lending activities. Our financial condition and results
of operations  will be enhanced by the capital from the  offering,  resulting in
increased  net  interest-earning  assets  and net  income.  However,  the  large
increase  in equity  that  resulted  from the  capital  raised  in the  offering
initially  had an adverse  impact on our return on  equity.  We may use  capital
management tools such as cash dividends and share  repurchases.  However,  under
Office of Thrift Supervision  regulations,  we will not be allowed to repurchase
any shares  during the first year  following  the  offering,  except to fund the
restricted stock awards under the stock-based benefit plan, unless extraordinary
circumstances exist and we receive regulatory approval.

         Off-Balance Sheet Arrangements.  In the normal course of operations, we
engage in a variety of financial transactions that, in accordance with generally
accepted accounting  principles,  are not recorded in our financial  statements.
These transactions  involve,  to varying degrees,  elements of credit,  interest
rate and  liquidity  risk.  Such  transactions  are  used  primarily  to  manage
customers'  requests for funding and take the form of loan commitments and lines
of credit.  A presentation of our outstanding  loan commitments and unused lines
of credit at March 31, 2007 and their  effect on our  liquidity  is presented at
note 17 of the notes to the consolidated  financial  statements included in this
annual report and under "--Risk Management--Liquidity Management."

         For  the  year  ended  March  31,  2007,  we  did  not  engage  in  any
off-balance-sheet  transactions  reasonably  likely to have a material effect on
our financial condition, results of operations or cash flows.

Impact of Recent Accounting Pronouncements

         In February  2006,  the  Financial  Accounting  Standards  Board (FASB)
issued SFAS No. 155,  "Accounting  for Certain Hybrid  Instruments"  (SFAS 155),
which  permits,  but does not  require,  fair  value  accounting  for any hybrid
financial  instrument that contains an embedded  derivative that would otherwise
require  bifurcation  in accordance  with SFAS 133. The statement  also subjects
beneficial  interests issued by  securitization  vehicles to the requirements of
SFAS No. 133. The  statement  is effective as of April 1, 2007.  The adoption of
SFAS 155 is not expected to have a material  impact on the  Company's  financial
condition and results of operations.

                                       45
<page>

         In March 2006, the FASB issued SFAS No. 156,  "Accounting for Servicing
of Financial  Assets- an amendment  of FASB  Statement  No. 140" (SFAS No. 156).
SFAS No. 156  requires an entity to  recognize a  servicing  asset or  servicing
liability each time it undertakes an obligation to service a financial  asset by
entering into a servicing  contract in specific  situations.  Additionally,  the
servicing  asset or  servicing  liability  shall be  initially  measured at fair
value;  however,  an entity may elect the  "amortization  method" or "fair value
method"  for  subsequent  balance  sheet  reporting  periods.  SFAS  No.  156 is
effective as of an entity's  first fiscal year  beginning  after  September  15,
2006.  Early  adoption is  permitted as of the  beginning of an entity's  fiscal
year,  provided the entity has not yet issued  financial  statements,  including
interim  financial  statements,  for any period of that fiscal year. The Company
does not expect the adoption of this statement to have a material  impact on its
financial condition, results of operations or cash flows.

         In  September   2006,  the  FASB  issued  SFAS  No.  157,  "Fair  Value
Measurements"  (SFAS 157). SFAS 157 defines fair value,  establishes a framework
for measuring fair value under generally accepted  accounting  principles (GAAP)
and enhances  disclosures  about fair value  measurements.  SFAS 157 retains the
exchange  price notion and clarifies  that the exchange  price is the price that
would be received  for an asset or paid to transfer a liability  (an exit price)
in an orderly  transaction  between market participants on the measurement date.
SFAS 157 is effective for the Company's  consolidated  financial  statements for
the year  beginning  on April 1, 2008,  with  earlier  adoption  permitted.  The
Company does not expect the adoption of this statement to have a material impact
on its financial condition and results of operations.

         In September 2006, the FASB issued SFAS No. 158, "Employer's Accounting
for Defined  Benefit  Pension and other  Postretirement  Plans - an amendment of
FASB Statements No. 87, 88, 106 and 132(R)" (SFAS 158). SFAS 158 requires 1) the
recognition of an asset or liability for the over-funded or under-funded  status
of a defined  benefit plan, 2) the recognition of actuarial gains and losses and
prior service costs and credits in other comprehensive income, 3) measurement of
plan assets and benefit  obligations  as of the  employer's  balance sheet date,
rather than at interim measurement dates as currently allowed, and 4) disclosure
of  additional  information  concerning  actuarial  gains and  losses  and prior
service  costs  and  credits  recognized  in other  comprehensive  income.  This
statement is effective for financial  statements  with fiscal years ending after
December 15, 2006.  Adoption of this Statement did not have a material impact on
the Company's financial position, result of operations, or cash flows.

         The following table illustrates the incremental effect of applying SFAS
158 on individual line items in the statement of financial  position as of March
31, 2007:

                                         Before                       After
                                     Application of              Application of
                                      Statement 158  Adjustments  Statement 158
                                      -------------  -----------  -------------
                                                   (In Thousands)
Deferred income taxes                  $    1,124          8       $    1,132
Total assets                              284,150          8          284,158
Liability for pension benefits                169         21              190
Total liabilities                         226,871         21          226,892
Accumulated other comprehensive loss         (345)       (13)            (358)
Total stockholders' equity                 57,279        (13)          57,266

         In February  2007,  the FASB issued SFAS No. 159 "The Fair Value Option
for Financial  Assets and Financial  Liabilities  including an amendment of FASB
Statement  No. 115" (SFAS 159).  SFAS 159 permits  entities to choose to measure
many  financial  instruments  and certain other items at fair value that are not
currently  required to be measured at fair value.  The  objective  is to improve
financial  reporting  by providing  entities  with the  opportunity  to mitigate
volatility  in  reported   earnings  caused  by  measuring  related  assets  and
liabilities  differently  without  having  to  apply  complex  hedge  accounting
provisions.   This  statement  also  establishes   presentation  and  disclosure
requirements  designed to facilitate  comparisons  between  entities that choose
different  measurement  attributes for similar types of assets and  liabilities.
The new  standard is effective at the  beginning  of the  Company's

                                       46
<page>

fiscal year  beginning  March 31,  2008,  and early  adoption  may be elected in
certain  circumstances.  The  Company is  currently  evaluating  and has not yet
determined  the impact the new  standard is  expected  to have on its  financial
position, results of operations or cash flow.

Effect of Inflation and Changing Prices

    The financial statements and related financial data presented in this annual
report have been  prepared in  accordance  with  generally  accepted  accounting
principles  in the United  States,  which require the  measurement  of financial
position  and  operating   results  in  terms  of  historical   dollars  without
considering the change in the relative  purchasing  power of money over time due
to inflation.  The primary impact of inflation on our operations is reflected in
increased operating costs. Unlike most industrial  companies,  virtually all the
assets and liabilities of a financial  institution are monetary in nature.  As a
result,  interest rates generally have a more significant  impact on a financial
institution's performance than do general levels of inflation. Interest rates do
not  necessarily  move in the same direction or to the same extent as the prices
of goods and services.



                                       47
<page>


ITEM 7.      CONSOLIDATED FINANCIAL STATEMENTS



               [LETTERHEAD OF SHATSWELL, MacLEOD & COMPANY, P.C.]



The Board of Directors
New England Bancshares, Inc.
Enfield, Connecticut

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------

We have audited the consolidated balance sheets of New England Bancshares,  Inc.
and  Subsidiary  as of March 31,  2007 and 2006,  and the  related  consolidated
statements  of income,  changes in  stockholders'  equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these consolidated financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated financial statements are free of material misstatement. The Company
is not  required  to  have,  nor were we  engaged  to  perform,  an audit of its
internal control over financial reporting.  Our audit included  consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness  of the Company's  internal  control
over  financial  reporting.  Accordingly,  we express no such opinion.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of New
England  Bancshares,  Inc. and Subsidiary as of March 31, 2007 and 2006, and the
results of their  operations  and their cash flows for the years then ended,  in
conformity with accounting principles generally accepted in the United States of
America.

                                          /S/ SHATSWELL, MacLEOD & COMPANY, P.C.
                                          SHATSWELL, MacLEOD & COMPANY, P.C.
West Peabody, Massachusetts
June 18, 2007


                                       48
<page>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------

                             March 31, 2007 and 2006
                             -----------------------
                (Dollars In Thousands, Except Per Share Amounts)
                ------------------------------------------------
<table>
<caption>

ASSETS                                                                      2007         2006
------                                                                   ---------    ---------

                                                                             <c>         <c>
Cash and due from banks                                                  $   4,400    $   4,882
Interest-bearing demand deposits with other banks                               43          308
Federal funds sold                                                          13,610       30,700
Money market mutual funds                                                      587        2,766
                                                                         ---------    ---------
           Total cash and cash equivalents                                  18,640       38,656
Interest-bearing time deposits with other banks                              1,877        4,222
Investments in available-for-sale securities (at fair value)                49,469       52,297
Federal Home Loan Bank stock, at cost                                        1,979        1,417
Loans, net of the allowance for loan losses of $1,875 as of
   March 31, 2007 and $1,636 as of March 31, 2006                          198,447      148,113
Premises and equipment, net                                                  4,244        4,441
Accrued interest receivable                                                  1,323          978
Deferred income taxes, net                                                   1,132        1,152
Cash surrender value of life insurance                                       4,218        4,060
Identifiable intangible assets                                                 599          687
Goodwill                                                                     1,090        1,090
Other assets                                                                 1,140          686
                                                                         ---------    ---------
           Total assets                                                  $ 284,158    $ 257,799
                                                                         =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
   Noninterest-bearing                                                   $  16,075    $  14,146
   Interest-bearing                                                        165,600      154,898
                                                                         ---------    ---------
           Total deposits                                                  181,675      169,044
Advanced payments by borrowers for taxes and insurance                         796          969
Federal Home Loan Bank advances                                             33,587       21,642
Securities sold under agreements to repurchase                               9,177        7,325
Due to broker                                                                   --          626
Other liabilities                                                            1,657        1,372
                                                                         ---------    ---------
           Total liabilities                                               226,892      200,978
                                                                         ---------    ---------
Stockholders' equity:
   Preferred stock, par value $.01 per share; 1,000,000 shares
     authorized; none issued                                                    --           --
   Common stock, par value $.01 per share; 19,000,000 shares
     authorized; 5,346,583 shares issued as of March 31, 2007 and 2006          53           53
   Paid-in capital                                                          42,742       42,339
   Retained earnings                                                        18,521       18,151
   Unearned ESOP shares, 317,063 shares as of March 31, 2007 and
     350,945 shares as of March 31, 2006                                    (2,666)      (2,903)
   Unearned shares, stock-based incentive plans, 95,786 shares
     as of March 31, 2007 and 34,500 as of March 31, 2006                   (1,026)        (211)
   Accumulated other comprehensive loss                                       (358)        (608)
                                                                         ---------    ---------
           Total stockholders' equity                                       57,266       56,821
                                                                         ---------    ---------
           Total liabilities and stockholders' equity                    $ 284,158    $ 257,799
                                                                         =========    =========
</table>

        The accompanying notes are an integral part of these consolidated
                              financial statements.

