| X |   | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------|-----------------------------------------------------------------------------------------|

| For the quarterly period ended | March 31, 2011 |
|--------------------------------|----------------|

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

| For the transition period from |   | To |   |
|--------------------------------|--------|----|--------|

|  Highlands Bancorp, Inc.                          |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

| New Jersey                      | 27-1954096          |
|---------------------------------|---------------------|
| (State or other jurisdiction of | (I.R.S. Employer    |
| incorporation or organization)  | Identification No.) |

| 310 Route 94, Vernon, New Jersey 07462              |
|-----------------------------------------------------|
| (Address of principal executive offices) (Zip Code) |

| Registrant’s telephone number, including area code | 973-764-3200 |
|----------------------------------------------------------|--------------|

| N/A                                                                                |
|------------------------------------------------------------------------------------|
| (Former name, former address and former fiscal year, if changed since last report) |

----

|                                              |                                                                                                                  | Page   |
|---------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|--------|
| Part I – CONSOLIDATED FINANCIAL INFORMATION |                                                                                                                  | Number |
|                                              |                                                                                                                  |   |
| Item 1:                                           | Consolidated Financial Statements                                                                                     |   |   |
|                                              |                                                                                                                  |   |   |
|                                              | Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010 (Unaudited)                                    |   | 3 |
|                                              |                                                                                                                  |   |   |
|                                              | Consolidated Statements of Operations for the Three Months Ended March 31, 2011 and 2010 (Unaudited)                  |   | 4 |
|                                              |                                                                                                                  |   |   |
|                                              | Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2011 and 2010 (Unaudited) |   | 5 |
|                                              |                                                                                                                  |   |   |
|                                              | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010 (Unaudited)                  |   | 6 |
|                                              |                                                                                                                  |   |   |
|                                              | Notes to Consolidated Financial Statements (Unaudited)                                                                |   | 7 |
|                                              |                                                                                                                  |   |   |
| Item 2:                                           | Management’s Discussion and Analysis of Financial Condition and Results of Operations                           |   | 19 |
|                                              |                                                                                                                  |   |   |
| Item 3:                                           | Quantitative and Qualitative Disclosures about Market Risk                                                            |   | 26 |
|                                              |                                                                                                                  |   |   |
| Item 4:                                           | Controls and Procedures                                                                                               |   | 27 |
|                                              |                                                                                                                  |   |
|                                              |                                                                                                                  |   |
| Part II - OTHER INFORMATION                       |                                                                                                                  |   |
|                                              |                                                                                                                  |   |   |
| Item 1:                                           | Legal Proceedings                                                                                                     |   | 27 |
|                                              |                                                                                                                  |   |   |
| Item 1.A.                                         | Risk Factors                                                                                                          |   | 27 |
|                                              |                                                                                                                  |   |   |
| Item 2:                                           | Unregistered Sales of Equity Securities and Use of Proceeds                                                           |   | 27 |
|                                              |                                                                                                                  |   |   |
| Item 3:                                           | Defaults Upon Senior Securities                                                                                       |   | 27 |
|                                              |                                                                                                                  |   |   |
| Item 4:                                           | (Removed and Reserved)                                                                                                |   | 27 |
|                                              |                                                                                                                  |   |   |
| Item 5:                                           | Other Information                                                                                                     |   | 27 |
|                                              |                                                                                                                  |   |   |
| Item 6:                                           | Exhibits                                                                                                              |   | 27 |
|                                              |                                                                                                                  |   |
|                                              |                                                                                                                  |   |
| SIGNATURES                                        |                                                                                                                  | 28     |

----

Part 1.

Item 1.

| HIGHLANDS BANCORP, INC.                                                |   |                                            |    |   |         |   |
|------------------------------------------------------------------------|--------|-------------------------------------------------|---------|--------|--------------|--------|
| Consolidated Balance Sheets (Unaudited)                                |   |                                            |    |   |         |   |
|                                                                   |   |                                            |    |   |         |   |
|                                                                   |   | March 31,                                       |    |   | December 31, |   |
|                                                                   |   | 2011                                            |    |   | 2010         |   |
|                                                                   |   | (In Thousands, except share and per share data) |    |
| ASSETS                                                                 |   |                                            |    |   |         |   |
| Cash and due from banks                                                |   | $                                               | 2,457   |   |         | $      | 1,225 |   |
| Interest bearing deposits in other banks                               |   |                                            | 76      |   |         |   | 30 |   |
| Federal funds sold                                                     |   |                                            | 2,075   |   |         |   | 192 |   |
|                                                                   |   |                                            |    |   |         |   |   |   |
| Cash and Cash Equivalents                                              |   |                                            | 4,608   |   |         |   | 1,447 |   |
|                                                                   |   |                                            |    |   |         |   |   |   |
| Time deposits in other banks                                           |   |                                            | 15,686  |   |         |   | 19,596 |   |
| Securities available for sale                                          |   |                                            | 16,101  |   |         |   | 17,462 |   |
| Restricted investment in bank stock                                    |   |                                            | 520     |   |         |   | 790 |   |
| Loans receivable, net of allowance for loan losses of $1,735 and       |   |                                            |    |   |         |   |   |   |
|    $1,693, respectively                                 |   |                                            | 121,767 |   |         |   | 121,030 |   |
| Premises and equipment, net                                            |   |                                            | 842     |   |         |   | 899 |   |
| Goodwill                                                               |   |                                            | 804     |   |         |   | 804 |   |
| Accrued interest receivable                                            |   |                                            | 636     |   |         |   | 631 |   |
| Foreclosed assets                                                      |   |                                            | 799     |   |         |   | 799 |   |
| Other assets                                                           |   |                                            | 608     |   |         |   | 775 |   |
|                                                                   |   |                                            |    |   |         |   |   |   |
| Total Assets                                                           |   | $                                               | 162,371 |   |         | $      | 164,233 |   |
|                                                                   |   |                                            |    |   |         |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                   |   |                                            |    |   |         |   |   |   |
| Liabilities                                                            |   |                                            |    |   |         |   |   |   |
| Deposits:                                                              |   |                                            |    |   |         |   |   |   |
| Non-interest bearing                                                   |   | $                                               | 23,782  |   |         | $      | 26,293 |   |
| Interest-bearing                                                       |   |                                            | 116,603 |   |         |   | 110,106 |   |
| Total Deposits                                                         |   |                                            | 140,385 |   |         |   | 136,399 |   |
|                                                                   |   |                                            |    |   |         |   |   |   |
| Borrowings                                                             |   |                                            | 5,000   |   |         |   | 11,000 |   |
| Accrued interest payable                                               |   |                                            | 71      |   |         |   | 70 |   |
| Other liabilities                                                      |   |                                            | 704     |   |         |   | 657 |   |
|                                                                   |   |                                            |    |   |         |   |   |   |
| Total Liabilities                                                      |   |                                            | 146,160 |   |         |   | 148,126 |   |
|                                                                   |   |                                            |    |   |         |   |   |   |
| Stockholders' Equity                                                   |   |                                            |    |   |         |   |   |   |
| Preferred stock, Series A, liquidation preference of $1,000 per share, |   |                                            | 5,508   |   |         |   | 5,501 |   |
| 5,450 outstanding; Warrant Preferred stock Series B, liquidation       |   |                                            |    |   |         |   |   |   |
| preference of $1,000 per share, 155 outstanding                        |   |                                            |    |   |         |   |   |   |
| Common stock, no par value; authorized 10,000,000 shares; issued and   |   |                                            |    |   |         |   |   |   |
| outstanding 1,788,262 shares                                           |   |                                            | 15,972  |   |         |   | 15,972 |   |
| Accumulated deficit                                                    |   |                                            | (5,476  | )      |         |   | (5,624 | ) |
| Accumulated other comprehensive income                                 |   |                                            | 207     |   |         |   | 258 |   |
|                                                                   |   |                                            |    |   |         |   |   |   |
| Total Stockholders' Equity                                             |   |                                            | 16,211  |   |         |   | 16,107 |   |
|                                                                   |   |                                            |    |   |         |   |   |   |
| Total Liabilities and Stockholders' Equity                             |   | $                                               | 162,371 |   |         | $      | 164,233 |   |

