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

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

| WELLESLEY BANCORP, INC.                                |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

| Maryland                                         |   | 45-3219901                           |
|--------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or |   | (I.R.S. Employer Identification No.) |
| organization)                                    |   |                                 |

| 40 Central Street, Wellesley, Massachusetts |   | 02482      |
|---------------------------------------------|--------|------------|
| (Address of principal executive offices)    |   | (Zip Code) |

| (781) 235-2550                                             |
|------------------------------------------------------------|
| (Registrant’s telephone number, including area code) |

| Not Applicable                                                                     |
|------------------------------------------------------------------------------------|
| (Former name, former address and former fiscal year, if changed since last report) |

|   | Large accelerated filer  ___             | Accelerated filer  ___                                                |
|--------|-----------------------------------------------|----------------------------------------------------------------------------|
|   | Non-accelerated filer  ___               | Smaller reporting company     X    |
|   | (Do not check if a smaller reporting company) |                                                                       |

----

----

|                                           |                                                                                                | PageNo. |
|------------------------------------------------|-----------------------------------------------------------------------------------------------------|---------|
| Part I.   Financial Information |                                                                                                |
|                                           |                                                                                                |    |
| Item 1.                                        | Financial Statements (Unaudited)                                                                    | 1       |
|                                           |                                                                                                |    |
|                                           | Consolidated Balance Sheets as of September 30, 2011 and  December 31, 2010                    | 1       |
|                                           |                                                                                                |    |
|                                           | Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2011 and 2010   | 2       |
|                                           |                                                                                                |    |
|                                           | Consolidated Statements of Changes in Surplus for the Nine Months Ended September 30, 2011 and 2010 | 3       |
|                                           |                                                                                                |    |
|                                           | Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011  and 2010   | 4       |
|                                           |                                                                                                |    |
|                                           | Notes to Consolidated Financial Statements                                                          | 5       |
|                                           |                                                                                                |    |
| Item 2.                                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations         | 22      |
|                                           |                                                                                                |    |
| Item 3.                                        | Quantitative and Qualitative Disclosures About Market Risk                                          | 34      |
|                                           |                                                                                                |    |
| Item 4.                                        | Controls and Procedures                                                                             | 35      |
|                                           |                                                                                                |    |
| Part II.   Other Information    |                                                                                                |
|                                           |                                                                                                |    |
| Item 1.                                        | Legal Proceedings                                                                                   | 36      |
|                                           |                                                                                                |    |
| Item 1A.                                       | Risk Factors                                                                                        | 36      |
|                                           |                                                                                                |    |
| Item 2.                                        | Unregistered Sales of Equity Securities and Use of Proceeds                                         | 36      |
|                                           |                                                                                                |    |
| Item 3.                                        | Defaults Upon Senior Securities                                                                     | 36      |
|                                           |                                                                                                |    |
| Item 4.                                        | [Removed and Reserved]                                                                              | 36      |
|                                           |                                                                                                |    |
| Item 5.                                        | Other Information                                                                                   | 36      |
|                                           |                                                                                                |    |
| Item 6.                                        | Exhibits                                                                                            | 36      |
|                                           |                                                                                                |    |
| Signatures                                     | 37                                                                                                  |

----

Item 1.  Financial Statements (Unaudited)

CONSOLIDATED BALANCE SHEETS

|                                            |   | September 30,  |    |   | December 31, |   |
|-------------------------------------------------|--------|----------------|---------|--------|--------------|--------|
|                                            |   | 2011           |    |   | 2010         |   |
|                                            |   | (In thousands) |    |
|                                            |   | (Unaudited)    |    |   |         |   |
| Assets                                          |   |           |    |   |         |   |
|                                            |   |           |    |   |         |   |
| Cash and due from banks                         |   | $              | 3,731   |   |         | $      | 3,780 |   |
| Short-term investments                          |   |           | 20,607  |   |         |   | 14,617 |   |
| Total cash and cash equivalents                 |   |           | 24,338  |   |         |   | 18,397 |   |
|                                            |   |           |    |   |         |   |   |   |
| Certificates of deposit                         |   |           | 100     |   |         |   | 3,433 |   |
| Securities available for sale, at fair value    |   |           | 32,555  |   |         |   | 25,565 |   |
| Federal Home Loan Bank of Boston stock, at cost |   |           | 1,930   |   |         |   | 1,930 |   |
|                                            |   |           |    |   |         |   |   |   |
| Loans                                           |   |           | 209,596 |   |         |   | 206,807 |   |
| Less allowance for loan losses                  |   |           | (3,245  | )      |         |   | (2,690 | ) |
| Loans, net                                      |   |           | 206,351 |   |         |   | 204,117 |   |
|                                            |   |           |    |   |         |   |   |   |
| Bank-owned life insurance                       |   |           | 4,171   |   |         |   | 4,062 |   |
| Premises and equipment, net                     |   |           | 847     |   |         |   | 786 |   |
| Accrued interest receivable                     |   |           | 893     |   |         |   | 865 |   |
| Net deferred tax asset                          |   |           | 1,198   |   |         |   | 1,168 |   |
| Prepaid FDIC assessment                         |   |           | 632     |   |         |   | 767 |   |
| Other assets                                    |   |           | 1,345   |   |         |   | 912 |   |
|                                            |   |           |    |   |         |   |   |   |
| Total assets                                    |   | $              | 274,360 |   |         | $      | 262,002 |   |
|                                            |   |           |    |   |         |   |   |   |
| Liabilities and Surplus                         |   |           |    |   |         |   |   |   |
|                                            |   |           |    |   |         |   |   |   |
| Deposits:                                       |   |           |    |   |         |   |   |   |
| Noninterest-bearing                             |   | $              | 28,066  |   |         | $      | 26,512 |   |
| Interest-bearing                                |   |           | 205,990 |   |         |   | 195,628 |   |
|                                            |   |           | 234,056 |   |         |   | 222,140 |   |
| Short-term borrowings                           |   |           | 7,902   |   |         |   | 5,804 |   |
| Long-term debt                                  |   |           | 7,500   |   |         |   | 12,500 |   |
| Accrued expenses and other liabilities          |   |           | 2,754   |   |         |   | 1,150 |   |
| Total liabilities                               |   |           | 252,212 |   |         |   | 241,594 |   |
|                                            |   |           |    |   |         |   |   |   |
| Commitments and contingencies                   |   |           |    |   |         |   |   |   |
|                                            |   |           |    |   |         |   |   |   |
| Surplus                                         |   |           | 21,585  |   |         |   | 20,099 |   |
| Accumulated other comprehensive income          |   |           | 563     |   |         |   | 309 |   |
| Total surplus                                   |   |           | 22,148  |   |         |   | 20,408 |   |
|                                            |   |           |    |   |         |   |   |   |
| Total liabilities and surplus                   |   | $              | 274,360 |   |         | $      | 262,002 |   |

----

CONSOLIDATED STATEMENTS OF INCOME

|                                                 |   | Three Months Ended |   |   | Nine Months Ended |   |
|------------------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                                 |   | September 30,      |   |   | September 30,     |   |
|                                                 |   | 2011               |   |   | 2010              |   |   | 2011 |   |   | 2010 |   |
|                                                 |   | (In thousands)     |   |
|                                                 |   | (Unaudited)        |   |
| Interest and dividend income:                        |   |               |   |   |              |   |   |   |   |   |   |   |
| Interest and fees on loans                           |   | $                  | 2,986  |   |              | $      | 3,168 |   |   | $ | 9,001 |   |   | $ | 9,069 |   |
| Debt securities:                                     |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                              |   |               | 151    |   |              |   | 204 |   |   |   | 435 |   |   |   | 659 |   |
| Tax-exempt                                           |   |               | 69     |   |              |   | 42 |   |   |   | 178 |   |   |   | 123 |   |
| Interest on short-term investments and               |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| certificates of deposit                              |   |               | 12     |   |              |   | 35 |   |   |   | 50 |   |   |   | 123 |   |
| Dividends on FHLB stock                              |   |               | 1      |   |              |   | - |   |   |   | 4 |   |   |   | - |   |
| Total interest and dividend income                   |   |               | 3,219  |   |              |   | 3,449 |   |   |   | 9,668 |   |   |   | 9,974 |   |
|                                                 |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense:                                    |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                             |   |               | 540    |   |              |   | 605 |   |   |   | 1,665 |   |   |   | 1,847 |   |
| Short-term borrowings                                |   |               | 22     |   |              |   | 24 |   |   |   | 62 |   |   |   | 64 |   |
| Long-term debt                                       |   |               | 70     |   |              |   | 191 |   |   |   | 332 |   |   |   | 696 |   |
| Total interest expense                               |   |               | 632    |   |              |   | 820 |   |   |   | 2,059 |   |   |   | 2,607 |   |
|                                                 |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                  |   |               | 2,587  |   |              |   | 2,629 |   |   |   | 7,609 |   |   |   | 7,367 |   |
| Provision for loan losses                            |   |               | 150    |   |              |   | 300 |   |   |   | 750 |   |   |   | 800 |   |
|                                                 |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income, after provision for loan losses |   |               | 2,437  |   |              |   | 2,329 |   |   |   | 6,859 |   |   |   | 6,567 |   |
|                                                 |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest income:                                  |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Customer service fees                                |   |               | 36     |   |              |   | 38 |   |   |   | 115 |   |   |   | 118 |   |
| Income on bank-owned life insurance                  |   |               | 37     |   |              |   | 38 |   |   |   | 109 |   |   |   | 113 |   |
| Wealth management fees                               |   |               | 29     |   |              |   | 20 |   |   |   | 82 |   |   |   | 48 |   |
| Miscellaneous                                        |   |               | 8      |   |              |   | 12 |   |   |   | 34 |   |   |   | 41 |   |
| Total noninterest income                             |   |               | 110    |   |              |   | 108 |   |   |   | 340 |   |   |   | 320 |   |
|                                                 |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Noninterest expenses:                                |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and employee benefits                       |   |               | 1,249  |   |              |   | 889 |   |   |   | 3,135 |   |   |   | 2,603 |   |
| Occupancy and equipment                              |   |               | 209    |   |              |   | 176 |   |   |   | 612 |   |   |   | 536 |   |
| Data processing                                      |   |               | 114    |   |              |   | 90 |   |   |   | 303 |   |   |   | 272 |   |
| FDIC insurance                                       |   |               | (51    | )      |              |   | 74 |   |   |   | 135 |   |   |   | 200 |   |
| Contributions                                        |   |               | 1      |   |              |   | 2 |   |   |   | 15 |   |   |   | 11 |   |
| Foreclosed assets, net                               |   |               | 1      |   |              |   | 62 |   |   |   | 1 |   |   |   | 62 |   |
| Other general and administrative                     |   |               | 201    |   |              |   | 235 |   |   |   | 676 |   |   |   | 695 |   |
| Total noninterest expenses                           |   |               | 1,724  |   |              |   | 1,528 |   |   |   | 4,877 |   |   |   | 4,379 |   |
|                                                 |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Income before income taxes                           |   |               | 823    |   |              |   | 909 |   |   |   | 2,322 |   |   |   | 2,508 |   |
|                                                 |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Provision for income taxes                           |   |               | 295    |   |              |   | 333 |   |   |   | 836 |   |   |   | 922 |   |
|                                                 |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                           |   | $                  | 528    |   |              | $      | 576 |   |   | $ | 1,486 |   |   | $ | 1,586 |   |