                                       49
<page>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------

                   For the Years Ended March 31, 2007 and 2006
                   -------------------------------------------

                (Dollars In Thousands, Except Per Share Amounts)
                ------------------------------------------------
<table>
<caption>
                                                                               2007      2006
                                                                              -------   -------

                                                                               <c>       <c>
Interest and dividend income:
   Interest and fees on loans                                                 $11,483   $ 9,001
   Interest on debt securities:
     Taxable                                                                    2,223     1,757
     Tax-exempt                                                                   396       261
   Dividends on Federal Home Loan Bank stock                                       95        64
   Interest on federal funds sold, interest-bearing deposits and dividends
     on marketable equity securities                                              966       871
                                                                              -------   -------
           Total interest and dividend income                                  15,163    11,954
                                                                              -------   -------
Interest expense:
   Interest on deposits                                                         4,204     2,850
   Interest on advanced payments by borrowers for taxes and insurance              10        11
   Interest on Federal Home Loan Bank advances                                  1,204       801
   Interest on securities sold under agreements to repurchase                     376       175
                                                                              -------   -------
           Total interest expense                                               5,794     3,837
                                                                              -------   -------
           Net interest and dividend income                                     9,369     8,117
Provision for loan losses                                                         242       210
                                                                              -------   -------
           Net interest and dividend income after provision for loan losses     9,127     7,907
                                                                              -------   -------
Noninterest income:
   Service charges on deposit accounts                                            519       514
   Gain on securities, net                                                         32        33
   Increase in cash surrender value of life insurance policies                    154       150
   Other income                                                                   286       138
                                                                              -------   -------
           Total noninterest income                                               991       835
                                                                              -------   -------
Noninterest expense:
   Salaries and employee benefits                                               4,930     3,842
   Occupancy and equipment expense                                              1,670     1,113
   Advertising and promotion                                                      152       216
   Professional fees                                                              373       303
   Data processing expense                                                        345       301
   Stationery and supplies                                                         96        91
   Amortization of identifiable intangible assets                                  88        88
   Other expense                                                                  989       835
                                                                              -------   -------
           Total noninterest expense                                            8,643     6,789
                                                                              -------   -------
           Income before income taxes                                           1,475     1,953
Income taxes                                                                      505       644
                                                                              -------   -------
           Net income                                                         $   970   $ 1,309
                                                                              =======   =======

Earnings per share:
   Basic                                                                      $  0.20   $  0.27
                                                                              =======   =======
   Diluted                                                                    $  0.19   $  0.26
                                                                              =======   =======
</table>

        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       50
<page>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           ----------------------------------------------------------

                   For the Years Ended March 31, 2007 and 2006
                   -------------------------------------------
                (Dollars In Thousands, Except Per Share Amounts)
                ------------------------------------------------
<table>
<caption>
                                                                                              Unearned
                                                                                               Shares
                                                                                                Stock-     Accumulated
                                                                                Unearned        Based         Other
                                         Common      Paid-in      Retained        ESOP        Incentive   Comprehensive
                                         Stock       Capital      Earnings       Shares         Plans         Loss          Total
                                       ----------   ----------   -----------   -----------   -----------   -----------   ----------

                                   <c>          <c>          <c>           <c>           <c>           <c>           <c>
Balance, March 31, 2005                $       23   $   12,547   $    17,125   $      (517)  $      (322)  $      (417)  $   28,439
ESOP shares released                           --           81            --            75            --            --          156
Tax benefit relating to
  stock-based incentive plan                   --           29            --            --            --            --           29
Compensation cost for
  stock-based incentive plan                   --           --            --            --           111            --          111
Dividends paid ($0.09 per share)               --           --          (283)           --            --            --         (283)
Reorganization and related
  stock offering (note 1):
   Merger of Enfield Federal, MHC             (14)          43            --            --            --            --           29
   Exchange of common stock
     (958,865 shares exchanged
     for 2,270,728 shares)                     13          (15)           --            --            --            --           (2)
   Proceeds from stock offering,
     net of related costs
     (3,075,855 shares issued)                 31       29,654            --            --            --            --       29,685
   Common stock acquired by ESOP
     (246,068 shares)                          --           --            --        (2,461)           --            --       (2,461)
Comprehensive income:
  Net income                                   --           --         1,309            --            --            --           --
  Net change in unrealized
     holding loss on
     available-for-sale
     securities, net of tax effect             --           --            --            --            --          (191)          --
               Comprehensive income            --           --            --            --            --            --        1,118
                                       ----------   ----------   -----------   -----------   -----------   -----------   ----------
Balance, March 31, 2006                        53       42,339        18,151        (2,903)         (211)         (608)      56,821
ESOP shares released                           --          162            --           237            --            --          399
Tax benefit relating to
  stock-based incentive plans                  --           45            --            --            --            --           45
Compensation cost for
  stock-based incentive plans                  --          203            --            --           197            --          400
Dividends paid ($0.12 per share)               --           --          (600)           --            --            --         (600)
Purchase of stock for
  equity incentive plan                        --           (7)           --            --        (1,012)           --       (1,019)
Comprehensive income:
  Net income                                   --           --           970            --            --            --           --
  Net change in unrealized
     holding loss on
     available-for-sale
     securities, net of tax effect             --           --            --            --            --           263           --
  Adjustment to initially
     apply FASB Statement No. 158              --           --            --            --            --           (13)          --
                 Comprehensive income          --           --            --            --            --            --        1,220
                                       ----------   ----------   -----------   -----------   -----------   -----------   ----------
Balance, March 31, 2007                $       53   $   42,742   $    18,521   $    (2,666)  $    (1,026)  $      (358)  $   57,266
                                       ==========   ==========   ===========   ===========   ===========   ===========   ==========
</table>

        The accompanying notes are an integral part of these consolidated
                             financial statements.


                                       51
<page>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

                   For the Years Ended March 31, 2007 and 2006
                   -------------------------------------------
                                 (In Thousands)
                                 --------------
<table>
<caption>
                                                                                         2007        2006
                                                                                       --------    --------

                                                                                        <c>         <c>
Cash flows from operating activities:
   Net income                                                                          $    970    $  1,309
   Adjustments to reconcile net income to net cash provided by operating activities:
     Net accretion of fair value adjustments                                                (63)        (86)
     Amortization of securities, net                                                         23         136
     Gain on securities, net                                                                (32)        (33)
     Provision for loan losses                                                              242         210
     Change in deferred loan origination fees                                              (244)         37
     Gain on sale of loans, net                                                             (28)         --
     Depreciation and amortization                                                          474         327
     Disposal of property and equipment                                                       2          48
     Increase in accrued interest receivable                                               (345)        (82)
     Deferred income tax benefit                                                           (139)       (179)
     Increase in cash surrender value life insurance policies                              (154)       (150)
     Increase in prepaid expenses and other assets                                         (430)       (169)
     Amortization of identifiable intangible assets                                          88          88
     Increase in accrued expenses and other liabilities                                     264         386
     Compensation cost for stock-based incentive plan                                       400         111
     ESOP shares released                                                                   399         156
                                                                                       --------    --------

   Net cash provided by operating activities                                              1,427       2,109
                                                                                       --------    --------

Cash flows from investing activities:
   Purchases of available-for-sale securities                                           (18,453)    (16,973)
   Proceeds from sales of available-for-sale securities                                  14,874       4,601
   Proceeds from maturities of available-for-sale securities                              6,220       6,593
   Loan originations and principal collections, net                                     (35,892)    (11,692)
   Purchases of loans                                                                   (18,268)     (4,127)
   Loans sold                                                                             3,844          --
   Recoveries of loans previously charged off                                                 2           6
   Proceeds from maturities of interest-bearing time deposits with other banks            2,345       1,972
   Purchases of interest-bearing time deposits with other banks                              --        (292)
   Capital expenditures                                                                    (258)     (2,334)
   Purchases of Federal Home Loan Bank stock                                               (562)       (291)
   Investment in life insurance policies                                                     (4)         (5)
                                                                                       --------    --------

   Net cash used in investing activities                                                (46,152)    (22,542)
                                                                                       --------    --------
</table>

        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       52
<page>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

                   For the Years Ended March 31, 2007 and 2006
                   -------------------------------------------
                                 (In Thousands)
                                 --------------
                                   (continued)
                                   -----------
<table>
<caption>
                                                                                         2007        2006
                                                                                       --------    --------

                                                                                      <c>          <c>
Cash flows from financing activities:
   Net increase in demand deposits, NOW and savings accounts                              6,074       3,909
   Net increase in time deposits                                                          6,630       2,240
   Net (decrease) increase in advanced payments by borrowers for taxes and insurance       (173)        325
   Proceeds from Federal Home Loan Bank long-term advances                               16,000       8,500
   Principal payments on Federal Home Loan Bank long-term advances                       (4,055)     (2,478)
   Net increase in securities sold under agreements to repurchase                         1,852       3,081
   Proceeds from stock offering, net of related costs                                        --      27,224
   Cash received from Enfield MHC due to reorganization                                      --          29
   Fractional share payout                                                                   --          (2)
   Purchase of stock for stock incentive plan                                            (1,019)         --
   Payments of cash dividends on common stock                                              (600)       (283)
                                                                                       --------    --------

   Net cash provided by financing activities                                             24,709      42,545
                                                                                       --------    --------

Net (decrease) increase in cash and cash equivalents                                    (20,016)     22,112
Cash and cash equivalents at beginning of year                                           38,656      16,544
                                                                                       --------    --------
Cash and cash equivalents at end of year                                               $ 18,640    $ 38,656
                                                                                       ========    ========

Supplemental disclosures:
   Interest paid                                                                       $  5,721    $  3,823
   Income taxes paid                                                                        533         943
   Due to broker                                                                             --         626
   Transfer from other assets to premises and equipment                                      --         422

</table>


        The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       53
<page>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

                   For the Years Ended March 31, 2007 and 2006
                   -------------------------------------------

NOTE 1 - NATURE OF OPERATIONS
-----------------------------

On September 7, 2005, NEBS  Bancshares,  Inc. (the  "Company") was  incorporated
under Maryland law to facilitate the conversion of Enfield  Federal  Savings and
Loan  Association  (the  "Association")  from the mutual holding company form of
organization to the stock form of organization (the  "second-step  conversion").
As a result of the  second-step  conversion,  NEBS  Bancshares,  Inc. became the
holding  company for the  Association  and was  immediately  renamed New England
Bancshares,  Inc. A total of  3,075,855  shares of common stock were sold in the
stock  offering  at the price of  $10.00  per  share.  In  addition,  a total of
2,270,728  shares were  issued to the  minority  shareholders  of the former New
England  Bancshares  at an exchange  ratio of 2.3683.  Total shares  outstanding
after  the  stock  offering  and the  exchange  totaled  5,346,583  shares.  The
second-step  conversion  was accounted for as a change in corporate form with no
resulting change in the historical  basis of the former New England  Bancshares'
assets, liabilities and equity. Direct offering costs totaling $1.1 million were
deducted from the proceeds of the shares sold in the  offering.  Net proceeds of
$27.2 million were raised in the stock  offering,  excluding  $2.5 million which
was  loaned by the  Company to a trust for the  Employee  Stock  Ownership  Plan
(ESOP)  enabling  it to  purchase  246,068  shares of common  stock in the stock
offering. In addition, as part of the second-step  conversion and dissolution of
Enfield Federal Mutual Holding Company, the former mutual holding company parent
of the Company, and the former New England Bancshares,  the Association received
$901,000 of cash previously held by these entities.

As a result of the second-step conversion,  all share and per share amounts have
been restated giving retroactive  recognition to the second-step  exchange ratio
of 2.3683.  Options granted under the Company's 2003 Stock-Based  Incentive Plan
and common shares held by the Association's  ESOP and shares of restricted stock
before the second-step conversion were also exchanged using the conversion ratio
of 2.3683.

On November 21, 2006 the Company entered into a definitive merger agreement with
First  Valley  Bancorp,  Inc.,  Bristol,  Connecticut,  under which First Valley
Bancorp  will combine  with the  Company.  First  Valley  Bancorp is the holding
company  for  Valley  Bank,  Bristol,  Connecticut.   Under  the  terms  of  the
transaction,  shareholders  of First Valley  Bancorp will be entitled to receive
0.8907 shares of Company  common stock and $9.00 in cash for each share of First
Valley Bancorp common stock.

The Company  will  continue to operate  Valley  Bank as a  separately  chartered
commercial bank  subsidiary.  In addition to retaining its own identity,  Valley
Bank will  retain its own Board of  Directors,  management  team,  branches  and
employees.  The  merger is not  expected  to result  in any  lay-offs  or branch
closings. As part of the transaction, the Company will also infuse approximately
$12.0 million of capital into Valley Bank.

The  Association  is a federally  chartered  stock savings and loan  association
which was incorporated in 1916 and is headquartered in Enfield, Connecticut. The
Association  operates  its  business  from  eight  banking  offices  located  in
Connecticut.   The  Association  is  engaged  principally  in  the  business  of
attracting  deposits  from the general  public and investing  those  deposits in
residential  and commercial  real estate loans,  and in consumer,  construction,
commercial and small business loans.

NOTE 2 - ACCOUNTING POLICIES
----------------------------

The accounting and reporting  policies of the Company and its subsidiary conform
to accounting  principles generally accepted in the United States of America and
predominant  practices within the banking industry.  The consolidated  financial
statements of the Company were prepared  using the accrual basis of  accounting.
The  significant  accounting  policies of the Company  are  summarized  below to
assist the reader in better understanding the consolidated  financial statements
and other data contained herein.

                                       54
<page>

         USE OF ESTIMATES:

         The preparation of consolidated financial statements in conformity with
         accounting  principles  generally  accepted  in the  United  States  of
         America  requires  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  consolidated
         financial  statements and the reported amounts of revenues and expenses
         during the  reporting  period.  Actual  results could differ from those
         estimates.

         BASIS OF PRESENTATION:

         The accompanying consolidated financial statements include the accounts
         of the  Company  and  the  Association.  All  significant  intercompany
         accounts and transactions have been eliminated in the consolidation.

         CASH AND CASH EQUIVALENTS:

         For purposes of reporting cash flows, cash and cash equivalents include
         cash on hand,  cash items,  due from  banks,  interest  bearing  demand
         deposits  with other banks,  federal funds sold and money market mutual
         funds.  Cash and due from banks as of March 31, 2007 and 2006  includes
         $361,000 and $234,000,  respectively,  which is subject to  withdrawals
         and usage  restrictions  to satisfy  the  reserve  requirements  of the
         Federal Reserve Bank.

         SECURITIES:

         Investments  in  debt  securities  are  adjusted  for  amortization  of
         premiums and accretion of discounts  computed so as to approximate  the
         interest method. Gains or losses on sales of investment  securities are
         computed on a specific identification basis.

         The  Company  classifies  debt and  equity  securities  into one of two
         categories:  available  for  sale  or  held to  maturity.  In  general,
         securities  may be classified as  held-to-maturity  only if the Company
         has the positive intent and ability to hold them to maturity. All other
         securities must be classified as available for sale.