----

| HIGHLANDS BANCORP, INC.                             |   |                             |      |   |   |   |
|-----------------------------------------------------|--------|----------------------------------|-----------|--------|--------|--------|
| Consolidated Statements of Operations (Unaudited)   |   |                             |      |   |   |   |
|                                                |   | Three Months Ended               |      |
|                                                |   | March 31,                        |      |
|                                                |   | 2011                             |      |   | 2010   |   |
|                                                |   | (In Thousands                    |      |
|                                                |   | except share and per share data) |      |
| Interest income:                                    |   |                             |      |   |   |   |
| Loans                                               |   | $                                | 1,713     |   |   | $      | 1,584 |   |
| Securities                                          |   |                             | 103       |   |   |   | 177 |   |
| Federal funds sold                                  |   |                             | 1         |   |   |   | 1 |   |
| Other interest-earning assets                       |   |                             | 42        |   |   |   | 112 |   |
| Total interest income                               |   |                             | 1,859     |   |   |   | 1,874 |   |
|                                                |   |                             |      |   |   |   |   |   |
| Interest expense:                                   |   |                             |      |   |   |   |   |   |
| Deposits                                            |   |                             | 275       |   |   |   | 402 |   |
| Borrowings                                          |   |                             | 36        |   |   |   | 44 |   |
| Total interest expense                              |   |                             | 311       |   |   |   | 446 |   |
|                                                |   |                             |      |   |   |   |   |   |
| Net Interest Income                                 |   |                             | 1,548     |   |   |   | 1,428 |   |
| Provision for loan losses                           |   |                             | 51        |   |   |   | 193 |   |
|                                                |   |                             |      |   |   |   |   |   |
| Net interest income after provision for loan losses |   |                             | 1,497     |   |   |   | 1,235 |   |
|                                                |   |                             |      |   |   |   |   |   |
| Non-interest income                                 |   |                             |      |   |   |   |   |   |
| Fees and service charges                            |   |                             | 87        |   |   |   | 98 |   |
| Gain on sale of investment securities               |   |                             | 38        |   |   |   | - |   |
| Other income                                        |   |                             | 13        |   |   |   | 9 |   |
| Total non-interest income                           |   |                             | 138       |   |   |   | 107 |   |
|                                                |   |                             |      |   |   |   |   |   |
| Non-interest expenses                               |   |                             |      |   |   |   |   |   |
| Salaries and employee benefits                      |   |                             | 585       |   |   |   | 568 |   |
| Occupancy and equipment                             |   |                             | 223       |   |   |   | 244 |   |
| Professional fees                                   |   |                             | 148       |   |   |   | 97 |   |
| Advertising and promotion                           |   |                             | 24        |   |   |   | 30 |   |
| Data processing                                     |   |                             | 149       |   |   |   | 128 |   |
| FDIC insurance premium                              |   |                             | 75        |   |   |   | 74 |   |
| Other                                               |   |                             | 204       |   |   |   | 123 |   |
| Total non-interest expense                          |   |                             | 1,408     |   |   |   | 1,264 |   |
|                                                |   |                             |      |   |   |   |   |   |
| Net income                                          |   | $                                | 227       |   |   | $      | 78 |   |
| Preferred stock dividends and accretion             |   |                             | (79       | )      |   |   | (79 | ) |
| Net income (loss) available to common stockholders  |   | $                                | 148       |   |   | $      | (1 | ) |
|                                                |   |                             |      |   |   |   |   |   |
| Net income (loss) per common share                  |   |                             |      |   |   |   |   |   |
| Basic and diluted                                   |   | $                                | 0.08      |   |   | $      | (0.00 | ) |
|                                                |   |                             |      |   |   |   |   |   |
| Weighted average common shares outstanding          |   |                             |      |   |   |   |   |   |
| Basic and diluted                                   |   |                             | 1,788,262 |   |   |   | 1,788,262 |   |

----

|                             |   | Three Months Ended |   |
|----------------------------------|--------|--------------------|--------|
|                             |   | March 31,          |   |
|                             |   | 2011               |   |   | 2010 |   |
|                             |   | (in Thousands)     |   |
|                             |   |               |   |   |   |   |
| Net income                       |   | $                  | 227    |   |   | $ | 78 |   |
| Comprehensive income (loss):     |   |               |   |   |   |   |   |   |
| Net change in unrealized gain on |   |               |   |   |   |   |   |   |
| securities available for sale    |   |               | (13    | ) |   |   | 211 |   |
| Reclassification adjustment for  |   |               |   |   |   |   |   |   |
| gains included in net income     |   |               | (38    | ) |   |   | - |   |
|                             |   |               | (51    | ) |   |   | 211 |   |
| Total comprehensive income       |   | $                  | 176    |   |   | $ | 289 |   |