----

CONSOLIDATED STATEMENTS OF CHANGES IN SURPLUS

|                                                         |   |           |   |   | Accumulated   |   |   |    |   |
|--------------------------------------------------------------|--------|----------------|--------|--------|---------------|--------|--------|---------|--------|
|                                                         |   |           |   |   | Other         |   |   |    |   |
|                                                         |   |           |   |   | Comprehensive |   |   | Total   |   |
|                                                         |   | Surplus        |   |   | Income        |   |   | Surplus |   |
|                                                         |   | (In thousands) |   |
|                                                         |   | (Unaudited)    |   |
|                                                         |   |           |   |   |          |   |   |    |   |
| Balance at December 31, 2009                                 |   | $              | 17,946 |   |          | $      | 357    |    |   | $ | 18,303 |   |
|                                                         |   |           |   |   |          |   |   |    |   |   |   |   |
| Comprehensive income:                                        |   |           |   |   |          |   |   |    |   |   |   |   |
| Net income                                                   |   |           | 1,586  |   |          |   | -      |    |   |   | 1,586 |   |
| Net unrealized gain on securities available for sale, net of |   |           |   |   |          |   |   |    |   |   |   |   |
| tax effects                                                  |   |           | -      |   |          |   | 196    |    |   |   | 196 |   |
| Total comprehensive income                                   |   |           |   |   |          |   |   |    |   |   | 1,782 |   |
|                                                         |   |           |   |   |          |   |   |    |   |   |   |   |
| Balance at September 30, 2010                                |   | $              | 19,532 |   |          | $      | 553    |    |   | $ | 20,085 |   |
|                                                         |   |           |   |   |          |   |   |    |   |   |   |   |
|                                                         |   |           |   |   |          |   |   |    |   |   |   |   |
| Balance at December 31, 2010                                 |   | $              | 20,099 |   |          | $      | 309    |    |   | $ | 20,408 |   |
|                                                         |   |           |   |   |          |   |   |    |   |   |   |   |
| Comprehensive income:                                        |   |           |   |   |          |   |   |    |   |   |   |   |
| Net income                                                   |   |           | 1,486  |   |          |   | -      |    |   |   | 1,486 |   |
| Net unrealized gain on securities available for sale, net of |   |           |   |   |          |   |   |    |   |   |   |   |
| tax effects                                                  |   |           | -      |   |          |   | 254    |    |   |   | 254 |   |
| Total comprehensive income                                   |   |           |   |   |          |   |   |    |   |   | 1,740 |   |
|                                                         |   |           |   |   |          |   |   |    |   |   |   |   |
| Balance at September 30, 2011                                |   | $              | 21,585 |   |          | $      | 563    |    |   | $ | 22,148 |   |

----

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                            |   | Nine Months Ended September 30, |    |
|-------------------------------------------------|--------|---------------------------------|---------|
|                                            |   | 2011                            |    |   | 2010 |   |
|                                            |   | (In thousands)                  |    |
|                                            |   | (Unaudited)                     |    |
| Cash flows from operating activities:           |   |                            |    |   |   |   |
| Net income                                      |   | $                               | 1,486   |   |   | $ | 1,586 |   |
| Adjustments to reconcile net income to net cash |   |                            |    |   |   |   |   |   |
| provided by operating activities:               |   |                            |    |   |   |   |   |   |
| Provision for loan losses                       |   |                            | 750     |   |   |   | 800 |   |
| Provision for losses on foreclosed assets       |   |                            | -       |   |   |   | 60 |   |
| Depreciation and amortization                   |   |                            | 154     |   |   |   | 127 |   |
| Net amortization of securities                  |   |                            | 117     |   |   |   | 67 |   |
| Accretion of net deferred loan fees             |   |                            | (248    | ) |   |   | (260 | ) |
| Income on bank-owned life insurance             |   |                            | (109    | ) |   |   | (113 | ) |
| Deferred income tax provision (benefit)         |   |                            | (189    | ) |   |   | 1 |   |
| Net change in:                                  |   |                            |    |   |   |   |   |   |
| Accrued interest receivable                     |   |                            | (28     | ) |   |   | (21 | ) |
| Other assets                                    |   |                            | (433    | ) |   |   | 346 |   |
| Prepaid FDIC assessment                         |   |                            | 135     |   |   |   | 292 |   |
| Accrued expenses and other liabilities          |   |                            | 1,604   |   |   |   | (64 | ) |
| Net cash provided by operating activities       |   |                            | 3,239   |   |   |   | 2,821 |   |
|                                            |   |                            |    |   |   |   |   |   |
| Cash flows from investing activities:           |   |                            |    |   |   |   |   |   |
| Activity in certificates of deposit:            |   |                            |    |   |   |   |   |   |
| Maturities                                      |   |                            | 3,333   |   |   |   | 6,588 |   |
| Activity in securities available for sale:      |   |                            |    |   |   |   |   |   |
| Maturities, prepayments and calls               |   |                            | 3,697   |   |   |   | 7,859 |   |
| Purchases                                       |   |                            | (10,391 | ) |   |   | (5,679 | ) |
| Loan originations, net of principal payments    |   |                            | (2,736  | ) |   |   | (17,746 | ) |
| Additions to premises and equipment             |   |                            | (215    | ) |   |   | (81 | ) |
| Proceeds from sale of fixed assets              |   |                            | -       |   |   |   | 33 |   |
| Net cash used by investing activities           |   |                            | (6,312  | ) |   |   | (9,026 | ) |
|                                            |   |                            |    |   |   |   |   |   |
| Cash flows from financing activities:           |   |                            |    |   |   |   |   |   |
| Net increase in deposits                        |   |                            | 11,916  |   |   |   | 15,937 |   |
| Repayments of long-term debt                    |   |                            | (5,000  | ) |   |   | (8,000 | ) |
| Increase in short-term borrowings               |   |                            | 2,098   |   |   |   | 1,170 |   |
| Net cash provided by financing activities       |   |                            | 9,014   |   |   |   | 9,107 |   |
|                                            |   |                            |    |   |   |   |   |   |
| Net change in cash and cash equivalents         |   |                            | 5,941   |   |   |   | 2,902 |   |
|                                            |   |                            |    |   |   |   |   |   |
| Cash and cash equivalents at beginning period   |   |                            | 18,397  |   |   |   | 9,370 |   |
|                                            |   |                            |    |   |   |   |   |   |
| Cash and cash equivalents at end of period      |   | $                               | 24,338  |   |   | $ | 12,272 |   |
|                                            |   |                            |    |   |   |   |   |   |
| Supplementary information:                      |   |                            |    |   |   |   |   |   |
| Interest paid                                   |   | $                               | 2,083   |   |   | $ | 2,561 |   |
| Income taxes paid                               |   |                            | 1,019   |   |   |   | 303 |   |
| Transfer of loans to foreclosed real estate     |   |                            | -       |   |   |   | 750 |   |

----

WELLESLEY BANK AND SUBSIDIARIES

----

----

|                                   |   | Nine Months Ended September 30, |   |
|----------------------------------------|--------|---------------------------------|--------|
|                                   |   | 2011                            |   |   | 2010 |   |
|                                   |   | (In thousands)                  |   |
|                                   |   |                            |   |   |   |   |
| Unrealized holding gains on            |   |                            |   |   |   |   |
| securities available for sale          |   | $                               | 413    |   |   | $ | 321 |   |
| Reclassification adjustment for losses |   |                            |   |   |   |   |   |   |
| (gains) realized in income             |   |                            | -      |   |   |   | - |   |
|                                   |   |                            |   |   |   |   |   |   |
| Net unrealized gains (losses)          |   |                            | 413    |   |   |   | 321 |   |
| Tax effects                            |   |                            | (159   | ) |   |   | (125 | ) |
|                                   |   |                            |   |   |   |   |   |   |
| Net-of-tax amount                      |   | $                               | 254    |   |   | $ | 196 |   |

----

|                            |   | September 30,  |   |   | December 31, |   |
|---------------------------------|--------|----------------|--------|--------|--------------|--------|
|                            |   | 2011           |   |   | 2010         |   |
|                            |   | (In thousands) |   |
| Net unrealized holding gains on |   |           |   |   |         |   |
| securities available for sale   |   | $              | 928    |   |         | $      | 515 |   |
| Tax effect                      |   |           | (365   | )      |         |   | (206 | ) |
| Net-of-tax amount               |   | $              | 563    |   |         | $      | 309 |   |