               --   Available-for-sale  securities  are carried at fair value on
                    the consolidated  balance sheets.  Unrealized  holding gains
                    and losses are not  included in earnings but are reported as
                    a net amount (less expected tax) in a separate  component of
                    stockholders' equity until realized.

               --   Held-to-maturity  securities  are measured at amortized cost
                    in the consolidated balance sheets. Unrealized holding gains
                    and losses are not  included  in  earnings  or in a separate
                    component of capital. They are merely disclosed in the notes
                    to the consolidated financial statements.

         Declines in the fair value of held-to-maturity  and  available-for-sale
         securities  below their cost that are deemed to be other than temporary
         are reflected in earnings as realized losses.

         LOANS:

         Loans  receivable  that  management  has the intent and ability to hold
         until maturity or payoff,  are reported at their outstanding  principal
         balances adjusted for amounts due to borrowers on unadvanced loans, any
         charge-offs,  the  allowance  for loan losses and any deferred  fees or
         costs on  originated  loans,  or  unamortized  premiums or discounts on
         purchased loans.

         Interest on loans is recognized on a simple interest basis.

         Loan origination,  commitment fees and certain direct origination costs
         are  deferred  and the net amount  amortized  as an  adjustment  of the
         related  loan's  yield by the  interest  method.  Deferred  amounts are
         recognized  for  fixed  rate  loans  over the  contractual  life of the
         related loans.  If the loan's stated  interest rate

                                       55
<page>

         varies with changes in an index or rate,  the  effective  yield used by
         the Association for amortization is the index or rate that is in effect
         at the  inception  of the loan.  Home  equity  line  deferred  fees are
         recognized  using the  straight-line  method  over the  period the home
         equity line is active, assuming that borrowings are outstanding for the
         maximum term provided in the contract.

         Residential  real estate loans are generally  placed on nonaccrual when
         reaching 90 days past due or in process of foreclosure.  All closed-end
         consumer  loans  90 days or more  past due and any  equity  line in the
         process  of  foreclosure  are  placed  on  nonaccrual  status.  Secured
         consumer  loans are  written  down to  realizable  value and  unsecured
         consumer loans are  charged-off  upon reaching 120 or 180 days past due
         depending  on the  type of  loan.  Commercial  real  estate  loans  and
         commercial business loans and leases which are 90 days or more past due
         are generally placed on nonaccrual status, unless secured by sufficient
         cash or other assets  immediately  convertible to cash. When a loan has
         been placed on nonaccrual  status,  previously  accrued and uncollected
         interest is reversed  against interest on loans. A loan can be returned
         to accrual  status  when  collectibility  of  principal  is  reasonably
         assured and the loan has performed for a period of time,  generally six
         months.

         Cash  receipts of interest  income on  impaired  loans are  credited to
         principal  to  the  extent  necessary  to  eliminate  doubt  as to  the
         collectibility  of the net carrying  amount of the loan if the total of
         such credits  reduces the carrying amount of the loan to an amount less
         than the collateral value. Some or all of the cash receipts of interest
         income  on  impaired  loans is  recognized  as  interest  income if the
         remaining  net  carrying  amount  of the  loan is  deemed  to be  fully
         collectible. When recognition of interest income on an impaired loan on
         a cash basis is appropriate, the amount of income that is recognized is
         limited to that  which  would  have been  accrued  on the net  carrying
         amount of the loan at the contractual  interest rate. Any cash interest
         payments  received in excess of the limit and not applied to reduce the
         net  carrying  amount  of  the  loan  are  recorded  as  recoveries  of
         charge-offs until the charge-offs are fully recovered.

         ALLOWANCE FOR LOAN LOSSES:

         The allowance for loan losses is established as losses are estimated to
         have occurred  through a provision for loan losses charged to earnings.
         Loan losses are charged against the allowance when management  believes
         the  uncollectibility  of  a  loan  balance  is  confirmed.  Subsequent
         recoveries, if any, are credited to the allowance.

         The  allowance  for loan  losses is  evaluated  on a  regular  basis by
         management  and is  based  upon  management's  periodic  review  of the
         collectibility  of the  loans in light of  historical  experience,  the
         composition and size of the loan portfolio, adverse situations that may
         affect the  borrower's  ability to repay,  the  estimated  value of any
         underlying   collateral  and  prevailing  economic   conditions.   This
         evaluation is inherently  subjective as it requires  estimates that are
         susceptible  to  significant   revision  as  more  information  becomes
         available.

         A loan is considered  impaired when,  based on current  information and
         events,  it is probable that the Association  will be unable to collect
         the  scheduled  payments of principal or interest when due according to
         the  contractual  terms of the loan  agreement.  Factors  considered by
         management in determining impairment include payment status, collateral
         value,  and the  probability  of  collecting  scheduled  principal  and
         interest payments when due. Loans that experience insignificant payment
         delays and payment shortfalls generally are not classified as impaired.
         Management  determines the  significance  of payment delays and payment
         shortfalls on a case-by-case  basis,  taking into  consideration all of
         the circumstances surrounding the loan and the borrower,  including the
         length of the delay,  the reasons for the delay,  the borrower's  prior
         payment  record,  and the amount of the  shortfall  in  relation to the
         principal and interest  owed.  Impairment is measured on a loan by loan
         basis for commercial and construction loans by either the present value
         of  expected  future  cash flows  discounted  at the  loan's  effective
         interest rate, the loan's obtainable market price, or the fair value of
         the collateral if the loan is collateral dependent.

         Large  groups of smaller  balance  homogeneous  loans are  collectively
         evaluated  for  impairment.   Accordingly,  the  Association  does  not
         separately  identify  individual  consumer  and  residential  loans for
         impairment disclosures.

                                       56
<page>

         PREMISES AND EQUIPMENT:

         Premises  and   equipment   are  stated  at  cost,   less   accumulated
         depreciation  and  amortization.   Cost  and  related   allowances  for
         depreciation  and  amortization  of premises and  equipment  retired or
         otherwise disposed of are removed from the respective accounts with any
         gain  or  loss  included  in  income  or  expense.   Depreciation   and
         amortization  are calculated  principally on the  straight-line  method
         over the estimated  useful lives of the assets.  Estimated lives are 10
         to 50 years for buildings and premises and 3 to 20 years for furniture,
         fixtures  and  equipment.   Expenditures   for  replacements  or  major
         improvements are capitalized;  expenditures for normal  maintenance and
         repairs are charged to expense as incurred.

         OTHER REAL ESTATE OWNED AND IN-SUBSTANCE FORECLOSURES:

         Other  real  estate  owned   includes   properties   acquired   through
         foreclosure and properties  classified as in-substance  foreclosures in
         accordance with Statement of Financial  Accounting  Standards  ("SFAS")
         No.  15,  "Accounting  by  Debtors  and  Creditors  for  Troubled  Debt
         Restructuring."  These  properties  are carried at the lower of cost or
         estimated fair value less  estimated  costs to sell. Any writedown from
         cost to estimated  fair value  required at the time of  foreclosure  or
         classification as in-substance  foreclosure is charged to the allowance
         for loan losses. Expenses incurred in connection with maintaining these
         assets, subsequent writedowns and gains or losses recognized upon sale,
         are included in other expense.

         In  accordance  with  SFAS  No.  114,   "Accounting  by  Creditors  for
         Impairment  of a Loan," the Company  classifies  loans as  in-substance
         repossessed or foreclosed if the Company receives  physical  possession
         of  the  debtor's  assets  regardless  of  whether  formal  foreclosure
         proceedings take place.

         INCOME TAXES:

         The  Company  recognizes  income  taxes  under the asset and  liability
         method.  Under this  method,  deferred tax assets and  liabilities  are
         established for the temporary  differences between the accounting basis
         and the tax basis of the Company's  assets and  liabilities  at enacted
         tax rates  expected to be in effect  when the  amounts  related to such
         temporary differences are realized or settled.

         EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN:

         In connection  with its Executive  Supplemental  Retirement  Plan,  the
         Company  established a Rabbi Trust to assist in the  administration  of
         the plan.  The  accounts  of the Rabbi  Trust are  consolidated  in the
         Company's financial statements. Any available-for-sale  securities held
         by the Rabbi Trust are accounted  for in accordance  with SFAS No. 115.
         Until the plan benefits are paid, creditors may make claims against the
         trust's assets if the Company becomes insolvent.

         EARNINGS PER SHARE ("EPS"):

         Basic  EPS  is  computed  by  dividing   income   available  to  common
         stockholders   by  the   weighted-average   number  of  common   shares
         outstanding for the period. Diluted EPS reflects the potential dilution
         that could occur if securities or other contracts to issue common stock
         were  exercised  or  converted  into  common  stock or  resulted in the
         issuance  of common  stock  that then  shared  in the  earnings  of the
         entity. The Company had 109,000 and 2,000 anti-dilutive shares at March
         31, 2007 and 2006, respectively. Anti-dilutive shares are stock options
         with weighted-average exercise prices in excess of the weighted-average
         market value for the same period. Unallocated common shares held by the
         Association's  employee  stock  ownership  plan are not included in the
         weighted-average  number of common shares  outstanding  for purposes of
         calculating both basic and diluted EPS.

                                       57
<page>

         FAIR VALUES OF FINANCIAL INSTRUMENTS:

         SFAS No. 107, "Disclosures about Fair Value of Financial  Instruments,"
         requires  that the Company  disclose the  estimated  fair value for its
         financial  instruments.  Fair value methods and assumptions used by the
         Company in estimating its fair value disclosures are as follows:

         Cash and cash equivalents: The carrying amounts reported in the balance
         sheet for cash and cash  equivalents  approximate  those  assets'  fair
         values.

         Interest-bearing  time  deposits  with  other  banks:  Fair  values  of
         interest-bearing  time deposits  with other banks are  estimated  using
         discounted  cash flow analyses based on current rates for similar types
         of deposits.

         Securities  (including  mortgage-backed  securities):  Fair  values for
         securities  are based on quoted  market  prices,  where  available.  If
         quoted market prices are not available, fair values are based on quoted
         market prices of comparable instruments.

         Loans receivable:  For variable-rate  loans that reprice frequently and
         with no  significant  change in credit  risk,  fair values are based on
         carrying  values.  The fair values for other loans are estimated  using
         discounted  cash flow analyses,  using interest rates  currently  being
         offered for loans with similar  terms to  borrowers  of similar  credit
         quality.

         Accrued  interest  receivable:  The carrying amount of accrued interest
         receivable approximates its fair value.

         Deposit  liabilities:  The fair values  disclosed  for demand  deposits
         (e.g., interest and non-interest  checking,  passbook savings and money
         market  accounts)  are, by  definition,  equal to the amount payable on
         demand at the  reporting  date (i.e.,  their  carrying  amounts).  Fair
         values for  fixed-rate  certificates  of deposit are estimated  using a
         discounted cash flow  calculation that applies interest rates currently
         being  offered on  certificates  to a schedule of  aggregated  expected
         monthly maturities on time deposits.

         Advanced  payments by borrowers for taxes and  insurance:  The carrying
         amounts  of  advance  payments  by  borrowers  for taxes and  insurance
         approximate their fair values.

         Federal  Home Loan Bank  advances:  The fair value of Federal Home Loan
         Bank advances was determined by discounting the anticipated future cash
         payments by using the rates currently available to the Company for debt
         with similar terms and remaining maturities.

         Securities  sold under  agreements to repurchase:  The carrying  amount
         reported on the  consolidated  balance sheet for securities  sold under
         agreements to repurchase  maturing  within ninety days  approximate its
         fair value.  Fair values of other  securities sold under  agreements to
         repurchase are estimated  using  discounted cash flow analyses based on
         the current rates for similar types of borrowing arrangements.

         Due to broker:  The carrying amounts of due to broker approximate their
         fair values.

         Off-balance  sheet  instruments:  The  fair  value  of  commitments  to
         originate loans is estimated using the fees currently  charged to enter
         similar  agreements,  taking into  account the  remaining  terms of the
         agreements and the present creditworthiness of the counterparties.  For
         fixed-rate loan commitments and the unadvanced  portion of loans,  fair
         value also considers the difference  between current levels of interest
         rates and the committed  rates.  The fair value of letters of credit is
         based  on fees  currently  charged  for  similar  agreements  or on the
         estimated  cost to terminate  them or otherwise  settle the  obligation
         with the counterparties at the reporting date.

                                       58
<page>

         STOCK-BASED COMPENSATION:

         At March 31,  2007,  the Company has two  stock-based  incentive  plans
         which are described more fully in Note 12. The Company accounts for the
         plans  under SFAS No.  123(R)  "Share-Based  Payment."  During the year
         ended March 31, 2007, $203,000 in stock-based employee compensation was
         recognized. Prior to April 1, 2006, the Company accounted for the plans
         under  the  recognition   and  measurement   principles  of  Accounting
         Principles  Board Opinion ("APB") No. 25,  "Accounting for Stock Issued
         to   Employees,"   and   related   Interpretations.   Accordingly,   no
         compensation cost was recognized for its stock option plans.