----

| HIGHLANDS BANCORP, INC.                                                          |   |                         |   |   |   |   |
|----------------------------------------------------------------------------------|--------|------------------------------|--------|--------|--------|--------|
| Consolidated Statements of Cash Flows                                            |   |                         |   |   |   |   |
| (Unaudited)                                                                      |   |                         |   |   |   |   |
|                                                                             |   | Three Months Ended March 31, |   |
|                                                                             |   | 2011                         |   |   | 2010   |   |
|                                                                             |   | (In Thousands)               |   |
| Cash flows from operating activities:                                            |   |                         |   |   |   |   |
| Net income                                                                       |   | $                            | 227    |   |   | $      | 78 |   |
| Adjustments to reconcile net income to net cash                                  |   |                         |   |   |   |   |   |   |
| provided by operating activities:                                                |   |                         |   |   |   |   |   |   |
| Depreciation of premises and equipment                                           |   |                         | 61     |   |   |   | 89 |   |
| Amortization and accretion, net                                                  |   |                         | 17     |   |   |   | 14 |   |
| Gain on sale of available for sale securities                                    |   |                         | (38    | )      |   |   | - |   |
| Provision for loan losses                                                        |   |                         | 51     |   |   |   | 193 |   |
| Increase in interest receivable                                                  |   |                         | (5     | )      |   |   | (12 | ) |
| Decrease in other assets                                                         |   |                         | 167    |   |   |   | 80 |   |
| Increase (decrease) in accrued interest payable                                  |   |                         | 1      |   |   |   | (14 | ) |
| Increase in other liabilities                                                    |   |                         | 47     |   |   |   | 77 |   |
| Net cash provided by operating activities                                        |   |                         | 528    |   |   |   | 505 |   |
|                                                                             |   |                         |   |   |   |   |   |   |
| Cash flows from investing activities:                                            |   |                         |   |   |   |   |   |   |
| Purchases of time deposits                                                       |   |                         | (849   | )      |   |   | (1,688 | ) |
| Principal maturities of time deposits                                            |   |                         | 4,759  |   |   |   | 5,388 |   |
| Proceeds from sales of securities available for sale                             |   |                         | 1,008  |   |   |   | - |   |
| Proceeds from maturities, calls and prepayments of securities available for sale |   |                         | 298    |   |   |   | 534 |   |
| Net increase in loans receivable                                                 |   |                         | (765   | )      |   |   | (1,182 | ) |
| Purchases of restricted stock                                                    |   |                         | (45    | )      |   |   | (540 | ) |
| Redemption of restricted stock                                                   |   |                         | 315    |   |   |   | 382 |   |
| Purchases of premises and equipment                                              |   |                         | (2     | )      |   |   | (9 | ) |
| Net cash provided by investing activities                                        |   |                         | 4,719  |   |   |   | 2,885 |   |
|                                                                             |   |                         |   |   |   |   |   |   |
| Cash flows from financing activities:                                            |   |                         |   |   |   |   |   |   |
| Net increase (decrease) in deposits                                              |   |                         | 3,986  |   |   |   | (2,336 | ) |
| (Decrease) increase in short term borrowings                                     |   |                         | (6,000 | )      |   |   | 19,000 |   |
| Repayment of long term borrowings                                                |   |                         | -      |   |   |   | (15,500 | ) |
| Cash dividends paid on preferred stock                                           |   |                         | (72    | )      |   |   | (72 | ) |
| Net cash provided by (used in) financing activities                              |   |                         | (2,086 | )      |   |   | 1,092 |   |
|                                                                             |   |                         |   |   |   |   |   |   |
| Net increase in cash and cash equivalents                                        |   |                         | 3,161  |   |   |   | 4,482 |   |
| Cash and cash equivalents-beginning                                              |   |                         | 1,447  |   |   |   | 3,298 |   |
| Cash and cash equivalents-ending                                                 |   | $                            | 4,608  |   |   | $      | 7,780 |   |
|                                                                             |   |                         |   |   |   |   |   |   |
| Supplemental information:                                                        |   |                         |   |   |   |   |   |   |
| Cash paid during the period for interest                                         |   | $                            | 310    |   |   | $      | 460 |   |

----

HIGHLANDS 

----

|                                  |   |           |   |   | Gross      |   |   | Gross      |   |   |   |   |
|---------------------------------------|--------|----------------|--------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
|                                  |   | Amortized      |   |   | Unrealized |   |   | Unrealized |   |   | Fair   |   |
|                                  |   | Cost           |   |   | Gains      |   |   | Losses     |   |   | Value  |   |
|                                  |   | (In Thousands) |   |
| March 31, 2011                        |   |           |   |   |       |   |   |       |   |   |   |   |
| U.S Government agencies and sponsored |   |           |   |   |       |   |   |       |   |   |   |   |
| agencies                              |   |           |   |   |       |   |   |       |   |   |   |   |
| Due within one year                   |   | $              | 2,000  |   |       | $      | 21     |       |   | $      | -      |   |   | $ | 2,021 |   |
| Due after one but within five years   |   |           | 5,541  |   |       |   | 50     |       |   |   | -      |   |   |   | 5,591 |   |
| Due after five but within ten years   |   |           | 1,018  |   |       |   | -      |       |   |   | 4      |   |   |   | 1,014 |   |
| Due after ten years                   |   |           | 3,086  |   |       |   | 39     |       |   |   | -      |   |   |   | 3,125 |   |
| U.S Government sponsored enterprises  |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |
| (GSEs)-mortgage-backed securities     |   |           | 3,798  |   |       |   | 103    |       |   |   | 20     |   |   |   | 3,881 |   |
|  Other                           |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Due after five but within ten years   |   |           | 219    |   |       |   | 6      |       |   |   | -      |   |   |   | 225 |   |
| Due after ten years                   |   |           | 232    |   |       |   | 13     |       |   |   | 1      |   |   |   | 244 |   |
|                                  |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |
|                                  |   | $              | 15,894 |   |       | $      | 232    |       |   | $      | 25     |   |   | $ | 16,101 |   |
|                                  |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |
| December 31, 2010                     |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |
| U.S Government agencies and sponsored |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |
| agencies                              |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Due within one year                   |   | $              | 1,002  |   |       | $      | 5      |       |   | $      | -      |   |   | $ | 1,007 |   |
| Due after one but within five years   |   |           | 6,548  |   |       |   | 82     |       |   |   | -      |   |   |   | 6,630 |   |
| Due after five but within ten years   |   |           | 1,022  |   |       |   | -      |       |   |   | 7      |   |   |   | 1,015 |   |
| Due after ten years                   |   |           | 3,108  |   |       |   | 39     |       |   |   | -      |   |   |   | 3,147 |   |
| U.S Government sponsored enterprises  |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |
| (GSEs)-mortgage-backed securities     |   |           | 4,340  |   |       |   | 119    |       |   |   | 16     |   |   |   | 4,443 |   |
|  Other                           |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |
| Due after five but within ten years   |   |           | 244    |   |       |   | 7      |       |   |   |   |   |   |   | 251 |   |
| Due after ten years                   |   |           | 940    |   |       |   | 34     |       |   |   | 5      |   |   |   | 969 |   |
|                                  |   |           |   |   |       |   |   |       |   |   |   |   |   |   |   |   |
|                                  |   | $              | 17,204 |   |       | $      | 286    |       |   | $      | 28     |   |   | $ | 17,462 |   |