----

|                                    |   | September 30, 2011 |   |
|-----------------------------------------|--------|--------------------|--------|
|                                    |   |               |   |   | Gross |   |   | Gross |   |   |   |   |
|                                    |   | Amortized          |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                    |   | Cost               |   |   | Gains |   |   | Losses |   |   | Value |   |
|                                    |   | (In thousands)     |   |
|                                    |   |               |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage-backed securities: |   |               |   |   |   |   |   |   |   |   |   |   |
| Government National Mortgage            |   |               |   |   |   |   |   |   |   |   |   |   |
| Association                             |   | $                  | 12,310 |   |   | $ | 288 |   |   | $ | (13 | ) |   | $ | 12,585 |   |
| Government-sponsored enterprises        |   |               | 7,401  |   |   |   | 220 |   |   |   | (8 | ) |   |   | 7,613 |   |
| SBA asset-backed securities             |   |               | 2,507  |   |   |   | 84 |   |   |   | (1 | ) |   |   | 2,590 |   |
| State and municipal bonds               |   |               | 8,023  |   |   |   | 359 |   |   |   | - |   |   |   | 8,382 |   |
| Government-sponsored                    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| enterprise obligations                  |   |               | 381    |   |   |   | 22 |   |   |   | - |   |   |   | 403 |   |
| Corporate bonds                         |   |               | 1,005  |   |   |   | 5 |   |   |   | (28 | ) |   |   | 982 |   |
|                                    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                    |   | $                  | 31,627 |   |   | $ | 978 |   |   | $ | (50 | ) |   | $ | 32,555 |   |

|                                    |   | December 31, 2010 |   |
|-----------------------------------------|--------|-------------------|--------|
|                                    |   |              |   |   | Gross |   |   | Gross |   |   |   |   |
|                                    |   | Amortized         |   |   | Unrealized |   |   | Unrealized |   |   | Fair |   |
|                                    |   | Cost              |   |   | Gains |   |   | Losses |   |   | Value |   |
|                                    |   | (In thousands)    |   |
|                                    |   |              |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage-backed securities: |   |              |   |   |   |   |   |   |   |   |   |   |
| Government National Mortgage            |   |              |   |   |   |   |   |   |   |   |   |   |
| Association                             |   | $                 | 11,418 |   |   | $ | 223 |   |   | $ | (27 | ) |   | $ | 11,614 |   |
| Government-sponsored enterprises        |   |              | 4,503  |   |   |   | 192 |   |   |   | (24 | ) |   |   | 4,671 |   |
| SBA asset-backed securities             |   |              | 2,700  |   |   |   | 64 |   |   |   | (53 | ) |   |   | 2,711 |   |
| State and municipal bonds               |   |              | 5,606  |   |   |   | 120 |   |   |   | (13 | ) |   |   | 5,713 |   |
| Government-sponsored                    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| enterprise obligations                  |   |              | 422    |   |   |   | 21 |   |   |   | - |   |   |   | 443 |   |
| Corporate bonds                         |   |              | 401    |   |   |   | 12 |   |   |   | - |   |   |   | 413 |   |
|                                    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                    |   | $                 | 25,050 |   |   | $ | 632 |   |   | $ | (117 | ) |   | $ | 25,565 |   |

----

|                       |   | September 30, 2011 |   |
|----------------------------|--------|--------------------|--------|
|                       |   | Amortized          |   |   | Fair |   |
|                       |   | Cost               |   |   | Value |   |
|                       |   | (In thousands)     |   |
|                       |   |               |   |   |   |   |
| Within 1 year              |   | $                  | 300    |   |   | $ | 301 |   |
| After 1 year to 5 years    |   |               | 3,293  |   |   |   | 3,392 |   |
| After 5 years to 10 years  |   |               | 1,671  |   |   |   | 1,707 |   |
| After 10 years             |   |               | 4,145  |   |   |   | 4,367 |   |
|                       |   |               | 9,409  |   |   |   | 9,767 |   |
| Mortgage- and asset-backed |   |               |   |   |   |   |   |   |
| securities                 |   |               | 22,218 |   |   |   | 22,788 |   |
|                       |   |               |   |   |   |   |   |   |
|                       |   | $                  | 31,627 |   |   | $ | 32,555 |   |

|                                    |   | Less Than Twelve Months |   |   | Over Twelve Months |   |
|-----------------------------------------|--------|-------------------------|--------|--------|--------------------|--------|
|                                    |   | Gross                   |   |   |               |   |   | Gross |   |   |   |   |
|                                    |   | Unrealized              |   |   | Fair               |   |   | Unrealized |   |   | Fair |   |
|                                    |   | Losses                  |   |   | Value              |   |   | Losses |   |   | Value |   |
|                                    |   | (In thousands)          |   |
| September 30, 2011                      |   |                    |   |   |               |   |   |   |   |   |   |   |
| Residential mortgage-backed securities: |   |                    |   |   |               |   |   |   |   |   |   |   |
| Government National Mortgage            |   |                    |   |   |               |   |   |   |   |   |   |   |
| Association                             |   | $                       | 4      |   |               | $      | 527 |   |   | $ | 9 |   |   | $ | 124 |   |
| Government-sponsored enterprises        |   |                    | 8      |   |               |   | 311 |   |   |   | - |   |   |   | - |   |
| SBA asset-backed securities             |   |                    | 1      |   |               |   | 403 |   |   |   | - |   |   |   | - |   |
| Corporate bonds                         |   |                    | 28     |   |               |   | 766 |   |   |   | - |   |   |   | - |   |
|                                    |   |                    |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
|                                    |   | $                       | 41     |   |               | $      | 2,007 |   |   | $ | 9 |   |   | $ | 124 |   |
|                                    |   |                    |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010                       |   |                    |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage-backed securities: |   |                    |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Government National Mortgage            |   |                    |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Association                             |   | $                       | 20     |   |               | $      | 2,732 |   |   | $ | 7 |   |   | $ | 96 |   |
| Government-sponsored enterprises        |   |                    | 24     |   |               |   | 483 |   |   |   | - |   |   |   | - |   |
| SBA asset-backed securities             |   |                    | 53     |   |               |   | 1,777 |   |   |   | - |   |   |   | - |   |
| State and municipal bonds               |   |                    | 13     |   |               |   | 1,080 |   |   |   | - |   |   |   | - |   |
|                                    |   |                    |   |   |               |   |   |   |   |   |   |   |   |   |   |   |
|                                    |   | $                       | 110    |   |               | $      | 6,072 |   |   | $ | 7 |   |   | $ | 96 |   |

----

|                          |   | September 30,  |    |   | December 31, |   |
|-------------------------------|--------|----------------|---------|--------|--------------|--------|
|                          |   | 2011           |    |   | 2010         |   |
|                          |   | (In thousands) |    |
|                          |   |           |    |   |         |   |
| Real estate loans:            |   |           |    |   |         |   |
| Residential - fixed           |   | $              | 15,443  |   |         | $      | 18,993 |   |
| Residential - variable        |   |           | 58,425  |   |         |   | 53,897 |   |
| Commercial                    |   |           | 66,094  |   |         |   | 53,907 |   |
| Construction                  |   |           | 35,133  |   |         |   | 40,770 |   |
|                          |   |           | 175,095 |   |         |   | 167,567 |   |
|                          |   |           |    |   |         |   |   |   |
| Commercial loans:             |   |           |    |   |         |   |   |   |
| Secured                       |   |           | 13,570  |   |         |   | 14,413 |   |
| Unsecured                     |   |           | 325     |   |         |   | 492 |   |
|                          |   |           | 13,895  |   |         |   | 14,905 |   |
|                          |   |           |    |   |         |   |   |   |
| Consumer loans:               |   |           |    |   |         |   |   |   |
| Home equity lines of credit   |   |           | 20,433  |   |         |   | 24,198 |   |
| Other                         |   |           | 563     |   |         |   | 503 |   |
|                          |   |           | 20,996  |   |         |   | 24,701 |   |
|                          |   |           |    |   |         |   |   |   |
| Total loans                   |   |           | 209,986 |   |         |   | 207,173 |   |
|                          |   |           |    |   |         |   |   |   |
| Less:                         |   |           |    |   |         |   |   |   |
| Allowance for loan losses     |   |           | (3,245  | )      |         |   | (2,690 | ) |
| Net deferred origination fees |   |           | (390    | )      |         |   | (366 | ) |
|                          |   |           |    |   |         |   |   |   |
| Loans, net                    |   | $              | 206,351 |   |         | $      | 204,117 |   |

----

|                                  |   | Residential    |   |   | Commercial  |   |   |         |   |   |       |   |   | Home   |   |   | Other    |   |   |        |   |   |   |   |
|---------------------------------------|--------|----------------|--------|--------|-------------|--------|--------|--------------|--------|--------|------------|--------|--------|--------|--------|--------|----------|--------|--------|-------------|--------|--------|--------|--------|
|                                  |   | Real Estate    |   |   | Real Estate |   |   | Construction |   |   | Commercial |   |   | Equity |   |   | Consumer |   |   | Unallocated |   |   | Total  |   |
|                                  |   | (In thousands) |   |
| Three Months Ended September 30, 2011 |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |
|                                  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |
| Allowance at June 30, 2011            |   | $              | 500    |   |        | $      | 1,022  |         |   | $      | 824        |   |   | $      | 441    |   |     | $      | 113    |        |   | $      | 16     |   |   | $ | 313 |   |   | $ | 3,229 |   |
|                                  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses             |   |           | 224    |   |        |   | 14     |         |   |   | (53        | )      |   |   | (35    | )      |     |   | (11    | )           |   |   | 1      |   |   |   | 10 |   |   |   | 150 |   |
| Loans charged off                     |   |           | (134   | )      |        |   | -      |         |   |   | -          |   |   |   | -      |   |     |   | -      |        |   |   | -      |   |   |   | - |   |   |   | (134 | ) |
|                                  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance at September 30, 2011       |   | $              | 590    |   |        | $      | 1,036  |         |   | $      | 771        |   |   | $      | 406    |   |     | $      | 102    |        |   | $      | 17     |   |   | $ | 323 |   |   | $ | 3,245 |   |
|                                  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Nine Months Ended September 30, 2011  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
|                                  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance at December 31, 2010        |   | $              | 319    |   |        | $      | 356    |         |   | $      | 1,258      |   |   | $      | 384    |   |     | $      | 84     |        |   | $      | 16     |   |   | $ | 273 |   |   | $ | 2,690 |   |
|                                  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses             |   |           | 466    |   |        |   | 680    |         |   |   | (487       | )      |   |   | 22     |   |     |   | 18     |        |   |   | 1      |   |   |   | 50 |   |   |   | 750 |   |
| Loans charged off                     |   |           | (195   | )      |        |   | -      |         |   |   | -          |   |   |   | -      |   |     |   | -      |        |   |   | -      |   |   |   | - |   |   |   | (195 | ) |
|                                  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance at September 30, 2011       |   | $              | 590    |   |        | $      | 1,036  |         |   | $      | 771        |   |   | $      | 406    |   |     | $      | 102    |        |   | $      | 17     |   |   | $ | 323 |   |   | $ | 3,245 |   |