         The following table illustrates the effect on net income if the Company
         had  applied  the fair  value  recognition  provisions  of SFAS No. 123
         (revised 2004) to stock-based employee  compensation for the year ended
         March 31:

<table>
<caption>
                                                                              2006
                                                                            ---------

                                                                         <c>
                                                               (Amounts in thousands, except earnings
                                                                            per share)

         Net income, as reported                                            $   1,309
         Deduct:  Total stock-based employee compensation expense
           determined under fair value based method for all stock options
           granted, net of related tax effects                                   (121)
                                                                            ---------
         Pro forma net income                                               $   1,188
                                                                            =========

         Earnings per share:
           Basic - as reported                                              $    0.27
           Basic - pro forma                                                $    0.24
           Diluted - as reported                                            $    0.26
           Diluted - pro forma                                              $    0.24
</table>

         RECENT ACCOUNTING PRONOUNCEMENTS:

         In February  2006,  the  Financial  Accounting  Standards  Board (FASB)
         issued SFAS No. 155,  "Accounting for Certain Hybrid Instruments" (SFAS
         155),  which permits,  but does not require,  fair value accounting for
         any hybrid  financial  instrument that contains an embedded  derivative
         that would otherwise  require  bifurcation in accordance with SFAS 133.
         The   statement   also   subjects   beneficial   interests   issued  by
         securitization  vehicles  to the  requirements  of SFAS  No.  133.  The
         statement is effective as of April 1, 2007. The adoption of SFAS 155 is
         not  expected  to have a  material  impact on the  Company's  financial
         condition and results of operations.

         In March 2006, the FASB issued SFAS No. 156,  "Accounting for Servicing
         of Financial  Assets- an amendment of FASB Statement No. 140" (SFAS No.
         156). SFAS No. 156 requires an entity to recognize a servicing asset or
         servicing  liability each time it undertakes an obligation to service a
         financial  asset by  entering  into a  servicing  contract  in specific
         situations.  Additionally,  the servicing asset or servicing  liability
         shall be initially measured at fair value; however, an entity may elect
         the "amortization method" or "fair value method" for subsequent balance
         sheet  reporting  periods.  SFAS No. 156 is effective as of an entity's
         first fiscal year beginning after September 15, 2006. Early adoption is
         permitted as of the beginning of an entity's fiscal year,  provided the
         entity  has not yet  issued  financial  statements,  including  interim
         financial  statements,  for any period of that fiscal year. The Company
         does not  expect  the  adoption  of this  statement  to have a material
         impact on its financial condition, results of operations or cash flows.

         In  September   2006,  the  FASB  issued  SFAS  No.  157,  "Fair  Value
         Measurements"  (SFAS 157).  SFAS 157 defines fair value,  establishes a
         framework for measuring fair value under generally accepted  accounting
         principles   (GAAP)   and   enhances   disclosures   about  fair  value
         measurements.  SFAS 157 retains the exchange price notion and clarifies
         that the  exchange  price is the price  that would be  received  for an
         asset or paid to  transfer a  liability  (an exit  price) in an orderly
         transaction  between market  participants on the measurement date. SFAS
         157 is effective for the Company's  consolidated  financial  statements
         for the  year  beginning  on

                                       59
<page>

         April 1, 2008, with earlier  adoption  permitted.  The Company does not
         expect the adoption of this statement to have a material  impact on its
         financial condition and results of operations.

         In September 2006, the FASB issued SFAS No. 158, "Employer's Accounting
         for  Defined  Benefit  Pension  and  other  Postretirement  Plans  - an
         amendment  of FASB  Statements  No 87, 88, 106 and 132(R)"  (SFAS 158).
         SFAS 158 requires 1) the  recognition  of an asset or liability for the
         over-funded or  under-funded  status of a defined  benefit plan, 2) the
         recognition  of actuarial  gains and losses and prior service costs and
         credits in other  comprehensive  income,  3) measurement of plan assets
         and benefit obligations as of the employer's balance sheet date, rather
         than  at  interim  measurement  dates  as  currently  allowed,  and  4)
         disclosure of additional  information  concerning  actuarial  gains and
         losses  and  prior  service  costs  and  credits  recognized  in  other
         comprehensive   income.  This  statement  is  effective  for  financial
         statements  with fiscal years ending after December 15, 2006.  Adoption
         of this  Statement  did not have a  material  impact  on the  Company's
         financial position, result of operations, or cash flows.

         The following table illustrates the incremental effect of applying FASB
         Statement  No.  158  on  individual  line  items  in the  statement  of
         financial position as of March 31, 2007:

<table>
<caption>
                                                    Before                           After
                                                Application of                  Application of
                                                 Statement 158    Adjustments    Statement 158
                                                 -------------    -----------    -------------

                                                      <c>           <c>             <c>
                                                                (In Thousands)
         Deferred income taxes                    $    1,124            8       $    1,132
         Total assets                                284,150            8          284,158
         Liability for pension benefits                  169           21              190
         Total liabilities                           226,871           21          226,892
         Accumulated other comprehensive loss           (345)         (13)            (358)
         Total stockholders' equity                   57,279          (13)          57,266
</table>

         In February  2007,  the FASB issued SFAS No. 159 "The Fair Value Option
         for Financial Assets and Financial  Liabilities  including an amendment
         of FASB  Statement  No. 115" (SFAS 159).  SFAS 159 permits  entities to
         choose to measure many financial instruments and certain other items at
         fair value  that are not  currently  required  to be  measured  at fair
         value.  The  objective is to improve  financial  reporting by providing
         entities  with the  opportunity  to  mitigate  volatility  in  reported
         earnings caused by measuring related assets and liabilities differently
         without  having to apply  complex  hedge  accounting  provisions.  This
         statement also  establishes  presentation  and disclosure  requirements
         designed  to  facilitate   comparisons  between  entities  that  choose
         different  measurement  attributes  for  similar  types of  assets  and
         liabilities.  The new  standard is  effective  at the  beginning of the
         Company's  fiscal year beginning March 31, 2008, and early adoption may
         be  elected  in  certain   circumstances.   The  Company  is  currently
         evaluating  and has not yet  determined  the impact the new standard is
         expected to have on its  financial  position,  results of operations or
         cash flow.

         ADVERTISING COSTS:

         It is the Company's  policy to expense  advertising  costs as incurred.
         Advertising  and promotion  expense is shown as a separate line item in
         the consolidated Statements of Income.

                                       60
<page>

NOTE 3 - INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES
-----------------------------------------------------

Debt  securities  have  been  classified  in  the  consolidated  balance  sheets
according to  management's  intent.  The amortized  cost of securities and their
approximate fair values are as follows as of March 31:

<table>
<caption>
                                                       Amortized        Gross       Gross
                                                          Cost       Unrealized   Unrealized      Fair
                                                          Basis         Gains       Losses       Value
                                                       ----------    ----------   ----------   ----------

                                                        <c>               <c>         <c>       <c>
                                                                         (In Thousands)
March 31, 2007:
   Debt securities issued by the U.S. Treasury
     and other U.S. government corporations and
     agencies                                          $   23,774    $       36   $      235   $   23,575
   Debt securities issued by states of the United
     States and political subdivisions of the states        7,493             9           97        7,405
   Corporate debt securities                                  100             1           --          101
   Mortgage-backed securities                              12,030            46          135       11,941
   Marketable equity securities                             7,224            --          190        7,034
                                                       ----------    ----------   ----------   ----------
                                                           50,621            92          657       50,056
   Money market mutual funds included in
     cash and cash equivalents                               (587)           --           --         (587)
                                                       ----------    ----------   ----------   ----------
                                                       $   50,034    $       92   $      657   $   49,469
                                                       ==========    ==========   ==========   ==========


March 31, 2006:
   Debt securities issued by the U.S. Treasury
     and other U.S. government corporations and
     agencies                                          $   25,666    $        5   $      546   $   25,125
   Debt securities issued by states of the United
     States and political subdivisions of the states        8,199            18          118        8,099
   Corporate debt securities                                  101             1           --          102
   Mortgage-backed securities                              12,689            40          199       12,530
   Marketable equity securities                             9,403            --          196        9,207
                                                       ----------    ----------   ----------   ----------
                                                           56,058            64        1,059       55,063
   Money market mutual funds included in
     cash and cash equivalents                             (2,766)           --           --       (2,766)
                                                       ----------    ----------   ----------   ----------
                                                       $   53,292    $       64   $    1,059   $   52,297
                                                       ==========    ==========   ==========   ==========
</table>

Mortgage-backed  securities are insured or issued by Ginnie Mae, Freddie Mac and
Fannie  Mae or  private  issuers,  substantially  all of  which  are  backed  by
fixed-rate mortgages.

The scheduled maturities of  available-for-sale  debt securities were as follows
as of March 31, 2007:

                                                                       Fair
                                                                       Value
                                                                  (In Thousands)
Due within one year                                                 $       98
Due after one year through five years                                    3,534
Due after five years through ten years                                  13,652
Due after ten years                                                     13,797
Mortgage-backed securities                                              11,941
                                                                    ----------
                                                                    $   43,022
                                                                    ==========

Proceeds from sales of  available-for-sale  securities  for the year ended March
31, 2007 were $14.9  million.  Gross  realized  gains on those sales amounted to
$49,000 and $22,000 of gross  realized  losses were  recognized.  Proceeds

                                       61
<page>

from sales of  available-for-sale  securities  for the year ended March 31, 2006
were $4.6 million.  Gross  realized gains on those sales amounted to $33,000 and
no gross realized losses were  recognized.  The tax expense  applicable to these
net  realized  gains in the years  ended  March 31,  2007 and 2006  amounted  to
$11,000 and $13,000, respectively.

The aggregate amortized cost basis and fair value of securities of issuers which
exceeded 10% of stockholders' equity were as follows as of March 31, 2007:

                                                            Amortized
                                                               Cost       Fair
                                                              Basis       Value
                                                             --------   --------
                                                                (In Thousands)
                  Issuer
-------------------------------------------------
Asset Management Fund - Ultra Short Mortgage Fund            $  5,295   $  5,138
Asset Management Fund - Ultra Short Fund                        1,342      1,309
                                                             --------   --------

Total Asset Management Funds                                 $  6,637   $  6,447
                                                             ========   ========

As of March 31, 2007 and 2006, securities with carrying amounts of $12.1 million
and $9.5 million,  respectively,  were pledged to secure  securities  sold under
agreements to repurchase.

The aggregate fair value and unrealized losses of securities that have been in a
continuous  unrealized-loss  position for less than twelve months and for twelve
months or more, and are not other than temporarily  impaired,  are as follows as
of March 31, 2007:

<table>
<caption>

                                                  Less than 12 Months       12 Months or Longer            Total
                                               -----------------------   -----------------------   -----------------------
                                                 Fair       Unrealized     Fair       Unrealized     Fair       Unrealized
                                                 Value        Losses       Value        Losses       Value        Losses
                                               ----------   ----------   ----------   ----------   ----------   ----------

                                                   <c>            <c>      <c>            <c>        <c>            <c>
                                                                              (In Thousands)
Debt securities issued by the U.S. Treasury
   and other U.S. government corporations
   and agencies                                $    3,072   $       11   $   16,349   $      224   $   19,421   $      235
Debt securities issued by states of the
   United States and political subdivisions
   of the states                                    1,873           34        3,806           63        5,679           97
Mortgage-backed securities                            839            3        7,063          132        7,902          135
Marketable equity securities                           --           --        6,447          190        6,447          190
                                               ----------   ----------   ----------   ----------   ----------   ----------
       Total temporarily impaired securities   $    5,784   $       48   $   33,665   $      609   $   39,449   $      657
                                               ==========   ==========   ==========   ==========   ==========   ==========
</table>

Management   has   assessed   the    securities    which   are   classified   as
available-for-sale  and in an  unrealized  loss  position  at March 31, 2007 and
determined the decline in fair value below  amortized  cost to be temporary.  In
making  this  determination   management  considered  the  period  of  time  the
securities were in a loss position,  the percentage decline in comparison to the
securities'  amortized  cost,  the  financial  condition  of the  issuer and the
Company's  ability  and intent to hold these  securities  until their fair value
recovers to their amortized cost.  Management believes the decline in fair value
is primarily  related to the current  interest rate  environment  and not to the
credit deterioration of the individual issuer.


At March 31, 2007, the Company's  unrealized losses in equity securities are not
considered impaired on an  other-than-temporary  basis. The Company's investment
in marketable  equity  securities has no contractual  maturity.  Therefore,  the
intent to hold these securities by itself does not guarantee that the decline in
market  value  will  be  temporary.  Consequently,  to  determine  whether  such
securities  are  other-than-temporarily  impaired,  the  Company  considers  the
severity of the unrealized losses, whether it has the ability and intent to hold
these investments until there is a market price recovery in the securities,  and
whether  evidence  indicating  the  cost of  these  investments  is  recoverable
outweighs  evidence to the contrary.  As the  forecasted  market price  recovery
period lengthens, the

                                       62
<page>

uncertainties  inherent in the estimate  increase,  impacting the reliability of
that estimate. Thus market price recoveries must reasonably be expected to occur
within an acceptable forecast period. Otherwise, a lack of objective evidence to
support  recovery of these  securities'  cost over a  reasonable  period of time
could result in an other-than-temporary impairment charge.