----

|                       |   | Less than 12 Months |   |   | 12 Months or More |   |   | Total  |   |
|----------------------------|--------|---------------------|--------|--------|-------------------|--------|--------|--------|--------|
|                       |   |                |   |   | Gross             |   |   |   |   |   | Gross |   |   |   |   |   | Gross |   |
|                       |   | Fair                |   |   | Unrealized        |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
|                       |   | Value               |   |   | Losses            |   |   | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
|                       |   | (In thousands)      |   |
| March 31, 2011             |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S Government agencies    |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and sponsored agencies     |   | $                   | 1,014  |   |              | $      | 4      |   |   | $ | - |   |   | $ | - |   |   | $ | 1,014 |   |   | $ | 4 |   |
| U.S Government sponsored   |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| enterprises (GSEs) -       |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| mortgage-backed securities |   |                | 1,239  |   |              |   | 20     |   |   |   | - |   |   |   | - |   |   |   | 1,239 |   |   |   | 20 |   |
| Other                      |   |                | 99     |   |              |   | 1      |   |   |   | - |   |   |   | - |   |   |   | 99 |   |   |   | 1 |   |
|                       |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   | $                   | 2,352  |   |              | $      | 25     |   |   | $ | - |   |   | $ | - |   |   | $ | 2,352 |   |   | $ | 25 |   |
|                       |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010          |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S Government agencies    |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and sponsored agencies     |   | $                   | 1,015  |   |              | $      | 7      |   |   | $ | - |   |   | $ | - |   |   | $ | 1,015 |   |   | $ | 7 |   |
| U.S Government sponsored   |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| enterprises (GSEs) -       |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| mortgage-backed securities |   |                | 1,252  |   |              |   | 16     |   |   |   | - |   |   |   | - |   |   |   | 1,252 |   |   |   | 16 |   |
| Other                      |   |                | 102    |   |              |   | 5      |   |   |   | - |   |   |   | - |   |   |   | 102 |   |   |   | 5 |   |
|                       |   |                |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                       |   | $                   | 2,369  |   |              | $      | 28     |   |   | $ | - |   |   | $ | - |   |   | $ | 2,369 |   |   | $ | 28 |   |

|                                      |   | March 31, |    |   | December 31, |   |
|-------------------------------------------|--------|-----------|---------|--------|--------------|--------|
| (In Thousands)                            |   | 2011      |    |   | 2010         |   |
| Commercial                                |   | $         | 18,930  |   |         | $      | 17,481 |   |
| Commercial real estate                    |   |      | 61,257  |   |         |   | 61,223 |   |
| Construction                              |   |      | 2,997   |   |         |   | 5,020 |   |
| Residential real estate                   |   |      | 14,312  |   |         |   | 11,846 |   |
| Home equity                               |   |      | 25,716  |   |         |   | 26,909 |   |
| Consumer                                  |   |      | 265     |   |         |   | 231 |   |
|      Total Loans |   |      | 123,477 |   |         |   | 122,710 |   |
|                                      |   |      |    |   |         |   |   |   |
| Allowance for loan losses                 |   |      | (1,735  | )      |         |   | (1,693 | ) |
| Net deferred loan costs                   |   |      | 25      |   |         |   | 13 |   |
|                                      |   |      | (1,710  | )      |         |   | (1,680 | ) |
|                                      |   | $         | 121,767 |   |         | $      | 121,030 |   |

----

| (In Thousands)                                                  |   | Commercial |   |   | Commercial Real Estate |   |   | Commercial Construction |   |   | Residental |   |   | Home Equity |   |   | Consumer - Other |   |   | Total  |   |
|-----------------------------------------------------------------|--------|------------|--------|--------|------------------------|--------|--------|-------------------------|--------|--------|------------|--------|--------|-------------|--------|--------|------------------|--------|--------|--------|--------|
| Allowance for loan losses:                                      |   |       |   |   |                   |   |   |                    |   |   |       |   |   |        |   |   |             |   |   |   |   |
| Beginning Balance 1/1/11                                        |   | $          | 483    |   |                   | $      | 717    |                    |   | $      | 207        |   |   | $           | 49     |   |             | $      | 231    |   |   | $ | 6 |   |   | $ | 1,693 |   |
|    Charge-offs                                   |   |       | -      |   |                   |   | -      |                    |   |   | -          |   |   |        | -      |   |             |   | (73    | )      |   |   | - |   |   |   | (73 | ) |
|    Recoveries                                    |   |       | 61     |   |                   |   | -      |                    |   |   | -          |   |   |        | -      |   |             |   | 1      |   |   |   | 2 |   |   |   | 64 |   |
|    Provisions                                    |   |       | 13     |   |                   |   | (15    | )                       |   |   | 21         |   |   |        | (1     | )      |             |   | 33     |   |   |   |   |   |   |   | 51 |   |
| Ending balance 3/31/11                                          |   | $          | 557    |   |                   | $      | 702    |                    |   | $      | 228        |   |   | $           | 48     |   |             | $      | 192    |   |   | $ | 8 |   |   | $ | 1,735 |   |
| Ending balance: individually evaluated for impairment           |   | $          | 21     |   |                   | $      | 77     |                    |   | $      | 162        |   |   | $           | -      |   |             | $      | -      |   |   | $ | - |   |   | $ | 260 |   |
| Ending balance: collectively evaluted for impairment            |   | $          | 536    |   |                   | $      | 625    |                    |   | $      | 66         |   |   | $           | 48     |   |             | $      | 192    |   |   | $ | 8 |   |   | $ | 1,475 |   |
|                                                            |   |       |   |   |                   |   |   |                    |   |   |       |   |   |        |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Financing receivables:                                          |   |       |   |   |                   |   |   |                    |   |   |       |   |   |        |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance                                                  |   | $          | 18,930 |   |                   | $      | 61,257 |                    |   | $      | 2,997      |   |   | $           | 14,312 |   |             | $      | 25,716 |   |   | $ | 265 |   |   | $ | 123,477 |   |
| Ending balance: individually evaluted  for impairment |   | $          | 495    |   |                   | $      | 2,160  |                    |   | $      | 1,773      |   |   | $           | -      |   |             | $      | -      |   |   | $ | - |   |   | $ | 4,428 |   |
| Ending balance: collectively evaluated for impairment           |   | $          | 18,435 |   |                   | $      | 59,097 |                    |   | $      | 1,224      |   |   | $           | 14,312 |   |             | $      | 25,716 |   |   | $ | 265 |   |   | $ | 119,049 |   |