----

|                                 |   | Residential    |   |   | Commercial  |   |   |         |   |   |       |   |   | Home   |   |   | Other    |   |   |        |   |   |   |   |
|--------------------------------------|--------|----------------|--------|--------|-------------|--------|--------|--------------|--------|--------|------------|--------|--------|--------|--------|--------|----------|--------|--------|-------------|--------|--------|--------|--------|
|                                 |   | Real Estate    |   |   | Real Estate |   |   | Construction |   |   | Commercial |   |   | Equity |   |   | Consumer |   |   | Unallocated |   |   | Total  |   |
|                                 |   | (In thousands) |   |
| September 30, 2011                   |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |
| Allowance related to loans           |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |
| individually evaluated for           |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |
| impairment                           |   | $              | -      |   |        | $      | 256    |         |   | $      | -          |   |   | $      | 43     |   |     | $      | -      |        |   | $      | -      |   |   | $ | - |   |   | $ | 299 |   |
|                                 |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance related to loans           |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| collectively evaluated               |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| for impairment                       |   |           | 590    |   |        |   | 780    |         |   |   | 771        |   |   |   | 363    |   |     |   | 102    |        |   |   | 17     |   |   |   | 323 |   |   | $ | 2,946 |   |
| Total allowance                      |   | $              | 590    |   |        | $      | 1,036  |         |   | $      | 771        |   |   | $      | 406    |   |     | $      | 102    |        |   | $      | 17     |   |   | $ | 323 |   |   | $ | 3,245 |   |
|                                 |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loan balances individually  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated                            |   | $              | 1,231  |   |        | $      | 1,405  |         |   | $      | -          |   |   | $      | 87     |   |     | $      | 17     |        |   | $      | -      |   |   | $ | - |   |   | $ | 2,740 |   |
|                                 |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan balances collectively evaluated |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| for impairment                       |   |           | 72,637 |   |        |   | 64,689 |         |   |   | 35,133     |   |   |   | 13,808 |   |     |   | 20,416 |        |   |   | 563    |   |   |   |   |   |   | $ | 207,246 |   |
| Total loans                          |   | $              | 73,868 |   |        | $      | 66,094 |         |   | $      | 35,133     |   |   | $      | 13,895 |   |     | $      | 20,433 |        |   | $      | 563    |   |   | $ | - |   |   | $ | 209,986 |   |
|                                 |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010                    |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance related to loans           |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| individually evaluated for           |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| impairment                           |   | $              | 56     |   |        | $      | 188    |         |   | $      | -          |   |   | $      | 112    |   |     | $      | -      |        |   | $      | -      |   |   | $ | - |   |   | $ | 356 |   |
|                                 |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance related to loans           |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| collectively evaluated               |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| for impairment                  |   |           | 263    |   |        |   | 168    |         |   |   | 1,258      |   |   |   | 272    |   |     |   | 84     |        |   |   | 16     |   |   |   | 273 |   |   |   | 2,334 |   |
| Total allowance                      |   | $              | 319    |   |        | $      | 356    |         |   | $      | 1,258      |   |   | $      | 384    |   |     | $      | 84     |        |   | $      | 16     |   |   | $ | 273 |   |   | $ | 2,690 |   |
|                                 |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loan balances individually  |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated                            |   | $              | 1,876  |   |        | $      | 376    |         |   | $      | -          |   |   | $      | 225    |   |     | $      | -      |        |   | $      | -      |   |   | $ | - |   |   | $ | 2,477 |   |
|                                 |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan balances collectively           |   |           |   |   |        |   |   |         |   |   |       |   |   |   |   |   |     |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| evaluated for impairment             |   |           | 71,014 |   |        |   | 53,531 |         |   |   | 40,770     |   |   |   | 14,680 |   |     |   | 24,198 |        |   |   | 503    |   |   |   | - |   |   |   | 204,696 |   |
| Total loans                          |   | $              | 72,890 |   |        | $      | 53,907 |         |   | $      | 40,770     |   |   | $      | 14,905 |   |     | $      | 24,198 |        |   | $      | 503    |   |   | $ | - |   |   | $ | 207,173 |   |

----

|                        |   |           |   |   |       |   |   |         |   |   |     |   |   | Past Due 90        |   |   |        |   |
|-----------------------------|--------|----------------|--------|--------|------------|--------|--------|--------------|--------|--------|----------|--------|--------|--------------------|--------|--------|-------------|--------|
|                        |   | 30-59 Days     |   |   | 60-89 Days |   |   | Past Due 90  |   |   | Total    |   |   | Days or More       |   |   | Non-accrual |   |
|                        |   | Past Due       |   |   | Past Due   |   |   | Days or More |   |   | Past Due |   |   | and Still Accruing |   |   | Loans       |   |
|                        |   | (In thousands) |   |
| September 30, 2011          |   |           |   |   |       |   |   |         |   |   |     |   |   |               |   |   |        |   |
|                        |   |           |   |   |       |   |   |         |   |   |     |   |   |               |   |   |        |   |
| Residential real estate     |   | $              | 1,786  |   |       | $      | 2,037  |         |   | $      | -        |   |   | $                  | 3,823  |   |        | $      | - |   |   | $ | 1,231 |   |
| Commercial real estate      |   |           | -      |   |       |   | -      |         |   |   | -        |   |   |               | -      |   |        |   | - |   |   |   | 1,405 |   |
| Construction                |   |           | 910    |   |       |   | -      |         |   |   | -        |   |   |               | 910    |   |        |   | - |   |   |   | - |   |
| Commercial                  |   |           | -      |   |       |   | -      |         |   |   | 227      |   |   |               | 227    |   |        |   | - |   |   |   | 87 |   |
| Consumer:                   |   |           |   |   |       |   |   |         |   |   |     |   |   |               |   |   |        |   |   |   |   |   |   |   |
| Home equity lines of credit |   |           | 201    |   |       |   | 15     |         |   |   | 17       |   |   |               | 233    |   |        |   | - |   |   |   | 17 |   |
| Other                       |   |           | -      |   |       |   | -      |         |   |   | -        |   |   |               | -      |   |        |   | - |   |   |   | - |   |
|                        |   |           |   |   |       |   |   |         |   |   |     |   |   |               |   |   |        |   |   |   |   |   |   |   |
| Total                       |   | $              | 2,897  |   |       | $      | 2,052  |         |   | $      | 244      |   |   | $                  | 5,193  |   |        | $      | - |   |   | $ | 2,740 |   |

|                        |   |           |   |   |       |   |   |         |   |   |     |   |   | Past Due 90        |   |   |        |   |
|-----------------------------|--------|----------------|--------|--------|------------|--------|--------|--------------|--------|--------|----------|--------|--------|--------------------|--------|--------|-------------|--------|
|                        |   | 30-59 Days     |   |   | 60-89 Days |   |   | Past Due 90  |   |   | Total    |   |   | Days or More       |   |   | Non-accrual |   |
|                        |   | Past Due       |   |   | Past Due   |   |   | Days or More |   |   | Past Due |   |   | and Still Accruing |   |   | Loans       |   |
|                        |   | (In thousands) |   |
| December 31, 2010           |   |           |   |   |       |   |   |         |   |   |     |   |   |               |   |   |        |   |
|                        |   |           |   |   |       |   |   |         |   |   |     |   |   |               |   |   |        |   |
| Residential real estate     |   | $              | 394    |   |       | $      | 902    |         |   | $      | 2,008    |   |   | $                  | 3,304  |   |        | $      | - |   |   | $ | 2,008 |   |
| Commercial real estate      |   |           | 1,176  |   |       |   | -      |         |   |   | -        |   |   |               | 1,176  |   |        |   | - |   |   |   | - |   |
| Construction                |   |           | -      |   |       |   | -      |         |   |   | -        |   |   |               | -      |   |        |   | - |   |   |   | - |   |
| Commercial                  |   |           | 90     |   |       |   | -      |         |   |   | -        |   |   |               | 90     |   |        |   | - |   |   |   | - |   |
| Consumer:                   |   |           |   |   |       |   |   |         |   |   |     |   |   |               |   |   |        |   |   |   |   |   |   |   |
| Home equity lines of credit |   |           | 879    |   |       |   | 19     |         |   |   | -        |   |   |               | 898    |   |        |   | - |   |   |   | - |   |
| Other                       |   |           | -      |   |       |   | -      |         |   |   | -        |   |   |               | -      |   |        |   | - |   |   |   | - |   |
|                        |   |           |   |   |       |   |   |         |   |   |     |   |   |               |   |   |        |   |   |   |   |   |   |   |
| Total                       |   | $              | 2,539  |   |       | $      | 921    |         |   | $      | 2,008    |   |   | $                  | 5,468  |   |        | $      | - |   |   | $ | 2,008 |   |