NOTE 4 - LOANS
--------------

Loans consisted of the following as of March 31:

                                                        2007             2006
                                                     ---------        ---------
                                                           (In Thousands)
Mortgage loans:
   Residential loans:
     One-to four-family                              $ 123,039        $  94,754
     Multi-family                                        5,778            5,850
   Commercial real estate                               50,126           37,453
   Construction loans                                    7,678            7,208
                                                     ---------        ---------
           Total mortgage loans                        186,621          145,265
Consumer loans 2,776                                     1,023
Commercial loans                                        11,058            3,838
                                                     ---------        ---------
                                                       200,455          150,126
Deferred loan origination fees, net                       (133)            (377)
Allowance for loan losses                               (1,875)          (1,636)
                                                     ---------        ---------
           Loans, net                                $ 198,447        $ 148,113
                                                     =========        =========

Certain  directors and executive  officers of the Company and companies in which
they have  significant  ownership  interest  were  customers of the  Association
during the year ended  March 31,  2007.  Total  loans to such  persons and their
companies  amounted to $2.9 million as of March 31, 2007.  During the year ended
March 31, 2007,  principal  payments  totaled  $486,000 and  principal  advances
amounted to $574,000.

Changes in the  allowance  for loan  losses  were as follows for the years ended
March 31:

                                                            2007          2006
                                                           -------      -------
                                                              (In Thousands)
Balance at beginning of period                             $ 1,636      $ 1,437
Provision for loan losses                                      242          210
Recoveries of loans previously charged off                       2            6
Loans charged off                                               (5)         (17)
                                                           -------      -------
Balance at end of period                                   $ 1,875      $ 1,636
                                                           =======      =======

The  following  table  sets forth  information  regarding  nonaccrual  loans and
accruing loans 90 days or more overdue as of March 31:

                                                            2007          2006
                                                           -------      -------
                                                              (In Thousands)
Total nonaccrual loans                                     $   824      $   600
                                                           =======      =======

Accruing loans which are 90 days or more overdue           $    --      $    --
                                                           =======      =======

                                       63
<page>

Information about loans that met the definition of an impaired loan in Statement
of Financial Accounting Standards No. 114 was as follows as of March 31:

<table>
<caption>
                                                                              2007                         2006
                                                                  ---------------------------   ---------------------------
                                                                  Recorded       Related        Recorded       Related
                                                                  Investment     Allowance      Investment     Allowance
                                                                  In Impaired    For Credit     In Impaired    For Credit
                                                                  Loans          Losses         Loans          Losses
                                                                  ------------   ------------   ------------   ------------

                                                               <c>            <c>            <c>            <c>
                                                                                      (In Thousands)
Loans for which there is a related allowance for credit losses    $         --   $         --   $         --   $         --

Loans for which there is no related allowance for credit losses             --             --             --             --
                                                                  ------------   ------------   ------------   ------------

           Totals                                                 $         --   $         --   $         --   $         --
                                                                  ============   ============   ============   ============

Average recorded investment in impaired loans during the
   year ended March 31                                            $         --                  $        161
                                                                  ============                  ============

Related amount of interest income  recognized during the time,
   in the year ended March 31 that the loans were impaired

           Total recognized                                       $         --                  $         --
                                                                  ============                  ============
           Amount recognized using a cash-basis method
              of accounting                                       $         --                  $         --
                                                                  ============                  ============
</table>

NOTE 5 - PREMISES AND EQUIPMENT, NET
------------------------------------

The following is a summary of premises and equipment as of March 31:

                                              2007       2006
                                            -------    -------
                                              (In Thousands)
Land                                        $   364    $   364
Buildings and building improvements           2,045      1,917
Furniture, fixtures and equipment             2,013      2,064
Leasehold improvements                        1,226      1,392
                                            -------    -------
                                              5,648      5,737
Accumulated depreciation and amortization    (1,404)    (1,296)
                                            -------    -------
                                            $ 4,244    $ 4,441
                                            =======    =======

                                       64
<page>

NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS
---------------------------------------------

The changes in the carrying  amounts of goodwill and other  intangibles  for the
years ended March 31, 2007 and 2006 were as follows:

                                                 Core Deposit
                                    Goodwill      Intangibles
                                  ------------   ------------
                                         (In Thousands)
Balance, March 31, 2005                  1,090            775
Amortization expense                        --            (88)
                                  ------------   ------------

Balance, March 31, 2006                  1,090            687
Amortization expense                        --            (88)
                                  ------------   ------------

Balance, March 31, 2007           $      1,090   $        599
                                  ============   ============

Estimated annual  amortization  expense of identifiable  intangible assets is as
follows:
                                                              (In Thousands)
Years Ended March 31,
         2008                                                        88
         2009                                                        88
         2010                                                        88
         2011                                                        88
         2012                                                        88
         Thereafter                                                 159
                                                                   ----
                  Total                                            $599
                                                                   ====

A summary of acquired  identifiable  intangible assets is as follows as of March
31, 2007:


                              Gross Carrying    Accumulated      Net Carrying
                                  Amount        Amortization        Amount
                              --------------    ------------     ------------
                                              (In Thousands)
Core deposit intangibles           $886            $(287)            $599

There  was no  impairment  recorded  in  fiscal  years  2007 and  2006  based on
valuations at March 31, 2007 and 2006.

NOTE 7 - DEPOSITS
-----------------

The aggregate  amount of time deposit  accounts in  denominations of $100,000 or
more was  $21.1  million  and  $16.5  million  as of March  31,  2007 and  2006,
respectively.  With the exception of self-directed retirement accounts which are
insured  up to  $250,000,  deposits  in excess  of  $100,000  are not  federally
insured.

For time deposits as of March 31, 2007, the scheduled maturities for each of the
following five years ended March 31, are:

                                                  (In Thousands)
              2008                                    $65,296
              2009                                     14,911
              2010                                      5,435
              2011                                      4,136
              2012                                        333
                                                      -------
                Total                                 $90,111
                                                      =======


                                       65
<page>

NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES

Advances  consist of funds  borrowed  from the Federal  Home Loan Bank of Boston
(the "FHLB").

Maturities  of advances  from the FHLB for the years ending after March 31, 2007
are summarized as follows:

                                                    (In Thousands)
         2008                                            4,001
         2009                                            3,569
         2010                                            4,655
         2011                                            8,642
         2012                                            2,763
         Thereafter                                      9,957
                                                       -------
                                                       $33,587
                                                       =======

Amortizing  advances  are being repaid in equal  monthly  payments and are being
amortized  from  the  date of the  advance  to the  maturity  date  on a  direct
reduction basis.

Borrowings from the FHLB are secured by a blanket lien on qualified  collateral,
consisting primarily of loans with first mortgages secured by one-to four-family
properties and other qualified assets.

At March 31, 2007,  the  interest  rates on FHLB  advances  ranged from 3.11% to
5.21%.  At March 31, 2007, the weighted  average  interest rate on FHLB advances
was 4.50%.

NOTE 9 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
-------------------------------------------------------

The  securities  sold under  agreements  to  repurchase as of March 31, 2007 are
securities sold,  primarily on a short-term basis, by the Company that have been
accounted  for not as sales  but as  borrowings.  The  securities  consisted  of
collateralized  mortgage obligations.  The securities were held in the Company's
safekeeping  account  under  the  control  of the  Company  and  pledged  to the
purchasers of the securities.  The purchasers have agreed to sell to the Company
substantially identical securities at the maturity of the agreements.

NOTE 10 - INCOME TAXES
----------------------

The  components  of income tax  expense are as follows for the years ended March
31:


                                                           2007            2006
                                                          -----           -----
                                                              (In Thousands)
Current:
   Federal                                                $ 511           $ 702
   State                                                    133             121
                                                          -----           -----
                                                            644             823
                                                          -----           -----
Deferred:
   Federal                                                 (113)           (146)
   State                                                    (26)            (33)
                                                          -----           -----
                                                           (139)           (179)
                                                          -----           -----
     Total income tax expense                             $ 505           $ 644
                                                          =====           =====

                                       66
<page>

The reasons for the  differences  between the statutory  federal income tax rate
and the effective tax rates are  summarized as follows for the years ended March
31:

<table>
<caption>

                                                                              2007        2006
                                                                            -------     -------

                                                                             <c>         <c>
Federal income tax at statutory rate                                           34.0%       34.0%
Increase (decrease) in tax resulting from:
   Nontaxable interest income                                                  (8.0)       (4.6)
   Nontaxable life insurance income                                            (5.5)       (2.6)
   Excess book basis of Employee Stock Ownership Plan                           5.9         2.5
   Other adjustments                                                            3.1         0.7
State tax, net of federal tax benefit                                           4.8         3.0
                                                                            -------     -------
     Effective tax rates                                                       34.3%       33.0%
                                                                            =======     =======

<caption>

The Company had gross deferred tax assets and gross deferred tax  liabilities as
follows as of March 31:

                                                                              2007        2006
                                                                            -------     -------

                                                                             <c>         <c>
                                                                              (In Thousands)

Deferred tax assets:
   Excess of allowance for loan losses over tax bad debt reserve            $   730     $   637
   Deferred loan origination fees                                                52         147
   Net unrealized holding loss on available-for-sale securities                 220         387
   Deferred compensation                                                        434         268
   FASB Statement No. 158 adjustment                                              8          --
   Other                                                                         43          14
                                                                            -------     -------
           Gross deferred tax assets                                          1,487       1,453
                                                                            -------     -------

Deferred tax liabilities:
   Premises and equipment, principally due to differences in depreciation       (92)        (28)
   Net mark-to-market adjustments                                              (258)       (268)
Other                                                                            (5)         (5)
                                                                            -------     -------
           Gross deferred tax liabilities                                      (355)       (301)
                                                                            -------     -------
Net deferred tax asset                                                      $ 1,132     $ 1,152
                                                                            =======     =======
</table>

Based on the Company's  historical and current pretax  earnings and  anticipated
results of future  operations,  management  believes the existing net deductible
temporary  differences  will  reverse  during  periods in which the Company will
generate sufficient net taxable income, and that it is more likely than not that
the Company will  realize the net  deferred tax assets  existing as of March 31,
2007.

Legislation  was enacted in 1996 to repeal  most of Section 593 of the  Internal
Revenue Code pertaining to how a qualified  savings  institution  calculates its
bad debt deduction for federal income tax purposes.  This repeal  eliminated the
percentage-of-taxable-income method to compute the tax bad debt deduction. Under
the  legislation,  the  recapture of the pre-1988 tax bad debt reserves has been
suspended and would occur only under very limited  circumstances.  Therefore,  a
deferred tax liability has not been provided for this temporary difference.  The
Company's  pre-1988  tax  bad  debt  reserves,  which  are  not  expected  to be
recaptured,  amount to $3.3 million. The potential tax liability on the pre-1988
reserves for which no deferred income taxes have been provided is  approximately
$1.3 million as of March 31, 2007.

NOTE 11 - BENEFIT PLANS
-----------------------

The Association has a  non-contributory  defined benefit  trusteed  pension plan
through  the  Financial  Institutions  Retirement  Fund  covering  all  eligible
employees.  The Association contributed $383,000 and $390,000 to the plan during
the years ended March 31, 2007 and 2006, respectively. The Association's plan is
part of a multi-employer plan for which detail as to the Association's  relative
position is not readily determinable. Effective January 1, 2006,

                                       67
<page>

the Association excluded from membership in the plan those employees hired on or
after  January 1, 2006.  Effective  February  1, 2007,  the  Association  ceased
benefit accruals under the plan.

The Association  established  the Enfield  Federal Savings and Loan  Association
Director Fee Continuation  Plan (the "Plan") to provide the directors serving on
the board as of the date of the plan's  implementation  with a retirement income
supplement. The plan has six directors. Participant-directors are entitled to an
annual benefit,  as of their Retirement Date, equal to $1,000 for each full year
of  service as a  director  from June 1,  1995,  plus $250 for each full year of
service as a director  prior to June 1, 1995,  with a maximum  benefit of $6,000
per year payable in ten annual installments.

The following table sets forth information about the Plan as of March 31, 2007:

Change in projected benefit obligation:                           (In Thousands)
  Benefit obligation at beginning of year                           $     159
  Service cost                                                             14
  Interest cost                                                            11
  Benefits paid                                                           (18)
  Prior service cost                                                       14
  Actuarial loss                                                           10
                                                                    ---------
           Benefit obligation at end of year                              190
  Plan assets                                                              --
                                                                    ---------
  Funded status/accrued pension cost included in other liabilities  $    (190)
                                                                    =========

Amounts recognized in accumulated other  comprehensive  loss, before tax effect,
consist of the following as of March 31, 2007:

                                                              (In thousands)
Unrecognized net loss                                              $10
Unrecognized prior service cost                                     11
                                                                   ---
                                                                   $21
                                                                   ===


The accumulated benefit obligation for the Plan was $190,000 at March 31, 2007.