| (In Thousands)  |   | Commercial |   |   | Commercial |   |   | Commercial Real Estate |   |   | Commercial Real Estate |   |   | Commercial Construction |   |   | Commercial Construction |   |
|-----------------|--------|------------|--------|--------|------------|--------|--------|------------------------|--------|--------|------------------------|--------|--------|-------------------------|--------|--------|-------------------------|--------|
|            |   | 3/31/2011  |   |   | 12/31/2010 |   |   | 3/31/2011              |   |   | 12/31/2010             |   |   | 3/31/2011               |   |   | 12/31/2010              |   |
| Pass            |   | $          | 18,295 |   |       | $      | 16,815 |                   |   | $      | 58,630                 |   |   | $                       | 57,492 |   |                    | $      | 1,224 |   |   | $ | 3,247 |   |
| Special Mention |   |       | 140    |   |       |   | 209    |                   |   |   | 467                    |   |   |                    | 1,571  |   |                    |   | - |   |   |   | - |   |
| Substandard     |   |       | 495    |   |       |   | 457    |                   |   |   | 2,160                  |   |   |                    | 2,160  |   |                    |   | 1,773 |   |   |   | 1,773 |   |
| Doubtful        |   |       | -      |   |       |   | -      |                   |   |   | -                      |   |   |                    | -      |   |                    |   | - |   |   |   | - |   |
| Total           |   | $          | 18,930 |   |       | $      | 17,481 |                   |   | $      | 61,257                 |   |   | $                       | 61,223 |   |                    | $      | 2,997 |   |   | $ | 5,020 |   |

| (In Thousands) |   | Residential Mortgage Loans |   |   | Residential Mortgage Loans |   |   | Home Equity Loans |   |   | Home Equity Loans |   |   | Consumer  |   |   | Consumer   |   |
|----------------|--------|----------------------------|--------|--------|----------------------------|--------|--------|-------------------|--------|--------|-------------------|--------|--------|-----------|--------|--------|------------|--------|
|           |   | 3/31/2011                  |   |   | 12/31/2010                 |   |   | 3/31/2011         |   |   | 12/31/2010        |   |   | 3/31/2011 |   |   | 12/31/2010 |   |
| Performing     |   | $                          | 13,962 |   |                       | $      | 11,496 |              |   | $      | 25,559            |   |   | $         | 26,679 |   |       | $      | 265 |   |   | $ | 231 |   |
| Nonperforming  |   |                       | 350    |   |                       |   | 350    |              |   |   | 157               |   |   |      | 230    |   |       |   | - |   |   |   | - |   |
| Total          |   | $                          | 14,312 |   |                       | $      | 11,846 |              |   | $      | 25,716            |   |   | $         | 26,909 |   |       | $      | 265 |   |   | $ | 231 |   |

----

| March 31, 2011                            |   | Recorded Investment |   | Unpaid Principal Balance |   | Related Allowance |   | Average Recorded Investment |   | Interest Income Recognized |   |
|-------------------------------------------|--------|---------------------|--------|--------------------------|--------|-------------------|--------|-----------------------------|--------|----------------------------|--------|
|                                      |   | (In Thousands)      |   |
| With no related allowance recorded:       |   |                |   |                     |   |              |   |                        |   |                       |   |   |
|    Commercial              |   | $                   | -      |                     |   | $                 | -      |                        |   | $                          | -      |   |   | $ | - |   |   | $ | - |   |
|    Commercial real estate  |   |                | -      |                     |   |              | -      |                        |   |                       | -      |   |   |   | - |   |   |   | - |   |
|    Commercial construction |   |                | -      |                     |   |              | -      |                        |   |                       | -      |   |   |   | - |   |   |   | - |   |
|                                      |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
| With an allowance recorded:               |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
|    Commercial              |   | $                   | 495    |                     |   | $                 | 498    |                        |   | $                          | 21     |   |   | $ | 468 |   |   | $ | - |   |
|    Commercial real estate  |   |                | 2,160  |                     |   |              | 2,166  |                        |   |                       | 77     |   |   |   | 2,160 |   |   |   | - |   |
|    Commercial construction |   |                | 1,773  |                     |   |              | 2,569  |                        |   |                       | 162    |   |   |   | 1,773 |   |   |   | - |   |
|                                      |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
| Total:                                    |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
|    Commercial              |   | $                   | 495    |                     |   | $                 | 498    |                        |   | $                          | 21     |   |   | $ | 468 |   |   | $ | - |   |
|    Commercial real estate  |   |                | 2,160  |                     |   |              | 2,166  |                        |   |                       | 77     |   |   |   | 2,160 |   |   |   | - |   |
|    Commercial construction |   |                | 1,773  |                     |   |              | 2,569  |                        |   |                       | 162    |   |   |   | 1,773 |   |   |   | - |   |
|                                      |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
|                                      |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
|                                      |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
|                                      |   | Recorded Investment |   | Unpaid Principal Balance |   | Related Allowance |   | Average Recorded Investment |   | Interest Income Recognized |   |
| December 31, 2010                         |   | (In Thousands)      |   |
| With no related allowance recorded:       |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |
|    Commercial              |   | $                   | -      |                     |   | $                 | -      |                        |   | $                          | -      |   |   | $ | - |   |   | $ | - |   |
|    Commercial real estate  |   |                | -      |                     |   |              | -      |                        |   |                       | -      |   |   |   | - |   |   |   | - |   |
|    Commercial construction |   |                | -      |                     |   |              | -      |                        |   |                       | -      |   |   |   | - |   |   |   | - |   |
|                                      |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
| With an allowance recorded:               |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
|    Commercial              |   | $                   | 457    |                     |   | $                 | 459    |                        |   | $                          | 13     |   |   | $ | 427 |   |   | $ | 2 |   |
|    Commercial real estate  |   |                | 2,160  |                     |   |              | 2,166  |                        |   |                       | 45     |   |   |   | 1,745 |   |   |   | 26 |   |
|    Commercial construction |   |                | 1,773  |                     |   |              | 2,569  |                        |   |                       | 118    |   |   |   | 2,478 |   |   |   | - |   |
|                                      |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
| Total:                                    |   |                |   |                     |   |              |   |                        |   |                       |   |   |   |   |   |   |   |   |   |   |
|    Commercial              |   | $                   | 457    |                     |   | $                 | 459    |                        |   | $                          | 13     |   |   | $ | 427 |   |   | $ | 2 |   |
|    Commercial real estate  |   |                | 2,160  |                     |   |              | 2,166  |                        |   |                       | 45     |   |   |   | 1,745 |   |   |   | 26 |   |
|    Commercial construction |   |                | 1,773  |                     |   |              | 2,569  |                        |   |                       | 118    |   |   |   | 2,478 |   |   |   | - |   |