|                                          |   | September 30, 2011 |   |   | December 31, 2010 |   |
|-----------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                          |   |               |   |   | Unpaid            |   |   |   |   |   |   |   |   | Unpaid |   |   |   |   |
|                                          |   | Recorded           |   |   | Principal         |   |   | Related |   |   | Recorded |   |   | Principal |   |   | Related |   |
|                                          |   | Investment         |   |   | Balance           |   |   | Allowance |   |   | Investment |   |   | Balance |   |   | Allowance |   |
|                                          |   | (In thousands)     |   |
| Impaired loans without a valuation allowance: |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential real estate                       |   | $                  | 1,231  |   |              | $      | 1,231 |   |   | $ | - |   |   | $ | 1,313 |   |   | $ | 1,313 |   |   | $ | - |   |
| Commercial real estate                        |   |               | 227    |   |              |   | 227 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer loans                                |   |               | 17     |   |              |   | 17 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                         |   |               | 1,475  |   |              |   | 1,475 |   |   |   | - |   |   |   | 1,313 |   |   |   | 1,313 |   |   |   | - |   |
|                                          |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans with a valuation allowance:    |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential real estate                       |   | $                  | -      |   |              | $      | - |   |   | $ | - |   |   | $ | 563 |   |   | $ | 703 |   |   | $ | 56 |   |
| Commercial real estate                        |   |               | 1,178  |   |              |   | 1,178 |   |   |   | 256 |   |   |   | 376 |   |   |   | 376 |   |   |   | 188 |   |
| Commercial                                    |   |               | 87     |   |              |   | 87 |   |   |   | 43 |   |   |   | 225 |   |   |   | 225 |   |   |   | 112 |   |
| Total                                         |   |               | 1,265  |   |              |   | 1,265 |   |   |   | 299 |   |   |   | 1,164 |   |   |   | 1,304 |   |   |   | 356 |   |
|                                          |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans                          |   | $                  | 2,740  |   |              | $      | 2,740 |   |   | $ | 299 |   |   | $ | 2,477 |   |   | $ | 2,617 |   |   | $ | 356 |   |

----

|                                          |   | Three Months   |   |   | Nine Months   |   |
|-----------------------------------------------|--------|----------------|--------|--------|---------------|--------|
|                                          |   | Ended          |   |   | Ended         |   |
|                                          |   | September 30,  |   |   | September 30, |   |
|                                          |   | 2011           |   |   | 2010          |   |   | 2011 |   |   | 2010 |   |
|                                          |   | (In thousands) |   |
|                                          |   |           |   |   |          |   |   |   |   |   |   |   |
| Average investment in impaired loans:         |   |           |   |   |          |   |   |   |   |   |   |   |
| Residential Real Estate                       |   | $              | 2,347  |   |          | $      | 2,895 |   |   | $ | 1,612 |   |   | $ | 2,641 |   |
| Commercial Real Estate                        |   |           | 1,417  |   |          |   | - |   |   |   | 1,289 |   |   |   | 696 |   |
| Commercial                                    |   |           | 149    |   |          |   | - |   |   |   | 128 |   |   |   | - |   |
| Consumer                                      |   |           | 4      |   |          |   | - |   |   |   | 2 |   |   |   | - |   |
| Total                                         |   | $              | 3,917  |   |          | $      | 2,895 |   |   | $ | 3,031 |   |   | $ | 3,337 |   |
|                                          |   |           |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Interest income recognized on impaired loans: |   |           |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Residential Real Estate                       |   | $              | 17     |   |          | $      | 14 |   |   | $ | 49 |   |   | $ | 58 |   |
| Commercial Real Estate                        |   |           | 37     |   |          |   | - |   |   |   | 53 |   |   |   | 32 |   |
| Commercial                                    |   |           | 1      |   |          |   | - |   |   |   | 2 |   |   |   | - |   |
| Consumer                                      |   |           | -      |   |          |   | - |   |   |   | - |   |   |   | - |   |
| Total                                         |   | $              | 55     |   |          | $      | 14 |   |   | $ | 104 |   |   | $ | 90 |   |
|                                          |   |           |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Interest income recognized on a cash basis    |   |           |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| on impaired loans:                            |   |           |   |   |          |   |   |   |   |   |   |   |   |   |   |   |
| Residential Real Estate                       |   | $              | 3      |   |          | $      | - |   |   | $ | 3 |   |   | $ | 9 |   |
| Commercial Real Estate                        |   |           | 37     |   |          |   | - |   |   |   | 53 |   |   |   | 32 |   |
| Commercial                                    |   |           | 1      |   |          |   | - |   |   |   | 2 |   |   |   | - |   |
| Consumer                                      |   |           | -      |   |          |   | - |   |   |   | - |   |   |   | - |   |
| Total                                         |   | $              | 41     |   |          | $      | - |   |   | $ | 57 |   |   | $ | 41 |   |

----

|               |   | September 30, 2011 |   |   | December 31, 2010 |   |
|--------------------|--------|--------------------|--------|--------|-------------------|--------|
|               |   | Commercial         |   |   |              |   |   |   |   |   |   |   |   | Commercial |   |   |   |   |   |   |   |   |   |   |
|               |   | Real Estate        |   |   | Construction      |   |   | Commercial |   |   | Total |   |   | Real Estate |   |   | Construction |   |   | Commercial |   |   | Total |   |
|               |   | (In thousands)     |   |
|               |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans rated 1 - 3B |   | $                  | 59,727 |   |              | $      | 32,133 |   |   | $ | 12,266 |   |   | $ | 104,126 |   |   | $ | 49,198 |   |   | $ | 35,858 |   |   | $ | 13,259 |   |   | $ | 98,315 |   |
| Loans rated 4      |   |               | 4,962  |   |              |   | 3,000 |   |   |   | 1,493 |   |   |   | 9,455 |   |   |   | 3,222 |   |   |   | 3,000 |   |   |   | 1,404 |   |   |   | 7,626 |   |
| Loans rated 5      |   |               | 1,060  |   |              |   | - |   |   |   | 49 |   |   |   | 1,109 |   |   |   | 1,487 |   |   |   | 1,912 |   |   |   | 225 |   |   |   | 3,624 |   |
| Loans rated 6      |   |               | 346    |   |              |   | - |   |   |   | 87 |   |   |   | 432 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Loans rated 7      |   |               | -      |   |              |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Categories 8 - 9   |   |               | -      |   |              |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 17 |   |   |   | 17 |   |
| Category 10        |   |               | -      |   |              |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|               |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total              |   | $                  | 66,094 |   |              | $      | 35,133 |   |   | $ | 13,895 |   |   | $ | 115,122 |   |   | $ | 53,907 |   |   | $ | 40,770 |   |   | $ | 14,905 |   |   | $ | 109,582 |   |

----

----

|                                    |   | September 30, 2011 |   |
|-----------------------------------------|--------|--------------------|--------|
|                                    |   | Level 1            |   |   | Level 2 |   |   | Level 3 |   |   | Fair Value |   |
|                                    |   | (In thousands)     |   |
|                                    |   |               |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage-backed securities: |   |               |   |   |   |   |   |   |   |   |   |   |
| Government National Mortgage            |   |               |   |   |   |   |   |   |   |   |   |   |
| Association                             |   | $                  | -      |   |   | $ | 12,585 |   |   | $ | - |   |   | $ | 12,585 |   |
| Government-sponsored enterprises        |   |               | -      |   |   |   | 7,613 |   |   |   | - |   |   |   | 7,613 |   |
| SBA asset-backed securities             |   |               | -      |   |   |   | 2,590 |   |   |   | - |   |   |   | 2,590 |   |
| State and municipal bonds               |   |               | -      |   |   |   | 8,382 |   |   |   | - |   |   |   | 8,382 |   |
| Government-sponsored                    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| enterprise obligations                  |   |               | -      |   |   |   | 403 |   |   |   | - |   |   |   | 403 |   |
| Corporate bonds                         |   |               | -      |   |   |   | 982 |   |   |   | - |   |   |   | 982 |   |
|                                    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                            |   | $                  | -      |   |   | $ | 32,555 |   |   | $ | - |   |   | $ | 32,555 |   |

|                                    |   | December 31, 2010 |   |
|-----------------------------------------|--------|-------------------|--------|
|                                    |   | Level 1           |   |   | Level 2 |   |   | Level 3 |   |   | Fair Value |   |
|                                    |   | (In thousands)    |   |
|                                    |   |              |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage-backed securities: |   |              |   |   |   |   |   |   |   |   |   |   |
| Government National Mortgage            |   |              |   |   |   |   |   |   |   |   |   |   |
| Association                             |   | $                 | -      |   |   | $ | 11,614 |   |   | $ | - |   |   | $ | 11,614 |   |
| Government-sponsored enterprises        |   |              | -      |   |   |   | 4,671 |   |   |   | - |   |   |   | 4,671 |   |
| SBA asset-backed securities             |   |              | -      |   |   |   | 2,711 |   |   |   | - |   |   |   | 2,711 |   |
| State and municipal bonds               |   |              | -      |   |   |   | 5,713 |   |   |   | - |   |   |   | 5,713 |   |
| Government-sponsored                    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| enterprise obligations                  |   |              | -      |   |   |   | 443 |   |   |   | - |   |   |   | 443 |   |
| Corporate bonds                         |   |              | -      |   |   |   | 413 |   |   |   | - |   |   |   | 413 |   |
|                                    |   |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                            |   | $                 | -      |   |   | $ | 25,565 |   |   | $ | - |   |   | $ | 25,565 |   |