Components of net periodic cost:                                  (In Thousands)
     Service cost                                                      $ 14
     Interest cost                                                       11
     Unrecognized prior service cost recognized                           3
                                                                       ----
              Net periodic pension cost                                  28
                                                                       ----

Other changes in benefit obligations recognized in other
  comprehensive  loss:
     Unrecognized net loss                                               10
     Prior service cost                                                  11
                                                                       ----
              Total recognized in other comprehensive loss               21
                                                                       ----
              Total recognized in net periodic pension cost and
                 other comprehensive loss                              $ 49
                                                                       ====

The  estimated  unrecognized  loss and prior service cost that will be amortized
from accumulated  other  comprehensive  loss into net periodic benefit cost over
the year ended March 31, 2008 is $6,000.

The discount rate used in determining the projected  benefit  obligation and net
periodic benefit cost was 6.0% for the year ended March 31, 2007.

                                       68
<page>

Estimated future benefit payments are as follows for the years ended March 31:

                                       (In Thousands)
         2008                              $  18
         2009                                 18
         2010                                 24
         2011                                 24
         2012                                 24
         2013-2017                           102

The Association  sponsors a 401(k) Plan whereby the  Association  matches 50% of
the first 6% of  employee  contributions.  During the years ended March 31, 2007
and 2006, the Association  contributed  $61,000 and $52,000,  respectively under
this plan.

The  Association has an Executive  Supplemental  Retirement Plan Agreement and a
Life Insurance Endorsement Method Split Dollar Plan Agreement for the benefit of
the President of the Association. The plan provides the President with an annual
retirement benefit equal to approximately  $173,000 over a period of 240 months.
Following  the  initial  240 month  period,  certain  additional  amounts may be
payable to the President  until his death based on the  performance  of the life
insurance  policies  that the  Association  has acquired as an informal  funding
source for its  obligation  to the  President.  The income  recorded on the life
insurance  policies  amounted to $154,000 and $150,000 for the years ended March
31, 2007 and 2006, respectively. A periodic amount is being expensed and accrued
to a liability reserve account during the President's  active employment so that
the  full  present  value  of the  promised  benefit  will  be  expensed  at his
retirement.  The  expense of this plan to the  Association  for the years  ended
March 31, 2007 and 2006 was $245,000 and $109,000,  respectively. The cumulative
liability for this plan is reflected in other  liabilities  on the  consolidated
balance  sheets as of March 31,  2007 and 2006 in the  amounts of  $764,000  and
$519,000, respectively.

The Association formed a Rabbi Trust for the Executive  Supplemental  Retirement
Plan. The Trust's assets  consist of split dollar life insurance  policies.  The
cash  surrender  values  of  the  policies  are  reflected  as an  asset  on the
consolidated  balance sheets. As of March 31, 2007 and 2006, total assets in the
Rabbi Trust were $4.0 million and $3.9 million, respectively.

The  Association  adopted  the  Enfield  Federal  Savings  and Loan  Association
Supplemental Executive Retirement Plan (SERP),  effective June 4, 2002. The SERP
provides restorative payments to executives designated by the Board of Directors
who are  prevented  by certain  provisions  of the  Internal  Revenue  Code from
receiving the full benefits  contemplated  by other benefit plans.  The Board of
Directors has designated the President to participate in the Plan.

The Company and the Association  each entered into an employment  agreement with
its President.  The employment  agreements  provide for the continued payment of
specified  compensation and benefits for specified periods.  The agreements also
provide  for  termination  of  the  executive  for  cause  (as  defined  in  the
agreements)  at any time.  The  employment  agreements  provide for the payment,
under certain circumstances,  of amounts upon termination following a "change in
control" as defined in the  agreements.  The agreements also provide for certain
payments in the event of the officer's  termination  for other than cause and in
the case of voluntary termination.

The Association  maintains change in control  agreements with several employees.
The  agreements  are  renewable   annually.   The  agreements  provide  that  if
involuntary  termination or, under certain circumstances,  voluntary termination
follows a change in control of the  Association,  the employee would be entitled
to receive a  severance  payment  equal to a multiple  of his "base  amount," as
defined under the Internal  Revenue Code.  The  Association  would also continue
and/or  pay for  life,  health  and  disability  coverage  for a period  of time
following termination.

NOTE 12 - STOCK COMPENSATION PLANS
----------------------------------

In 2003, the Company adopted the New England  Bancshares,  Inc. 2003 Stock-Based
Incentive  Plan (the "2003 Plan") which  includes  grants of options to purchase
Company stock and awards of Company stock.  The number of shares of

                                       69
<page>

common  stock  reserved  for grants and awards  under the 2003 Plan is  473,660,
consisting  of 338,327  shares for stock  options and  135,333  shares for stock
awards.  All  employees  and outside  directors  of the Company are  eligible to
participate in the 2003 Plan.

In 2006,  the  Company  adopted  the New England  Bancshares,  Inc.  2006 Equity
Incentive  Plan (the "2006 Plan") which  includes  grants of options to purchase
Company stock and awards of Company stock.  The number of shares of common stock
reserved  for grants and awards  under the 2006 Plan is 274,878,  consisting  of
196,342 shares for stock options and 78,536 shares for stock awards.

The 2003 and 2006  Plans  define  the stock  option  exercise  price as the fair
market  value  of the  Company  stock  at the  date of the  grant.  The  Company
determines the term during which a participant may exercise a stock option,  but
in no event may a  participant  exercise a stock option more than ten years from
the date of grant. The stock options vest in installments over five years.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions  used for stock  option  grants in the year ended March 31, 2007 and
2006.

                                                       2007              2006
                                                       ----              ----
Dividend yield                                         0.93%             1.11%
Expected life                                       10 years          10 years
Expected volatility                                    14.0%             34.0%
Risk-free interest rate                                4.80%             4.54%

A summary of the status of the Plans as of March 31,  2007 and 2006 and  changes
during the years then ended is presented below:

<table>
<caption>
                                                      2007                         2006
                                         -----------------------------  -----------------------------
                                                       Weighted-Average               Weighted-Average
                                            Shares      Exercise Price     Shares      Exercise Price
                                         ------------   --------------  ------------   --------------

                                           <c>        <c>                 <c>        <c>
Outstanding at beginning of year              252,004    $       6.68        254,740    $       6.67
Granted                                       108,563           12.84          2,000           10.81
Forfeited                                      (3,789)           7.73         (4,736)           7.81
                                         ------------                   ------------
Outstanding at end of year                    356,778    $       8.55        252,004    $       6.68
                                         ============                   ============

Options exercisable at year-end               186,195                        135,794
Weighted-average fair value of options
   granted during the year               $       4.14                   $       4.93
</table>

The following table summarizes information about stock options outstanding as of
March 31, 2007:

<table>
<caption>
                 Options Outstanding                              Options Exercisable
--------------------------------------------------------     --------------------------------
    Number        Weighted-Average                              Number
 Outstanding         Remaining          Weighted-Average      Exercisable     Weighted-Average
as of 3/31/07     Contractual Life       Exercise Price      as of 3/31/07     Exercise Price
-------------     ----------------      ----------------     -------------     --------------

                   <c>                     <c>                <c>                <c>
   213,537            5.9 years               $6.40              171,587            $6.40
    32,678            7.1 years                8.17               14,208             8.17
     2,000            8.9 years               10.81                  400            10.81
   108,563            9.4 years               12.84                  ---              ---
   -------                                                       -------
   356,778            7.1 years                8.55              186,195             6.54
   =======                                                       =======
</table>

Under the 2003 and 2006 Plans,  common stock of the Company may be granted at no
cost to employees and outside  directors of the Company.  Plan  participants are
entitled to cash  dividends  and to vote such  shares.  Such shares vest in five
equal annual installments. Upon issuance of shares of restricted stock under the
Plans, unearned

                                       70
<page>

compensation  equivalent  to the market value at the date of grant is charged to
the capital  accounts and  subsequently  amortized to expense over the five-year
vesting period. In February 2003, 86,251 shares were awarded under the 2003 Plan
and in  September  2006,  53,189  shares were awarded  under the 2006 Plan.  The
awards vest in installments over five years. The compensation cost that has been
charged  against  income for the  granting  of stock  awards  under the plan was
$197,000 and $111,000 for the years ended March 31, 2007 and 2006, respectively.

Upon a change in control as defined in the 2003 and 2006 Plans,  options held by
participants will become  immediately  exercisable and shall remain  exercisable
until the  expiration  of the term of the  option,  regardless  of  whether  the
participant  is employed or in service  with the  Company;  and all stock awards
held by a participant will immediately vest and further restrictions lapse.

As of March 31,  2007,  there was  $640,000 of  unrecognized  compensation  cost
related to unvested stock options granted under the Plans. That cost is expected
to be recognized over a weighted-average period of 3.3 years.

NOTE 13 - EMPLOYEE STOCK OWNERSHIP PLAN
---------------------------------------

On June 4,  2002,  the  date  the  mutual  holding  company  reorganization  was
consummated,  the  Association  implemented the Enfield Federal Savings and Loan
Association  Employee Stock Ownership Plan (the "ESOP")  effective as of January
1, 2002. On June 4, 2002, the ESOP  purchased  73,795 shares of the common stock
of the Company (174,768 as adjusted for the 2.3683 share exchange).  To fund the
purchases,  the ESOP  borrowed  $738,000  from the  Company.  The  borrowing  is
currently  at an  interest  rate of 4.75% and is to be  repaid  in equal  annual
installments  through  December 31, 2011.  In fiscal  2006,  the ESOP  purchased
246,068 shares of common stock in the second-step conversion with a $2.5 million
loan from the  Company,  which has a 15 year term at an interest  rate of 7.25%.
Dividends paid on unreleased  shares are used to reduce the principal balance of
the loan.  The  collateral  for the borrowing is the common stock of the Company
purchased  by the  ESOP.  Contributions  by the  Association  to  the  ESOP  are
discretionary;  however, the Association intends to make annual contributions to
the ESOP in an  aggregate  amount at least equal to the  principal  and interest
requirements  on the  debt.  The  shares of stock of the  Company  are held in a
suspense  account until released for allocation among  participants.  The shares
will be released annually from the suspense account and the released shares will
be  allocated  among  the  participants  on  the  basis  of  the   participant's
compensation for the year of allocation compared to all other  participants.  As
any shares are  released  from  collateral,  the  Company  reports  compensation
expense  equal to the current  market price of the shares and the shares will be
outstanding  for  earnings-per-share  purposes.  The  shares  not  released  are
reported as unearned ESOP shares in the capital  accounts section of the balance
sheet. ESOP expense for the years ended March 31, 2007 and 2006 was $421,000 and
$210,000, respectively.

The ESOP shares as of March 31 were as follows:

                                                        2007             2006
                                                     ----------       ----------
Allocated shares                                         95,038           66,701
Unreleased shares                                       317,063          350,945
                                                     ----------       ----------
Total ESOP shares                                       412,101          417,646
                                                     ==========       ==========

Fair value of unreleased shares                      $4,277,180       $3,762,130
                                                     ==========       ==========

NOTE 14 - REGULATORY MATTERS
----------------------------

The Company,  as a savings and loan holding  company,  is not subject to capital
requirements.   The  Association  is  subject  to  various   regulatory  capital
requirements  administered  by the  federal  banking  agencies.  Failure to meet
minimum  capital  requirements  can  initiate  certain  mandatory  and  possibly
additional discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Association's financial statements.  Under capital
adequacy  guidelines and the regulatory  framework for prompt corrective action,
the Association must meet specific capital guidelines that involve  quantitative
measures  of its assets,  liabilities  and  certain  off-balance-sheet  items as
calculated  under   regulatory   accounting   practices.   Capital  amounts  and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.

                                       71
<page>

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Association to maintain minimum amounts and ratios (set forth in the
table  below) of total and Tier 1 capital  (as  defined in the  regulations)  to
risk-weighted  assets (as  defined),  of Core  capital (as  defined) to adjusted
tangible  assets (as  defined)  and  Tangible  capital (as  defined) to Tangible
assets (as defined).  Management  believes,  as of March 31, 2007 and 2006, that
the Association meets all capital adequacy requirements to which it is subject.

As of March 31,  2007,  the most recent  notification  from the Office of Thrift
Supervision categorized the Association as well capitalized under the regulatory
framework for prompt  corrective  action.  To be categorized as well capitalized
the Association must maintain minimum total risk-based,  Tier 1 risk-based, Core
and Tangible  capital ratios as set forth in the table.  There are no conditions
or events since that  notification  that  management  believes  have changed the
Association's category.

The  Association's  actual capital  amounts and ratios are also presented in the
table.