|                    |   | 03/31/11       |   |   | 12/31/10 |   |
|-------------------------|--------|----------------|--------|--------|----------|--------|
|                    |   | (In Thousands) |   |
| Commercial              |   | $              | 495    |   |     | $      | 457 |   |
| Commercial real estate  |   |           | 1,334  |   |     |   | 1,334 |   |
| Commercial construction |   |           | 1,773  |   |     |   | 1,773 |   |
| Residential mortgage    |   |           | 350    |   |     |   | 350 |   |
| Home equity             |   |           | 157    |   |     |   | 230 |   |
| Consumer, other         |   |           | -      |   |     |   | - |   |
|                    |   | $              | 4,109  |   |     | $      | 4,144 |   |

----

| March 31, 2011                                                                      |   | 30-59 Days Past Due |   | 60-89 Days Past Due |   | Greater than 90 Days |   | Total Past Due |   | Current |   |   | Total Financing Receivables |   | Recorded Investment > 90 Days and Accruing |   |
|-------------------------------------------------------------------------------------|--------|---------------------|--------|---------------------|--------|----------------------|--------|----------------|--------|---------|--------|--------|-----------------------------|--------|-----------------------------------------------|--------|
|                                                                                |   | (In Thousands)      |   |
| Commercial                                                                          |   | $                   | -      |                |   | $                    | -      |           |   | $       | 478    |   |                        | $      | 478                                           |   |   | $ | 18,452 |   |   | $ | 18,930 |   |   | $ | - |   |
| Commercial real estate                                                              |   |                | 1,843  |                |   |                 | -      |           |   |    | 1,334  |   |                        |   | 3,177                                         |   |   |   | 58,080 |   |   |   | 61,257 |   |   |   | - |   |
| Commercial construction                                                             |   |                | -      |                |   |                 | -      |           |   |    | 1,773  |   |                        |   | 1,773                                         |   |   |   | 1,224 |   |   |   | 2,997 |   |   |   | - |   |
| Residential real estate                                                             |   |                | -      |                |   |                 | -      |           |   |    | 350    |   |                        |   | 350                                           |   |   |   | 13,962 |   |   |   | 14,312 |   |   |   | - |   |
| Home Equity                                                                         |   |                | -      |                |   |                 | -      |           |   |    | 157    |   |                        |   | 157                                           |   |   |   | 25,559 |   |   |   | 25,716 |   |   |   | - |   |
| Consumer other                                                                      |   |                | -      |                |   |                 | -      |           |   |    | -      |   |                        |   | -                                             |   |   |   | 265 |   |   |   | 265 |   |   |   | - |   |
| Adjustments                                                                         |   |                |   |                |   |                 |   |           |   |    |   |   |                        |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |                |   |                |   |                 |   |           |   |    |   |   |                        |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|              Total |   | $                   | 1,843  |                |   | $                    | -      |           |   | $       | 4,092  |   |                        | $      | 5,935                                         |   |   | $ | 117,542 |   |   | $ | 123,477 |   |   | $ | - |   |
|                                                                                |   |                |   |                |   |                 |   |           |   |    |   |   |                        |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |                |   |                |   |                 |   |           |   |    |   |   |                        |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                |   |                |   |                |   |                 |   |           |   |    |   |   |                        |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010                                                                   |   | 30-59 Days Past Due |   | 60-89 Days Past Due |   | Greater than 90 Days |   | Total Past Due |   | Current |   |   | Total Financing Receivables |   | Recorded Investment > 90 Days and Accruing |   |
|                                                                                |   | (In Thousands)      |   |
| Commercial                                                                          |   | $                   | 22     |                |   | $                    | 43     |           |   | $       | 437    |   |                        | $      | 502                                           |   |   | $ | 16,979 |   |   | $ | 17,481 |   |   | $ | - |   |
| Commercial real estate                                                              |   |                | 1,101  |                |   |                 | -      |           |   |    | 1,334  |   |                        |   | 2,435                                         |   |   |   | 58,788 |   |   |   | 61,223 |   |   |   | - |   |
| Commercial construction                                                             |   |                | -      |                |   |                 | -      |           |   |    | 1,773  |   |                        |   | 1,773                                         |   |   |   | 3,247 |   |   |   | 5,020 |   |   |   | - |   |
| Residential real estate                                                             |   |                | -      |                |   |                 | 210    |           |   |    | 141    |   |                        |   | 351                                           |   |   |   | 11,495 |   |   |   | 11,846 |   |   |   | - |   |
| Home Equity                                                                         |   |                | -      |                |   |                 | -      |           |   |    | 230    |   |                        |   | 230                                           |   |   |   | 26,679 |   |   |   | 26,909 |   |   |   | - |   |
| Consumer other                                                                      |   |                | 2      |                |   |                 | -      |           |   |    | -      |   |                        |   | 2                                             |   |   |   | 229 |   |   |   | 231 |   |   |   | - |   |
| Adjustments                                                                         |   |                |   |                |   |                 |   |           |   |    |   |   |                        |   |                                          |   |   |   |   |   |   |   |   |   |   |   | - |   |
|                                                                                |   |                |   |                |   |                 |   |           |   |    |   |   |                        |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|              Total |   | $                   | 1,125  |                |   | $                    | 253    |           |   | $       | 3,915  |   |                        | $      | 5,293                                         |   |   | $ | 117,417 |   |   | $ | 122,710 |   |   | $ | - |   |

----

|                                                      |   | Three Months Ended March 31, |      |
|-----------------------------------------------------------|--------|------------------------------|-----------|
|                                                      |   | 2011                         |      |   | 2010 |   |
|                                                      |   | (In Thousands, except        |      |
|                                                      |   | per share data)              |      |
|                                                      |   |                         |      |   |   |   |
| Net income (loss) available to common stockholders        |   | $                            | 148       |   |   | $ | (1 | ) |
|                                                      |   |                         |      |   |   |   |   |   |
| Weighted average shares outstanding                       |   |                         | 1,788,262 |   |   |   | 1,788,262 |   |
| Dilutive effect of potential common shares, stock options |   |                         | -         |   |   |   | - |   |
|                                                      |   |                         |      |   |   |   |   |   |
| Diluted weighted average common shares outstanding        |   |                         | 1,788,262 |   |   |   | 1,788,262 |   |
| Basic income (loss) per common share                      |   | $                            | 0.08      |   |   | $ | (0.00 | ) |
| Diluted income (loss) per common share                    |   | $                            | 0.08      |   |   | $ | (0.00 | ) |

| Stock options for 124,000 and 132,000 shares of common stock were not considered in computing diluted income |
|--------------------------------------------------------------------------------------------------------------|
| (loss) per common share for the three months ended March 31, 2011 and 2010, respectively because they were   |
| not dilutive.                                                                                                |