----

|           |   |               |   |   |    |   |   |    |   |   | Three Months Ended |   |   | Nine Months Ended |   |
|----------------|--------|--------------------|--------|--------|---------|--------|--------|---------|--------|--------|--------------------|--------|--------|-------------------|--------|
|           |   |               |   |   |    |   |   |    |   |   | September 30,      |   |   | September 30,     |   |
|           |   | September 30, 2011 |   |   | 2011    |   |   | 2010    |   |   | 2011               |   |   | 2010              |   |
|           |   | Level 1            |   |   | Level 2 |   |   | Level 3 |   |   | Total Losses       |   |   | Total Losses      |   |   | Total Losses |   |   | Total Losses |   |
|           |   | (In thousands)     |   |
|           |   |               |   |   |    |   |   |    |   |   |               |   |   |              |   |   |   |   |   |   |   |
| Impaired loans |   | $                  | -      |   |    | $      | -      |    |   | $      | 965                |   |   | $                 | 37     |   |   | $ | - |   |   | $ | 299 |   |   | $ | - |   |

|           |   | December 31, 2010 |   |   |
|----------------|--------|-------------------|--------|--------|
|           |   | Level 1           |   |   | Level 2 |   |   | Level 3 |   |   |
|           |   | (In thousands)    |   |   |
|           |   |              |   |   |   |   |   |   |   |   |
| Impaired loans |   | $                 | -      |   |   | $ | - |   |   | $ | 808 |   |   |

----

|                          |   | September 30, 2011 |    |   | December 31, 2010 |   |
|-------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                          |   | Carrying           |    |   | Fair              |   |   | Carrying |   |   | Fair |   |
|                          |   | Amount             |    |   | Value             |   |   | Amount |   |   | Value |   |
|                          |   | (In thousands)     |    |
|                          |   |               |    |   |              |   |   |   |   |   |   |   |
| Financial assets:             |   |               |    |   |              |   |   |   |   |   |   |   |
| Cash and cash equivalents     |   | $                  | 24,338  |   |              | $      | 24,338 |   |   | $ | 18,397 |   |   | $ | 18,397 |   |
| Certificates of deposit       |   |               | 100     |   |              |   | 100 |   |   |   | 3,433 |   |   |   | 3,433 |   |
| Securities available for sale |   |               | 32,555  |   |              |   | 32,555 |   |   |   | 25,565 |   |   |   | 25,565 |   |
| FHLB stock                    |   |               | 1,930   |   |              |   | 1,930 |   |   |   | 1,930 |   |   |   | 1,930 |   |
| Loans, net                    |   |               | 206,351 |   |              |   | 200,066 |   |   |   | 204,117 |   |   |   | 203,366 |   |
| Accrued interest receivable   |   |               | 893     |   |              |   | 893 |   |   |   | 865 |   |   |   | 865 |   |
|                          |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:        |   |               |    |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                      |   |               | 234,056 |   |              |   | 235,207 |   |   |   | 222,140 |   |   |   | 222,814 |   |
| Short-term borrowings         |   |               | 7,902   |   |              |   | 7,902 |   |   |   | 5,804 |   |   |   | 5,804 |   |
| Long-term debt                |   |               | 7,500   |   |              |   | 7,908 |   |   |   | 12,500 |   |   |   | 12,988 |   |
| Accrued interest payable      |   |               | 23      |   |              |   | 23 |   |   |   | 47 |   |   |   | 47 |   |

----

----

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operation

----

----

----

|                                                              |   | For the Three Months Ended September 30, |    |
|-------------------------------------------------------------------|--------|------------------------------------------|---------|
|                                                              |   | 2011                                     |    |   | 2010 |   |
|                                                              |   | AverageOutstandingBalance                |    |   | InterestEarned/Paid |   |   | AverageYield/Rate (1) |   |   | AverageOutstandingBalance |   |   | InterestEarned/Paid |   |   | AverageYield/Rate (1) |   |
|                                                              |
| (Dollars in thousands)                                            |
| Interest-earning assets:                                          |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term investments                                            |   | $                                        | 15,110  |   |   | $ | 7 |   |   |   | 0.19 | % |   | $ | 8,872 |   |   | $ | 4 |   |   |   | 0.20 | % |
| Certificates of deposit                                           |   |                                     | 1,002   |   |   |   | 5 |   |   |   | 1.96 |   |   |   | 7,099 |   |   |   | 31 |   |   |   | 1.71 |   |
| Debt securities:                                                  |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                           |   |                                     | 20,127  |   |   |   | 151 |   |   |   | 2.98 |   |   |   | 20,578 |   |   |   | 204 |   |   |   | 3.94 |   |
| Tax-exempt                                                        |   |                                     | 8,095   |   |   |   | 69 |   |   |   | 3.40 |   |   |   | 4,769 |   |   |   | 42 |   |   |   | 3.46 |   |
| Total loans                                                       |   |                                     | 209,882 |   |   |   | 2,986 |   |   |   | 5.64 |   |   |   | 203,666 |   |   |   | 3,168 |   |   |   | 6.17 |   |
| FHLB stock                                                        |   |                                     | 1,930   |   |   |   | 1 |   |   |   | 0.27 |   |   |   | 1,930 |   |   |   | - |   |   |   | 0.00 |   |
| Total interest-earning assets                                     |   |                                     | 256,146 |   |   | $ | 3,219 |   |   |   | 4.99 | % |   |   | 246,914 |   |   | $ | 3,449 |   |   |   | 5.54 | % |
|                                                              |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                                         |   |                                     | (3,253  | ) |   |   |   |   |   |   |   |   |   |   | (2,545 | ) |   |   |   |   |   |   |   |   |
| Total interest-earning assets less allowance for loan losses |   |                                     | 252,893 |   |   |   |   |   |   |   |   |   |   |   | 244,369 |   |   |   |   |   |   |   |   |   |
| Noninterest-earning assets                                        |   |                                     | 12,724  |   |   |   |   |   |   |   |   |   |   |   | 13,189 |   |   |   |   |   |   |   |   |   |
| Total assets                                                      |   | $                                        | 265,617 |   |   |   |   |   |   |   |   |   |   | $ | 257,558 |   |   |   |   |   |   |   |   |   |
|                                                              |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                     |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Regular savings accounts                                          |   | $                                        | 24,692  |   |   | $ | 32 |   |   |   | 0.51 | % |   | $ | 19,790 |   |   | $ | 29 |   |   |   | 0.59 | % |
| NOW checking accounts                                             |   |                                     | 13,607  |   |   |   | 7 |   |   |   | 0.21 |   |   |   | 11,803 |   |   |   | 5 |   |   |   | 0.16 |   |
| Money market accounts                                             |   |                                     | 46,861  |   |   |   | 69 |   |   |   | 0.58 |   |   |   | 37,528 |   |   |   | 76 |   |   |   | 0.80 |   |
| Certificates of deposit                                           |   |                                     | 114,274 |   |   |   | 432 |   |   |   | 1.50 |   |   |   | 114,858 |   |   |   | 495 |   |   |   | 1.71 |   |
| Total interest-bearing deposits                                   |   |                                     | 199,434 |   |   |   | 540 |   |   |   | 1.07 |   |   |   | 183,979 |   |   |   | 605 |   |   |   | 1.31 |   |
| Short-term borrowings                                             |   |                                     | 7,517   |   |   |   | 22 |   |   |   | 1.15 |   |   |   | 7,649 |   |   |   | 24 |   |   |   | 1.24 |   |
| Long-term debt                                                    |   |                                     | 7,500   |   |   |   | 70 |   |   |   | 3.70 |   |   |   | 17,413 |   |   |   | 191 |   |   |   | 4.33 |   |
| Total interest-bearing liabilities                                |   |                                     | 214,451 |   |   |   | 632 |   |   |   | 1.17 | % |   |   | 209,041 |   |   |   | 820 |   |   |   | 1.56 | % |
| Noninterest-bearing demand deposits                               |   |                                     | 28,005  |   |   |   |   |   |   |   |   |   |   |   | 26,917 |   |   |   |   |   |   |   |   |   |
| Other noninterest-bearing liabilities                             |   |                                     | 1,529   |   |   |   |   |   |   |   |   |   |   |   | 2,048 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                 |   |                                     | 243,985 |   |   |   |   |   |   |   |   |   |   |   | 238,006 |   |   |   |   |   |   |   |   |   |
| Equity                                                            |   |                                     | 21,632  |   |   |   |   |   |   |   |   |   |   |   | 19,552 |   |   |   |   |   |   |   |   |   |
| Total liabilities and equity                                      |   | $                                        | 265,617 |   |   |   |   |   |   |   |   |   |   | $ | 257,558 |   |   |   |   |   |   |   |   |   |
|                                                              |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                               |   |                                     |    |   |   | $ | 2,587 |   |   |   |   |   |   |   |   |   |   | $ | 2,629 |   |   |   |   |   |
| Net interest rate spread (2)                                      |   |                                     |    |   |   |   |   |   |   |   | 3.82 | % |   |   |   |   |   |   |   |   |   |   | 3.99 | % |
| Net interest-earning assets (3)                                   |   | $                                        | 41,695  |   |   |   |   |   |   |   |   |   |   | $ | 37,873 |   |   |   |   |   |   |   |   |   |
| Net interest margin (4)                                           |   |                                     |    |   |   |   |   |   |   |   | 4.01 | % |   |   |   |   |   |   |   |   |   |   | 4.22 | % |
| Average total interest-earning assets to average total            |   |                                     |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   interest-bearing liabilities                               |   |                                     | 119.44  | % |   |   |   |   |   |   |   |   |   |   | 118.12 | % |   |   |   |   |   |   |   |   |

| (1) | Ratios for the three-month periods have been annualized. |
|-----|----------------------------------------------------------|

| (2) | Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Represents total average interest-earning assets less total average interest-bearing liabilities. |
|-----|---------------------------------------------------------------------------------------------------|

| (4) | Represents net interest income as a percent of average interest-earning assets. |
|-----|---------------------------------------------------------------------------------|