<table>
<caption>
                                                                                                      To Be Well
                                                                                                   Capitalized Under
                                                                                 For Capital       Prompt Corrective
                                                              Actual          Adequacy Purposes    Action Provisions
                                                        -----------------    ------------------    -----------------
                                                        Amount      Ratio      Amount     Ratio    Amount       Ratio
                                                        ------      -----      ------     -----    ------       -----

                                                      <c>        <c>         <c>         <c>     <c>          <c>
                                                                        (Dollar Amounts in Thousands)
As of March 31, 2007:

   Total Capital (to Risk Weighted Assets)              $43,350     25.26%     $13,730    > 8.0%   $17,162    > 10.0%
                                                                                          -                   -

   Tangible Capital (to Tangible Assets)                 41,476     14.66        4,243    > 1.5        N/A       N/A
                                                                                          -

   Core Capital (to Adjusted Tangible Assets)            41,476     14.66       11,315    > 4.0     14,143     > 5.0
                                                                                          -                    -

   Tier 1 Capital (to Risk Weighted Assets)              41,476     24.17          N/A    N/A       10,297     > 6.0
                                                                                                               -

As of March 31, 2006:

   Total Capital (to Risk Weighted Assets)              $42,179     28.75%     $11,738    > 8.0%   $14,673    > 10.0%
                                                                                          -                   -

   Tangible Capital (to Tangible Assets)                 40,543     15.77        3,855    > 1.5        N/A       N/A
                                                                                          -

   Core Capital (to Adjusted Tangible Assets)            40,543     15.77       10,281    > 4.0     12,851     > 5.0
                                                                                          -                    -

   Tier 1 Capital (to Risk Weighted Assets)              40,543     27.63       N/A       N/A        8,804     > 6.0
                                                                                                               -
</table>

The  Association  will not be able to  declare  or pay a cash  dividend  on,  or
repurchase  any of its common  stock,  if the  effect  thereof  would  cause the
regulatory  capital of the  Association to be reduced below the amount  required
under OTS rules and regulations.

                                       72
<page>

NOTE 15 - EARNINGS PER SHARE (EPS)
----------------------------------

Reconciliation  of the numerators and  denominators of the basic and diluted per
share computations for net income are as follows:

<table>
<caption>
                                                                 Income         Shares       Per-Share
                                                              (Numerator)    (Denominator)     Amount
                                                              -----------    -------------     ------

                                                           <c>               <c>         <c>
                                                             (In Thousands)
Year ended March 31, 2007
   Basic EPS
     Net income and income available to common stockholders   $        970      4,945,603   $       0.20
     Effect of dilutive securities options                              --        179,964
                                                              ------------   ------------
   Diluted EPS
     Income available to common stockholders and
       assumed conversions                                    $        970      5,125,567   $       0.19
                                                              ============   ============

Year ended March 31, 2006
   Basic EPS
     Net income and income available to common stockholders   $      1,309      4,933,037   $       0.27
     Effect of dilutive securities options                              --        113,180
                                                              ------------   ------------
   Diluted EPS
     Income available to common stockholders and
       assumed conversions                                    $      1,309      5,046,217   $       0.26
                                                              ============   ============
</table>

NOTE 16 - COMMITMENTS AND CONTINGENT LIABILITIES
------------------------------------------------

The  Company is  obligated  under  non-cancelable  operating  leases for banking
premises and equipment  expiring  between  fiscal year 2008 and 2031.  The total
minimum  rental due in future  periods  under these  existing  agreements  is as
follows as of March 31, 2007:

         Year Ended March 31                                (In Thousands)
         -------------------
                2008                                            $  447
                2009                                               426
                2010                                               425
                2011                                               433
                2012                                               458
                Thereafter                                       8,893
                                                               -------
                  Total minimum lease payments                 $11,082
                                                               =======

Certain  leases  contain  provisions  for  escalation of minimum lease  payments
contingent  upon increases in real estate taxes and percentage  increases in the
consumer price index.  Certain leases contain options to extend for periods from
one to five years.  The total rental  expense  amounted to $540,000 and $252,000
for the years ended March 31, 2007 and 2006, respectively.

                                       73
<page>

NOTE 17 - OTHER COMPREHENSIVE INCOME (LOSS)
-------------------------------------------

Other  comprehensive  income  (loss) for the years ended March 31, 2007 and 2006
are as follows:

<table>
<caption>

                                                                            March 31, 2007
                                                                 --------------------------------------
                                                                 Before Tax      Tax         Net of Tax
                                                                   Amount       Effects        Amount
                                                                 ----------    ----------    ----------

                                                              <c>           <c>           <c>
                                                                         (Dollars in Thousands)
Net unrealized holding gains on available-for-sale securities    $      462    $     (180)   $      282
Reclassification adjustment for realized gains in net income            (32)           13           (19)
                                                                 ----------    ----------    ----------
Unrealized gains on available-for-sale securities                       430          (167)          263
Adjustment to initially apply SFAS No. 158                              (21)            8           (13)
                                                                 ----------    ----------    ----------

Total                                                            $      409    $     (159)   $      250
                                                                 ==========    ==========    ==========
<caption>

                                                                            March 31, 2006
                                                                 --------------------------------------
                                                                 Before Tax      Tax         Net of Tax
                                                                   Amount       Effects        Amount
                                                                 ----------    ----------    ----------

                                                              <c>           <c>           <c>
                                                                         (Dollars in Thousands)
Net unrealized holding losses on available-for-sale securities   $     (279)   $      108    $     (171)
Reclassification adjustment for realized gains in net income            (33)           13           (20)
                                                                 ----------    ----------    ----------

Total                                                            $     (312)   $      121    $     (191)
                                                                 ==========    ==========    ==========
</table>

NOTE 18 - FINANCIAL INSTRUMENTS
-------------------------------

The Company is party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing  needs of its  customers.  These
financial instruments include commitments to originate loans, standby letters of
credit  and  unadvanced  funds on loans.  The  instruments  involve,  to varying
degrees,  elements  of credit  risk in excess of the  amount  recognized  in the
balance sheets. The contract amounts of those instruments  reflect the extent of
involvement the Company has in particular classes of financial instruments.

The  Company's  exposure  to credit loss in the event of  nonperformance  by the
other party to the financial instrument for loan commitments and standby letters
of credit is represented by the contractual  amounts of those  instruments.  The
Company  uses the same credit  policies in making  commitments  and  conditional
obligations as it does for on-balance sheet instruments.

Commitments  to originate  loans are  agreements to lend to a customer  provided
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since many of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent  future cash  requirements.  The  Company  evaluates  each  customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,  if
deemed  necessary  by  the  Company  upon  extension  of  credit,  is  based  on
management's credit evaluation of the borrower.  Collateral held varies, but may
include  secured  interests  in  mortgages,   accounts  receivable,   inventory,
property, plant and equipment and income-producing properties.

Standby letters of credit are conditional  commitments  issued by the Company to
guarantee  the  performance  by a customer  to a third  party.  The credit  risk
involved in issuing  letters of credit is essentially  the same as that involved
in extending  loan  facilities to customers.  As of March 31, 2007 and 2006, the
maximum  potential amount of the Company's  obligation was $10,000 for financial
and  standby  letters of credit.  The  Company's  outstanding  letters of credit
generally  have a term of less  than one  year.  If a letter  of credit is drawn
upon, the Company may seek recourse  through the customer's  underlying  line of
credit.  If the  customer's  line of credit is also in default,  the Company may
take possession of the collateral, if any, securing the line of credit.

                                       74
<page>

The  following are carrying  amounts and estimated  fair values of the Company's
financial assets and liabilities as of March 31:

<table>
<caption>
                                                                        2007                          2006
                                                            ---------------------------   ---------------------------
                                                              Carrying      Estimated       Carrying      Estimated
                                                               Amount       Fair Value       Amount       Fair Value
                                                            ------------   ------------   ------------   ------------

                                                                <c>            <c>            <c>            <c>
                                                                                   (In Thousands)
Financial assets:
   Cash and cash equivalents                                $     18,640   $     18,640   $     38,656   $     38,656
   Interest-bearing time deposits with other banks                 1,877          1,903          4,222          4,266
   Available-for-sale securities                                  49,469         49,469         52,297         52,297
   Federal Home Loan Bank stock                                    1,979          1,979          1,417          1,417
   Loans, net                                                    198,447        197,812        148,113        144,053
   Accrued interest receivable                                     1,323          1,323            978            978

Financial liabilities:
   Deposits                                                      181,675        182,330        169,044        169,318
   Advanced payments by borrowers for taxes and insurance            796            796            969            969
   FHLB advances                                                  33,587         33,432         21,642         20,866
   Securities sold under agreements to repurchase                  9,177          9,182          7,325          7,332
   Due to broker                                                      --             --            626            626

</table>

The  carrying  amounts of  financial  instruments  shown in the above tables are
included  in the  consolidated  balance  sheets  under the  indicated  captions.
Accounting policies related to financial instruments are described in Note 2.

The notional amounts of financial instrument  liabilities with off-balance sheet
credit risk are as follows as of March 31:

                                                          2007            2006
                                                         -------         -------
                                                             (In Thousands)
Commitments to originate loans                           $ 2,947         $ 3,772
Standby letters of credit                                     10              10
Unadvanced portions of loans:
   Construction                                            6,281           5,462
   Home equity                                             1,726           1,789
   Commercial lines of credit                              4,300           3,251
                                                         -------         -------
                                                         $15,264         $14,284
                                                         =======         =======

There is no material  difference  between the notional amounts and the estimated
fair values of the off-balance sheet liabilities.

NOTE 19 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
---------------------------------------------------------

Most of the  Company's  business  activity  is  with  customers  located  within
Connecticut.  There  are no  concentrations  of credit  to  borrowers  that have
similar economic  characteristics.  The majority of the Company's loan portfolio
is  comprised  of loans  collateralized  by real estate  located in the state of
Connecticut.

NOTE 20 - RECLASSIFICATION
--------------------------

Certain  amounts in the prior year have been  reclassified to be consistent with
the current year's statement presentation.

NOTE 21 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
--------------------------------------------------

The following financial statements are for the Company (Parent Company Only) and
should be read in conjunction with the consolidated  financial statements of the
Company.

                                       75
<page>

                          NEW ENGLAND BANCSHARES, INC.
                          ----------------------------
                              (Parent Company Only)

                                 Balance Sheets
                                 --------------
                                 (In Thousands)
<table>
<caption>
                                                                                            March 31,
                                                                                        -----------------
ASSETS                                                                                    2007      2006
------                                                                                  -------   -------

                                                                                      <c>       <c>
Cash on deposit with Enfield Federal Savings and Loan Association                       $11,376   $12,025
Investment in subsidiary, Enfield Federal Savings and Loan Association                   42,852    41,711
Loan to ESOP                                                                              2,770     2,934
Accrued interest receivable                                                                  48        95
Other assets                                                                                359        32
Due from subsidiary                                                                         139        57
                                                                                        -------   -------
           Total assets                                                                 $57,544   $56,854
                                                                                        =======   =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Other liabilities                                                                       $   259   $    14
Deferred tax liability                                                                       19        19
Stockholders' equity                                                                     57,266    56,821
                                                                                        -------   -------
           Total liabilities and stockholders' equity                                   $57,544   $56,854
                                                                                        =======   =======

<caption>

                          NEW ENGLAND BANCSHARES, INC.
                          ----------------------------
                              (Parent Company Only)

                              Statements of Income
                              --------------------
                                 (In Thousands)


                                                                                       For the Years Ended
                                                                                            March 31,
                                                                                        -----------------
                                                                                          2007      2006
                                                                                        -------   -------

                                                                                     <c>       <c>
Interest income                                                                         $   762   $   114
Other expense                                                                               235        97
                                                                                        -------   -------
Income before income tax expense and equity in undistributed net income of subsidiary       527        17
Income tax expense                                                                          211         9
                                                                                        -------   -------
Income before equity in undistributed net income of subsidiary                              316         8
Equity in undistributed net income of subsidiary                                            654     1,301
                                                                                        -------   -------
Net income                                                                              $   970   $ 1,309
                                                                                        =======   =======
</table>

                                       76
<page>

                          NEW ENGLAND BANCSHARES, INC.
                          ----------------------------
                              (Parent Company Only)

                            Statements of Cash Flows
                            ------------------------
                                 (In Thousands)
<table>
<caption>

                                                                                    For the Years Ended
                                                                                         March 31,
                                                                                     2007        2006
                                                                                   --------    --------

                                                                                     <c>         <c>
Cash flows from operating activities:
   Net income                                                                      $    970    $  1,309
   Adjustments to reconcile net income to net cash used in operating activities:
     Decrease (increase) in accrued interest receivable                                  47         (89)
     Decrease in due from subsidiary                                                    525          --
     Increase in other assets                                                          (327)        (32)
     Increase (decrease) in other liabilities                                           245         (15)
     Deferred tax expense                                                                --          19
     Undistributed net income of subsidiary                                            (654)     (1,301)
                                                                                   --------    --------

   Net cash provided by (used in) operating activities                                  806        (109)
                                                                                   --------    --------

Cash flows from investing activities:
     Cash contributed to subsidiary bank                                                 --     (15,874)
     Loans to ESOP                                                                       --      (2,461)
     Principal payments received on loans to ESOP                                       164          68
                                                                                   --------    --------

   Net cash provided by (used in) investing activities                                  164     (18,267)
                                                                                   --------    --------

Cash flows from financing activities:
     Proceeds from stock offering, net of related costs                                  --      29,685
     Merger of Enfield MHC                                                               --          29
     Fractional share payout                                                             --          (2)
     Purchase of stock for equity incentive plan                                     (1,019)         --
     Payment of cash dividends on common stock                                         (600)       (283)
                                                                                   --------    --------

     Net cash (used in) provided by financing activities                             (1,619)     29,429
                                                                                   --------    --------

Net (decrease) increase in cash and cash equivalents                                   (649)     11,024
Cash and cash equivalents at beginning of year                                       12,025       1,001
                                                                                   --------    --------
Cash and cash equivalents at end of year                                           $ 11,376    $ 12,025
                                                                                   ========    ========
</table>

                                       77
<page>


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.