----

|   |   | (In Thousands) |   |
|--------|--------|----------------|--------|
| 2012   |   | $              | 2,000  |   |
| 2013   |   |           | 3,000  |   |
|   |   | $              | 5,000  |   |

----

|                                               |   |           |   |   | (Level 1)          |   |   |              |   |   | (Level 3)    |   |
|----------------------------------------------------|--------|----------------|--------|--------|--------------------|--------|--------|-------------------|--------|--------|--------------|--------|
|                                               |   |           |   |   | Quoted Prices in   |   |   | (Level 2)         |   |   | Significant  |   |
|                                               |   |           |   |   | Active Markets for |   |   | Significant Other |   |   | Unobservable |   |
|                                               |   | Total          |   |   | Identical Assets   |   |   | Observable Inputs |   |   | Inputs       |   |
|                                               |   | (In Thousands) |   |
| March 31, 2011                                     |   |           |   |   |               |   |   |              |   |   |         |   |
| U.S Government agencies                            |   |           |   |   |               |   |   |              |   |   |         |   |
|     and sponsored agencies     |   | $              | 11,751 |   |               | $      | -      |              |   | $      | 11,751       |   |   | $ | - |   |
| U.S Government sponsored                           |   |           |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
|     enterprises (GSEs) -       |   |           |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
|     mortgage-backed securities |   |           | 3,881  |   |               |   | -      |              |   |   | 3,881        |   |   |   | - |   |
| Other                                              |   |           | 469    |   |               |   | -      |              |   |   | 469          |   |   |   | - |   |
|                                               |   | $              | 16,101 |   |               | $      | -      |              |   | $      | 16,101       |   |   | $ | - |   |
|                                               |   |           |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
|                                               |   |           |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
| December 31, 2010:                                 |   |           |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
| U.S Government agencies                            |   |           |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
|     and sponsored agencies     |   | $              | 11,798 |   |               | $      | -      |              |   | $      | 11,798       |   |   | $ | - |   |
| U.S Government sponsored                           |   |           |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
|     enterprises (GSEs) -       |   |           |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
|     mortgage-backed securities |   |           | 4,443  |   |               |   | -      |              |   |   | 4,443        |   |   |   | - |   |
| Other                                              |   |           | 1,221  |   |               |   | -      |              |   |   | 1,221        |   |   |   | - |   |
|                                               |   | $              | 17,462 |   |               | $      | -      |              |   | $      | 17,462       |   |   | $ | - |   |

|              |   |         |   |   | (Level 1)          |   |   |              |   |   | (Level 3)    |   |
|-------------------|--------|--------------|--------|--------|--------------------|--------|--------|-------------------|--------|--------|--------------|--------|
|              |   |         |   |   | Quoted Prices in   |   |   | (Level 2)         |   |   | Significant  |   |
|              |   | March 31,    |   |   | Active Markets for |   |   | Significant Other |   |   | Unobservable |   |
| (In thousands)    |   | 2011         |   |   | Identical Assets   |   |   | Observable Inputs |   |   | Inputs       |   |
|              |   |         |   |   |               |   |   |              |   |   |         |   |
| Impaired Loans    |   | $            | 4,168  |   |               | $      | -      |              |   | $      | -            |   |   | $ | 4,168 |   |
|              |   |         |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
| Foreclosed Assets |   | $            | 799    |   |               | $      | -      |              |   | $      | -            |   |   | $ | 799 |   |
|              |   |         |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
|              |   |         |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
|              |   | December 31, |   |   |               |   |   |              |   |   |         |   |   |   |   |
|              |   |         | 2010   |   |               |   |   |              |   |   |         |   |   |   |   |   |
|              |   |         |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
| Impaired Loans    |   | $            | 4,214  |   |               | $      | -      |              |   | $      | -            |   |   | $ | 4,214 |   |
|              |   |         |   |   |               |   |   |              |   |   |         |   |   |   |   |   |
| Foreclosed Assets |   | $            | 799    |   |               | $      | -      |              |   | $      | -            |   |   | $ | 799 |   |

----

----

|                                |   | March 31, 2011 |    |   | December 31, 2010 |   |
|-------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                |   | Carrying or    |    |   |              |   |   | Carrying or |   |   |   |   |
|                                |   | Notional       |    |   | Fair              |   |   | Notional |   |   | Fair |   |
|                                |   | Amount         |    |   | Value             |   |   | Amount |   |   | Value |   |
|                                |   | (In Thousands) |    |
| Financial Assets:                   |   |           |    |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents           |   | $              | 4,608   |   |              | $      | 4,608 |   |   | $ | 1,447 |   |   | $ | 1,447 |   |
| Time deposits in other banks        |   |           | 15,686  |   |              |   | 15,686 |   |   |   | 19,596 |   |   |   | 19,596 |   |
| Securities available for sale       |   |           | 16,101  |   |              |   | 16,101 |   |   |   | 17,462 |   |   |   | 17,462 |   |
| Loans receivable, net               |   |           | 121,767 |   |              |   | 121,798 |   |   |   | 121,030 |   |   |   | 121,407 |   |
| Restricted investment in bank stock |   |           | 520     |   |              |   | 520 |   |   |   | 790 |   |   |   | 790 |   |
| Accrued interest receivable         |   |           | 636     |   |              |   | 636 |   |   |   | 631 |   |   |   | 631 |   |
|                                |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities:              |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Demand and savings deposits         |   |           | 107,191 |   |              |   | 107,191 |   |   |   | 110,161 |   |   |   | 110,161 |   |
| Time deposits                       |   |           | 33,194  |   |              |   | 32,923 |   |   |   | 26,238 |   |   |   | 26,094 |   |
| Borrowings                          |   |           | 5,000   |   |              |   | 5,007 |   |   |   | 11,000 |   |   |   | 11,036 |   |
| Accrued interest payable            |   |           | 71      |   |              |   | 71 |   |   |   | 70 |   |   |   | 70 |   |
|                                |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Off-Balance Financial Instruments:  |   |           |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Commitments to extend credit        |   |           | -       |   |              |   | - |   |   |   | - |   |   |   | - |   |
| Letters of credit                   |   |           | -       |   |              |   | - |   |   |   | - |   |   |   | - |   |