----

|                                       |   | Three Months Ended September 30, 2011Compared toThree Months Ended September 30, 2010 |   |
|--------------------------------------------|--------|---------------------------------------------------------------------------------------|--------|
|                                       |   | Increase (Decrease)Due to                                                             |   |   | Total Increase(Decrease) |   |
| (In thousands)                             |   | Volume                                                                                |   |   | Rate |   |
| Interest-earning assets:                   |   |                                                                                  |   |   |   |   |   |   |   |
| Short-term investments                     |   | $                                                                                     | 3      |   |   | $ | - |   |   | $ | 3 |   |
| Certificates of deposit                    |   |                                                                                  | (26    | ) |   |   | - |   |   |   | (26 | ) |
| Debt securities:                           |   |                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Taxable                                    |   |                                                                                  | (5     | ) |   |   | (48 | ) |   |   | (53 | ) |
| Tax-exempt                                 |   |                                                                                  | 29     |   |   |   | (2 | ) |   |   | 27 |   |
| Total loans                                |   |                                                                                  | 101    |   |   |   | (283 | ) |   |   | (182 | ) |
| FHLB stock                                 |   |                                                                                  | -      |   |   |   | 1 |   |   |   | 1 |   |
| Total interest-earning assets              |   |                                                                                  | 102    |   |   |   | (332 | ) |   |   | (230 | ) |
|                                       |   |                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:              |   |                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Regular savings                            |   |                                                                                  | 7      |   |   |   | (4 | ) |   |   | 3 |   |
| NOW checking                               |   |                                                                                  | -      |   |   |   | 2 |   |   |   | 2 |   |
| Money market                               |   |                                                                                  | 19     |   |   |   | (26 | ) |   |   | (7 | ) |
| Certificates of deposit                    |   |                                                                                  | (2     | ) |   |   | (61 | ) |   |   | (63 | ) |
| Total interest-bearing deposits            |   |                                                                                  | 24     |   |   |   | (89 | ) |   |   | (65 | ) |
| Short-term borrowings                      |   |                                                                                  | (0     | ) |   |   | (2 | ) |   |   | (2 | ) |
| Long-term debt                             |   |                                                                                  | (108   | ) |   |   | (13 | ) |   |   | (121 | ) |
| Total interest-bearing liabilities         |   |                                                                                  | (84    | ) |   |   | (104 | ) |   |   | (188 | ) |
|                                       |   |                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in net interest income |   | $                                                                                     | 186    |   |   | $ | (228 | ) |   | $ | (42 | ) |

----

|                                                              |   | Three Months Ended |   |
|-------------------------------------------------------------------|--------|--------------------|--------|
|                                                              |   | September 30,      |   |
| (Dollars in thousands)                                            |   | 2011               |   |   | 2010 |   |
| Balance at beginning of period                                    |   | $                  | 3,229  |   |   | $ | 2,460 |   |
| Provision for loan losses                                         |   |               | 150    |   |   |   | 300 |   |
| Charge-offs:                                                      |   |               |   |   |   |   |   |   |
| Real estate loans:                                                |   |               |   |   |   |   |   |   |
| Residential                                                       |   |               | (134   | ) |   |   | (51 | ) |
| Commercial                                                        |   |               | -      |   |   |   | - |   |
| Construction                                                      |   |               | -      |   |   |   | - |   |
| Commercial loans                                                  |   |               | -      |   |   |   | - |   |
| Consumer loans                                                    |   |               | -      |   |   |   | - |   |
| Total charge-offs                                                 |   |               | (134   | ) |   |   | (51 | ) |
| Recoveries                                                        |   |               | -      |   |   |   | - |   |
| Net charge-offs                                                   |   |               | (134   | ) |   |   | (51 | ) |
| Allowance at end of period                                        |   | $                  | 3,245  |   |   | $ | 2,709 |   |
| Allowance for loan losses to nonperforming loans at end of period |   |               | 118.4  | % |   |   | 99.9 | % |
| Allowance for loan losses to total loans at end of period         |   |               | 1.55   | % |   |   | 1.33 | % |
| Net charge-offs to average loans outstanding during the period    |   |               | 0.06   | % |   |   | 0.03 | % |

----

----

|                                                         |   | For the Nine Months Ended September 30, |    |
|--------------------------------------------------------------|--------|-----------------------------------------|---------|
|                                                         |   | 2011                                    |    |   | 2010 |   |
|                                                         |   | AverageOutstandingBalance               |    |   | InterestEarned/Paid |   |   | AverageYield/Rate (1) |   |   | AverageOutstandingBalance |   |   | InterestEarned/Paid |   |   | AverageYield/Rate (1) |   |
|                                                         |
| (Dollars in thousands)                                       |
| Interest-earning assets:                                     |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term investments                                       |   | $                                       | 15,906  |   |   | $ | 25 |   |   |   | 0.21 | % |   | $ | 7,960 |   |   | $ | 12 |   |   |   | 0.21 | % |
| Certificates of deposit                                      |   |                                    | 1,748   |   |   |   | 25 |   |   |   | 1.92 |   |   |   | 9,190 |   |   |   | 111 |   |   |   | 1.61 |   |
| Debt securities:                                             |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                      |   |                                    | 19,708  |   |   |   | 435 |   |   |   | 2.95 |   |   |   | 21,486 |   |   |   | 659 |   |   |   | 4.10 |   |
| Tax-exempt                                                   |   |                                    | 7,132   |   |   |   | 178 |   |   |   | 3.34 |   |   |   | 4,587 |   |   |   | 123 |   |   |   | 3.58 |   |
| Total loans                                                  |   |                                    | 209,297 |   |   |   | 9,001 |   |   |   | 5.75 |   |   |   | 197,434 |   |   |   | 9,069 |   |   |   | 6.14 |   |
| FHLB stock                                                   |   |                                    | 1,930   |   |   |   | 4 |   |   |   | 0.29 |   |   |   | 1,930 |   |   |   | - |   |   |   | 0.00 |   |
| Total interest-earning assets                                |   |                                    | 255,721 |   |   | $ | 9,668 |   |   |   | 5.06 | % |   |   | 242,587 |   |   | $ | 9,974 |   |   |   | 5.50 | % |
|                                                         |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                                    |   |                                    | (3,028  | ) |   |   |   |   |   |   |   |   |   |   | (2,342 | ) |   |   |   |   |   |   |   |   |
| Total interest-earning assets less allowance for loan losses |   |                                    | 252,693 |   |   |   |   |   |   |   |   |   |   |   | 240,246 |   |   |   |   |   |   |   |   |   |
| Noninterest-earning assets                                   |   |                                    | 12,503  |   |   |   |   |   |   |   |   |   |   |   | 12,688 |   |   |   |   |   |   |   |   |   |
| Total assets                                                 |   | $                                       | 265,196 |   |   |   |   |   |   |   |   |   |   | $ | 252,934 |   |   |   |   |   |   |   |   |   |
|                                                         |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                                |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Regular savings accounts                                     |   | $                                       | 24,282  |   |   | $ | 99 |   |   |   | 0.55 | % |   | $ | 18,959 |   |   | $ | 83 |   |   |   | 0.59 | % |
| NOW checking accounts                                        |   |                                    | 13,600  |   |   |   | 20 |   |   |   | 0.20 |   |   |   | 11,573 |   |   |   | 14 |   |   |   | 0.17 |   |
| Money market accounts                                        |   |                                    | 45,212  |   |   |   | 206 |   |   |   | 0.61 |   |   |   | 37,073 |   |   |   | 217 |   |   |   | 0.78 |   |
| Certificates of deposit                                      |   |                                    | 113,783 |   |   |   | 1,340 |   |   |   | 1.57 |   |   |   | 112,217 |   |   |   | 1,533 |   |   |   | 1.83 |   |
| Total interest-bearing deposits                              |   |                                    | 196,877 |   |   |   | 1,665 |   |   |   | 1.13 |   |   |   | 179,822 |   |   |   | 1,847 |   |   |   | 1.37 |   |
| Short-term borrowings                                        |   |                                    | 7,146   |   |   |   | 62 |   |   |   | 1.16 |   |   |   | 6,933 |   |   |   | 64 |   |   |   | 1.24 |   |
| Long-term debt                                               |   |                                    | 10,485  |   |   |   | 332 |   |   |   | 4.24 |   |   |   | 20,002 |   |   |   | 696 |   |   |   | 4.65 |   |
| Total interest-bearing liabilities                           |   |                                    | 214,508 |   |   |   | 2,059 |   |   |   | 1.28 | % |   |   | 206,757 |   |   |   | 2,607 |   |   |   | 1.69 | % |
| Noninterest-bearing demand deposits                          |   |                                    | 28,143  |   |   |   |   |   |   |   |   |   |   |   | 25,558 |   |   |   |   |   |   |   |   |   |
| Other noninterest-bearing liabilities                        |   |                                    | 1,444   |   |   |   |   |   |   |   |   |   |   |   | 1,606 |   |   |   |   |   |   |   |   |   |
| Total liabilities                                            |   |                                    | 244,095 |   |   |   |   |   |   |   |   |   |   |   | 233,921 |   |   |   |   |   |   |   |   |   |
| Equity                                                       |   |                                    | 21,101  |   |   |   |   |   |   |   |   |   |   |   | 19,013 |   |   |   |   |   |   |   |   |   |
| Total liabilities and equity                                 |   | $                                       | 265,196 |   |   |   |   |   |   |   |   |   |   | $ | 252,934 |   |   |   |   |   |   |   |   |   |
|                                                         |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                          |   |                                    |    |   |   | $ | 7,609 |   |   |   |   |   |   |   |   |   |   | $ | 7,367 |   |   |   |   |   |
| Net interest rate spread (2)                                 |   |                                    |    |   |   |   |   |   |   |   | 3.77 | % |   |   |   |   |   |   |   |   |   |   | 3.81 | % |
| Net interest-earning assets (3)                              |   | $                                       | 41,332  |   |   |   |   |   |   |   |   |   |   | $ | 35,830 |   |   |   |   |   |   |   |   |   |
| Net interest margin (4)                                      |   |                                    |    |   |   |   |   |   |   |   | 3.98 | % |   |   |   |   |   |   |   |   |   |   | 4.06 | % |
| Average total interest-earning assets to average total       |   |                                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   interest-bearing liabilities                          |   |                                    | 119.28  | % |   |   |   |   |   |   |   |   |   |   | 117.33 | % |   |   |   |   |   |   |   |   |

| (1) | Ratios for the nine-month periods have been annualized. |
|-----|---------------------------------------------------------|

| (2) | Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Represents total average interest-earning assets less total average interest-bearing liabilities. |
|-----|---------------------------------------------------------------------------------------------------|

| (4) | Represents net interest income as a percent of average interest-earning assets. |
|-----|---------------------------------------------------------------------------------|