ITEM 8A. CONTROLS AND PROCEDURES

         The Company's  management,  including the Company's principal executive
officer and principal financial officer, have evaluated the effectiveness of the
Company's  "disclosure controls and procedures," as such term is defined in Rule
13a-15(e)  promulgated  under the  Securities  Exchange Act of 1934, as amended,
(the  "Exchange  Act").  Based upon their  evaluation,  the principal  executive
officer and principal  financial  officer  concluded  that, as of the end of the
period covered by this report, the Company's  disclosure controls and procedures
were effective for the purpose of ensuring that the  information  required to be
disclosed  in the reports that the Company  files or submits  under the Exchange
Act with the  Securities  and Exchange  Commission  (the "SEC") (1) is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
SEC's rules and forms,  and (2) is accumulated and communicated to the Company's
management,  including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure.

ITEM 8B. OTHER INFORMATION

         None.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors

         The   information   relating  to  the   directors  of  the  Company  is
incorporated   herein  by  reference  to  the  sections   captioned   "Corporate
Governance--Committees  of the Board of Directors" and "Proposal 1 - Election of
Directors"  in the  Company's  Proxy  Statement  for the 2007 Annual  Meeting of
Stockholders.

Executive Officers

         Certain  executive  officers of the Association also serve as executive
officers of the  Company.  The  day-to-day  management  duties of the  executive
officers of the Company and Association  relate  primarily to their duties as to
the  Association.  The executive  officers are elected  annually and hold office
until their successors have been elected and qualified or until they are removed
or replaced. The executive officers of the Company currently are as follows:


Name                  Age(1)                        Position(s)
----------------      ------    ------------------------------------------------
David J. O'Connor       60      President, Chief Executive Officer and Director
                                   of New England Bancshares and Enfield Federal
John F. Parda           58      Senior Vice President and Chief Loan Officer of
                                  Enfield Federal Senior Vice President and
                                  Chief Financial Officer of New England
Scott D. Nogles         37      Bancshares and Enfield Federal

--------------------------------------

(1) As of March 31, 2007.

         David J. O'Connor.  Mr. O'Connor has been the Chief Executive  Officer,
President  and  Director  of  Enfield  Federal  since  1999  and of New  England
Bancshares  since 2002.  Mr.  O'Connor  also served as the

                                       78
<page>

Company's and Enfield Federal's Chief Financial Officer from 1999 to April 2004.
Mr.  O'Connor has over 30 years of banking  experience  in New  England.  Before
joining  Enfield  Federal,  he was the Executive Vice  President,  Treasurer and
Chief  Financial  Officer  of The  Berlin  City Bank,  a  community  bank in New
Hampshire.

         John  F.  Parda.  Mr.  Parda  joined  Enfield  Federal  in 1999 as Vice
President and Senior Loan Officer. He was named Senior Vice President and Senior
Loan  Officer  in 2001.  Mr.  Parda  has over 30  years of  diversified  banking
experience  with  Connecticut  financial  institutions.  Before joining  Enfield
Federal,  he was a Vice  President and  Commercial  Loan Officer with the former
First International Bank, now a subsidiary of UPS Capital, a lender specializing
in government guaranteed loans.

         Scott D. Nogles.  Mr. Nogles joined New England  Bancshares and Enfield
Federal in 2004 as Senior Vice  President and Chief  Financial  Officer.  Before
joining Enfield  Federal,  he was Vice President and Chief Financial  Officer of
Luzerne National Bank in Luzerne,  Pennsylvania from 2003 to 2004. For the three
years prior to 2003, Mr. Nogles worked in senior accounting  positions for Asian
Bank,  Silicon  Power  Corporation  and  ThinAir  Apps,  a software  development
company. Mr. Nogles has an MBA from the University of Connecticut.

Compliance with Section 16(a) of the Exchange Act

         Reference  is made to the cover page of this  report and to the section
captioned  "Section  16(a)  Beneficial  Ownership  Reporting  Compliance" in the
Company's Proxy Statement for the 2007 Annual Meeting of Stockholders.

Disclosure of Code of Ethics and Business Conduct

         For   information   concerning  the  Company's  code  of  ethics,   the
information contained under the section captioned "Corporate Governance--Code of
Ethics and  Business  Conduct" in the  Company's  Proxy  Statement  for the 2007
Annual Meeting of Stockholders is incorporated by reference.  A copy of the code
of ethics and  business  conduct is  available,  without  charge,  upon  written
request to Nancy L. Grady,  Corporate Secretary,  New England Bancshares,  Inc.,
855 Enfield Street, Enfield, Connecticut 06082.

Corporate Governance

         For  information  regarding the audit committee and its composition and
the  audit  committee   financial  expert,  the  section  captioned   "Corporate
Governance -  Committees  of the Board of  Directors - Audit  Committee"  in the
Company's  Proxy  Statement  for the 2007  Annual  Meeting  of  Stockholders  is
incorporated by reference.

ITEM 10. EXECUTIVE COMPENSATION

         The information regarding executive compensation is incorporated herein
by  reference  to the  sections  captioned  "Corporate  Governance  - Directors'
Compensation" and "Executive  Compensation" in the Company's Proxy Statement for
the 2007 Annual Meeting of Stockholders.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

         (a)      Security Ownership of Certain Beneficial Owners

                  Information  required by this item is  incorporated  herein by
                  reference to the section  captioned  "Stock  Ownership" in the
                  Company's  Proxy  Statement  for the 2007  Annual  Meeting  of
                  Stockholders.

                                       79
<page>

         (b)      Security Ownership of Management

                  Information  required by this item is  incorporated  herein by
                  reference to the section  captioned  "Stock  Ownership" in the
                  Company's  Proxy  Statement  for the 2007  Annual  Meeting  of
                  Stockholders.

         (c)      Changes in Control

                  Management of New England Bancshares knows of no arrangements,
                  including  any  pledge  by any  person  of  securities  of New
                  England Bancshares, the operation of which may at a subsequent
                  date result in a change in control of the registrant.


         (d)      Equity Compensation Plan Information

         The  following  table  provides  information  as of March 31,  2007 for
compensation plans under which equity securities may be issued.

<table>
<caption>
--------------------------------------------------------------------------------------------------
   Plan category        Number of Securities to      Weighted-average      Number of securities
                        be issued upon exercise      exercise price of    remaining available for
                        of outstanding options,    outstanding options,    future issuance under
                          warrants and rights       warrants and rights     equity compensation
                                                                              plans (excluding
                                                                          securities reflected in
                                                                                column (a))

                                  (a)                       (b)                      (c)
--------------------------------------------------------------------------------------------------

                              <C>                       <C>                       <C>
Equity compensation
plans approved by
security holders                 356,778                   $8.55                   177,891
--------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by
security holders                     ---                     ---                       ---
--------------------------------------------------------------------------------------------------
Total                            356,778                   $8.55                   177,891
--------------------------------------------------------------------------------------------------
</table>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Relationships and Related Transactions

         For   information   regarding   certain   relationships   and   related
transactions,  the section captioned  "Transactions with Related Persons" in the
Company's  Proxy  Statement  for the 2007  Annual  Meeting  of  Stockholders  is
incorporated by reference.

Corporate Governance

         For information regarding director independence,  the section captioned
"Proposal 1 - Election of Directors" in the  Company's  Proxy  Statement for the
2007 Annual Meeting of Stockholders is incorporated by reference.

                                       80
<page>

ITEM 13. EXHIBITS

         2.1      Agreement and Plan of Merger,  dated November 21, 2006, by and
                  among, New England  Bancshares,  Inc., New England  Bancshares
                  Acquisition, Inc. and First Valley Bancorp, Inc. (1)
         3.1      Articles of Incorporation of New England Bancshares, Inc. (2)
         3.2      Bylaws of New England Bancshares, Inc. (2)
         4.0      Specimen stock certificate of New England Bancshares, Inc. (2)
         10.1     Form of Enfield Federal Savings and Loan Association  Employee
                  Stock Ownership Plan and Trust(3)
         10.2     Employment  Agreement by and between  Enfield  Federal Savings
                  and Loan Association and David J. O'Connor (4)
         10.3     Employment  Agreement  by and between New England  Bancshares,
                  Inc. and David J. O'Connor (4)
         10.4     Form of Enfield Federal Savings and Loan Association  Employee
                  Severance Compensation Plan(3)
         10.5     Enfield Federal Savings and Loan Association  Employee Savings
                  & Profit-Sharing Plan and Adoption Agreement (3)
         10.6     Enfield  Federal  Savings  and  Loan   Association   Executive
                  Supplemental Retirement Plan, as amended and restated (5)
         10.7     Form  of  Enfield   Federal   Savings  and  Loan   Association
                  Supplemental Executive Retirement Plan(3)
         10.8     Form of Enfield Federal Savings and Loan Association  Director
                  Fee Continuation Plan (3)
         10.9     Split Dollar Arrangement with David J. O'Connor (3)
         10.10    New England Bancshares,  Inc. 2003 Stock-Based Incentive Plan,
                  as amended and restated
         10.11    Change  in  Control  Agreement  by and among  Enfield  Federal
                  Savings and Loan Association, New England Bancshares, Inc. and
                  John F. Parda, as amended and restated (6)
         10.12    Change  in  Control  Agreement  by and among  Enfield  Federal
                  Savings and Loan Association, New England Bancshares, Inc. and
                  Scott D. Nogles, as amended and restated (6)
         10.13    Lease agreement with Troiano Professional Center, LLC (6)
         23.1     Consent of Shatswell, MacLeod & Company, P.C.
         31.1     Rule 13a-14(a)  /15d-14(a)  Certification  of Chief  Executive
                  Officer
         31.2     Rule 13a-14(a)  /15d-14(a)  Certification  of Chief  Financial
                  Officer
         32.1     Section 1350 Certification of Chief Executive Officer
         32.2     Section 1350 Certification of Chief Financial Officer

         --------------------
         (1)      Incorporated by reference into this document from the exhibits
                  to the Current Report on Form 8-K filed on November 28, 2006.
         (2)      Incorporated   by  reference   into  this  document  from  the
                  Company's Form SB-2,  Registration  Statement  filed under the
                  Securities Act of 1933, Registration No. 333-128277.
         (3)      Incorporated   by  reference   into  this  document  from  the
                  Company's Form SB-2,  Registration  Statement  filed under the
                  Securities Act of 1933, Registration No. 333-82856.
         (4)      Incorporated  herein by reference  into this document from the
                  exhibits  to the  Quarterly  Report  on  Form  10-QSB  for the
                  quarter ended December 31, 2005.
         (5)      Incorporated by reference into this document from the exhibits
                  to the Annual  Report on Form  10-KSB for the year ended March
                  31, 2006.
         (6)      Incorporated by reference into this document from the exhibits
                  to the Annual  Report on Form  10-KSB for the year ended March
                  31, 2005.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The information relating to the Company's principal accountant fees and
services is incorporated  herein by reference to the section captioned "Proposal
2--Ratification  of Independent  Auditors" in the Company's  Proxy Statement for
the 2006 Annual Meeting of Stockholders.

                                       81
<page>

                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                           New England Bancshares, Inc.


Date:  June 25, 2007                       By: /s/ David J. O'Connor
                                              ----------------------------------
                                              David J. O'Connor
                                              President, Chief Executive Officer
                                              and Director

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant in the  capacities and on
the dates indicated.



/s/ David J. O'Connor                      /s/ Scott D. Nogles
-----------------------------------        ------------------------------------
David J. O'Connor, President, Chief          Scott D. Nogles, Senior Vice
  Executive  Officer and Director              President and Chief Financial
  (principal executive officer)                Officer (principal financial
                                               and accounting officer)

Date:  June 25, 2007                       Date:  June 25, 2007



/s/ Peter T. Dow                           /s/ Lucien P. Bolduc
-----------------------------------        ------------------------------------
Peter T. Dow, Chairman of the Board        Lucien P. Bolduc, Director

Date:  June 25, 2007                       Date:  June 25, 2007



/s/ William C. Leary                       /s/ Myron J. Marek
-----------------------------------        ------------------------------------
William C. Leary, Director                 Myron J. Marek, Director

Date:  June 25, 2007                       Date:  June 25, 2007



/s/ Dorothy K. McCarty                     /s/ Richard K. Stevens
-----------------------------------        ------------------------------------
Dorothy K. McCarty, Director               Richard K. Stevens, Director

Date:  June 25, 2007                       Date:  June 25, 2007



/s/ Richard M. Tatoian, Esq.
-----------------------------------
Richard M. Tatoian, Esq., Director

Date:  June 25, 2007


                                       82