----

|                                                                                       | ● | A reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and                   |
|--------------------------------------------------------------------------------------------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                       |    |                                                                                                                                                                                                       |
|                                                                                       | ● | In the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements.      |
|                                                                                       |    |                                                                                                                                                                                                       |
| In addition, ASU 2010-06 clarifies the requirements of the following existing disclosures: |
|                                                                                       |    |                                                                                                                                                                                                       |
|                                                                                       | ● | For purposes of reporting fair value measurements for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities; and |
|                                                                                       |    |                                                                                                                                                                                                       |
|                                                                                       | ● | A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements.                            |

----

Item 2

----

----

----

|                                  |   | 2011    |    | 2010   |
|---------------------------------------|--------|---------|---------|--------|
|                                  |   | Average |    |   | Income/ |   |   | Yield/ |   |   | Average |   |   | Income/ |   |   | Yield/ |   |
| (Dollars in thousands)                |   | Balance |    |   | Expense |   |   | Rate |   |   | Balance |   |   | Expense |   |   | Rate |   |
|                                  |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:              |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans receivable                      |   | $       | 123,742 |   |   | $ | 1,713 |   |   |   | 5.54 | % |   | $ | 116,047 |   |   | $ | 1,584 |   |   |   | 5.46 | % |
| Securities available for sale         |   |    | 16,697  |   |   |   | 103 |   |   |   | 2.47 | % |   |   | 19,016 |   |   |   | 177 |   |   |   | 3.72 | % |
| Federal funds sold                    |   |    | 2,025   |   |   |   | 1 |   |   |   | 0.20 | % |   |   | 1,191 |   |   |   | 1 |   |   |   | 0.34 | % |
| Deposits with other banks             |   |    | 17,527  |   |   |   | 42 |   |   |   | 0.96 | % |   |   | 25,526 |   |   |   | 112 |   |   |   | 1.76 | % |
| Total interest-earning assets         |   |    | 159,991 |   |   |   | 1,859 |   |   |   | 4.65 | % |   |   | 161,780 |   |   |   | 1,874 |   |   |   | 4.63 | % |
|                                  |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest earning assets           |   |    | 4,882   |   |   |   |   |   |   |   |   |   |   |   | 4,316 |   |   |   |   |   |   |   |   |   |
|                                  |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL ASSETS                          |   | $       | 164,873 |   |   |   |   |   |   |   |   |   |   | $ | 166,096 |   |   |   |   |   |   |   |   |   |
|                                  |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:         |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand, interest-bearing              |   | $       | 7,244   |   |   | $ | 10 |   |   |   | 0.55 | % |   | $ | 4,144 |   |   | $ | 8 |   |   |   | 0.77 | % |
| Money market and savings              |   |    | 76,125  |   |   |   | 126 |   |   |   | 0.66 | % |   |   | 86,967 |   |   |   | 231 |   |   |   | 1.06 | % |
| Time deposits                         |   |    | 32,423  |   |   |   | 139 |   |   |   | 1.71 | % |   |   | 28,832 |   |   |   | 163 |   |   |   | 2.26 | % |
| Borrowed funds                        |   |    | 6,863   |   |   |   | 36 |   |   |   | 2.10 | % |   |   | 8,609 |   |   |   | 44 |   |   |   | 2.04 | % |
| Total interest-bearing liabilities    |   |    | 122,655 |   |   |   | 311 |   |   |   | 1.01 | % |   |   | 128,552 |   |   |   | 446 |   |   |   | 1.39 | % |
|                                  |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest bearing liabilities:     |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand, non-interest bearing deposits |   |    | 25,555  |   |   |   |   |   |   |   |   |   |   |   | 19,885 |   |   |   |   |   |   |   |   |   |
| Other liabilities                     |   |    | 487     |   |   |   |   |   |   |   |   |   |   |   | 675 |   |   |   |   |   |   |   |   |   |
|                                  |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders' equity                  |   |    | 16,176  |   |   |   |   |   |   |   |   |   |   |   | 16,984 |   |   |   |   |   |   |   |   |   |
|                                  |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL LIABILITIES AND                 |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SHAREHOLDERS' EQUITY                  |   | $       | 164,873 |   |   |   |   |   |   |   |   |   |   | $ | 166,096 |   |   |   |   |   |   |   |   |   |
|                                  |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income/rate spread       |   |    |    |   |   | $ | 1,548 |   |   |   | 3.63 | % |   |   |   |   |   | $ | 1,428 |   |   |   | 3.25 | % |
|                                  |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest margin                   |   |    |    |   |   |   |   |   |   |   | 3.87 | % |   |   |   |   |   |   |   |   |   |   | 3.53 | % |

----

----

----

----

|                                                          |   | March 31, |   |   | December 31, |   |
|---------------------------------------------------------------|--------|-----------|--------|--------|--------------|--------|
| (In Thousands except for ratios)                              |   | 2011      |   |   | 2010         |   |
| Tier I, common stockholders' equity                           |   | $         | 15,201 |   |         | $      | 15,045 |   |
| Tier II, allowable portion of allowance for loan losses       |   |      | 1,679  |   |         |   | 1,693 |   |
|         Total capital |   | $         | 16,880 |   |         | $      | 16,738 |   |
|                                                          |   |      |   |   |         |   |   |   |
| Total risk-based capital                                      |   |      | 12.6   | %      |         |   | 12.2 | % |
| Tier I risk-based capital                                     |   |      | 11.3   | %      |         |   | 11.0 | % |
| Tier I leverage capital                                       |   |      | 9.3    | %      |         |   | 9.1 | % |

Item 3

----

Item 4

Part II 

Item 1

Item 1A 

Item 2

Item 3

Item 4

Item 5

Item 6.

----

SIGNATURE

|               |                                                                                                                                                                                     |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               | HIGHLANDS BANCORP, INC.                                                                                                                                                                  |
|               |                                                                                                                                                                                     |
| Date: May 12, 2011 |                                                                                                                                                                                     |
|               | By:  /s/ George E. Irwin                          |
|               | George E. Irwin                                                                                                                                                                          |
|               | President and Chief Executive Officer                                                                                                                                                    |
|               |                                                                                                                                                                                     |
|               |                                                                                                                                                                                     |
|               |                                                                                                                                                                                     |
| Date: May 12, 2011 | By:  /s/ Eileen D. Piersa                              |
|               | Eileen D. Piersa                                                                                                                                                                         |
|               | Chief Financial Officer                                                                                                                                                                  |