----

|                                       |   | Nine Months Ended September 30, 2011Compared toNine Months Ended September 30, 2010 |   |
|--------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|
|                                       |   | Increase (Decrease)Due to                                                           |   |   | Total Increase(Decrease) |   |
| (In thousands)                             |   | Volume                                                                              |   |   | Rate |   |
| Interest-earning assets:                   |   |                                                                                |   |   |   |   |   |   |   |
| Short-term investments                     |   | $                                                                                   | 13     |   |   | $ | - |   |   | $ | 13 |   |
| Certificates of deposit                    |   |                                                                                | (112   | ) |   |   | 26 |   |   |   | (86 | ) |
| Debt securities:                           |   |                                                                                |   |   |   |   |   |   |   |   |   |   |
| Taxable                                    |   |                                                                                | (173   | ) |   |   | (51 | ) |   |   | (224 | ) |
| Tax-exempt                                 |   |                                                                                | (8     | ) |   |   | 63 |   |   |   | 55 |   |
| Total loans                                |   |                                                                                | 556    |   |   |   | (624 | ) |   |   | (68 | ) |
| FHLB stock                                 |   |                                                                                | -      |   |   |   | 4 |   |   |   | 4 |   |
| Total interest-earning assets              |   |                                                                                | 276    |   |   |   | (582 | ) |   |   | (306 | ) |
|                                       |   |                                                                                |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:              |   |                                                                                |   |   |   |   |   |   |   |   |   |   |
| Regular savings                            |   |                                                                                | 21     |   |   |   | (5 | ) |   |   | 16 |   |
| NOW checking                               |   |                                                                                | 3      |   |   |   | 3 |   |   |   | 6 |   |
| Money market                               |   |                                                                                | 53     |   |   |   | (64 | ) |   |   | (11 | ) |
| Certificates of deposit                    |   |                                                                                | 22     |   |   |   | (215 | ) |   |   | (193 | ) |
| Total interest-bearing deposits            |   |                                                                                | 99     |   |   |   | (281 | ) |   |   | (182 | ) |
| Short-term borrowings                      |   |                                                                                | 2      |   |   |   | (4 | ) |   |   | (2 | ) |
| Long-term debt                             |   |                                                                                | (306   | ) |   |   | (58 | ) |   |   | (364 | ) |
| Total interest-bearing liabilities         |   |                                                                                | (205   | ) |   |   | (343 | ) |   |   | (548 | ) |
|                                       |   |                                                                                |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in net interest income |   | $                                                                                   | 481    |   |   | $ | (239 | ) |   | $ | 242 |   |

----

|                                                                   |   | Nine Months Ended |   |
|------------------------------------------------------------------------|--------|-------------------|--------|
|                                                                   |   | September 30,     |   |
| (Dollars in thousands)                                                 |   | 2011              |   |   | 2010 |   |
| Balance at beginning of period                                         |   | $                 | 2,690  |   |   | $ | 2,060 |   |
| Provision for loan losses                                              |   |              | 750    |   |   |   | 800 |   |
| Charge-offs:                                                           |   |              |   |   |   |   |   |   |
| Real estate loans:                                                     |   |              |   |   |   |   |   |   |
| Residential                                                            |   |              | (195   | ) |   |   | (151 | ) |
| Commercial                                                             |   |              | -      |   |   |   | - |   |
| Construction                                                           |   |              | -      |   |   |   | - |   |
| Commercial loans                                                       |   |              | -      |   |   |   | - |   |
| Consumer loans                                                         |   |              | -      |   |   |   | - |   |
| Total charge-offs                                                      |   |              | (195   | ) |   |   | (151 | ) |
| Recoveries                                                             |   |              | -      |   |   |   | - |   |
| Net charge-offs                                                        |   |              | (195   | ) |   |   | (151 | ) |
| Allowance at end of period                                             |   | $                 | 3,245  |   |   | $ | 2,709 |   |
| Allowance for loan losses to nonperforming loans at end of period |   |              | 118.4  | % |   |   | 99.9 | % |
| Allowance for loan losses to total loans at end of period              |   |              | 1.55   | % |   |   | 1.33 | % |
| Net charge-offs to average loans outstanding during the period         |   |              | 0.09   | % |   |   | 0.08 | % |

----

|                                                                                 |   | At September 30, |   |   | At December 31, |   |
|--------------------------------------------------------------------------------------|--------|------------------|--------|--------|-----------------|--------|
| (Dollars in thousands)                                                               |   | 2011             |   |   | 2010            |   |
| Nonaccrual loans:                                                                    |   |             |   |   |            |   |
| Real estate loans:                                                                   |   |             |   |   |            |   |
| Residential mortgage                                                                 |   | $                | 1,231  |   |            | $      | 2,008 |   |
| Commercial real estate                                                               |   |             | 1,405  |   |            |   | — |   |
| Construction                                                                         |   |             | -      |   |            |   | — |   |
| Commercial                                                                           |   |             | 87     |   |            |   | — |   |
| Consumer                                                                             |   |             | 17     |   |            |   | — |   |
| Total nonaccrual loans                                                               |   |             | 2,740  |   |            |   | 2,008 |   |
|                                                                                 |   |             |   |   |            |   |   |   |
| Total nonperforming loans                                                            |   |             | 2,740  |   |            |   | 2,008 |   |
| Real estate owned                                                                    |   |             | -      |   |            |   | — |   |
| Total nonperforming assets                                                           |   |             | 2,740  |   |            |   | 2,008 |   |
| Accruing troubled debt restructurings (1)                                            |   |             | 1,112  |   |            |   | 1,124 |   |
| Total nonperforming assets and accruing troubled debt restructurings            |   | $                | 3,852  |   |            | $      | 3,132 |   |
|                                                                                 |   |             |   |   |            |   |   |   |
| Total nonperforming loans to total loans                                             |   |             | 1.30   | %      |            |   | 0.97 | % |
| Total nonperforming loans to total assets                                            |   |             | 1.00   | %      |            |   | 0.77 | % |
| Total nonperforming assets and accruing troubled debt restructurings to total assets |   |             | 1.40   | %      |            |   | 1.20 | % |

| (1) | We did not have any nonaccruing troubled debt restructurings at the dates indicated. |
|-----|--------------------------------------------------------------------------------------|

----

----

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

----

|                                          |   | As of September 30, 2011 |   |   | Over the Next 12 MonthsEnding September 30, 2012 |   |
|-----------------------------------------------|--------|--------------------------|--------|--------|--------------------------------------------------|--------|
|                                          |   | Present Value of Equity  |   |   | Projected Net Interest Income                    |   |
| Basis Point (“bp”)Change in Rates |   | $ Amount                 |   |   | $ Change                                         |   |   | % Change |   |   | $ Amount |   |   | $ Change |   |   | % Change |   |
|                                          |   | (Dollars in thousands)   |   |   | (Dollars in thousands)                           |   |
| 300bp                                         |   | $                        | 22,677 |   |                                             | $      | (5,117 | ) |   |   | (18.4 | )% |   | $ | 9,913 |   |   | $ | (22 | ) |   |   | (0.2 | )% |
| 200                                           |   | $                        | 23,965 |   |                                             | $      | (3,829 | ) |   |   | (13.8 | )% |   | $ | 9,944 |   |   | $ | 9 |   |   |   | 0.1 | % |
| 100                                           |   | $                        | 25,661 |   |                                             | $      | (2,133 | ) |   |   | (7.7 | )% |   | $ | 9,922 |   |   | $ | (13 | ) |   |   | (0.1 | )% |
| 0                                             |   | $                        | 27,794 |   |                                             |   | - |   |   |   | - |   |   | $ | 9,935 |   |   |   | - |   |   |   | - |   |
| (100)                                         |   | $                        | 30,650 |   |                                             | $      | 2,856 |   |   |   | 10.3 | % |   | $ | 9,779 |   |   | $ | (156 | ) |   |   | (1.6 | )% |

Item 4.  Controls and Procedures

----

Item 1.  Legal Proceedings

Item 1A.  Risk Factors

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

Item 3.  Defaults Upon Senior Securities

Item 4.  [Removed and Reserved]

Item 5.  Other Information

Item 6.  Exhibits

|   | 3.1  | Amended and Restated Articles of Incorporation of Wellesley Bancorp, Inc. (1)                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | 3.2       | Bylaws of Wellesley Bancorp, Inc. (2)                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | 4.1       | Form of Common Stock Certificate of Wellesley Bancorp, Inc. (2)                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | 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                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | 32.0      | Section 1350 Certifications                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | 101.1*    | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statement of Changes in Surplus, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements, tagged as blocks of text. |

----

|   | (1) | Incorporated herein by reference to the exhibits to Wellesley Bancorp, Inc.’s Pre-Effective Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-176764), filed with the Securities and Exchange Commission on November 7, 2011. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Incorporated herein by reference to the exhibits to Wellesley Bancorp, Inc.’s Registration Statement on Form S-1 (File No. 333-176764), filed with the Securities and Exchange Commission on September 9, 2011. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | * | Furnished, not filed. |
|--------|---|-----------------------|

----

SIGNATURES

|                                 |   | WELLESLEY BANCORP, INC.                      |   |
|--------------------------------------|--------|----------------------------------------------|--------|
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| Dated:   December 27, 2011 | By:    | /s/ Thomas J. Fontaine                       |   |
|                                 |   | Thomas J. Fontaine                           |   |
|                                 |   | President and Chief Executive Officer        |   |
|                                 |   | (principal executive officer)                |   |
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| Dated:   December 27, 2011 | By:    | /s/ Gary P. Culyer                           |   |
|                                 |   | Gary P. Culyer                               |   |
|                                 |   | Chief Financial Officer and Treasurer        |   |
|                                 |   | (principal accounting and financial officer) |   |