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

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

| Norwood Financial Corp.                                |
|--------------------------------------------------------|
| (Exact name of Registrant as specified in its charter) |

| Pennsylvania                                                  |   | 23-2828306                           |
|---------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction ofIncorporation or organization) |   | (I.R.S. employer identification no.) |

| 717 Main Street, Honesdale, Pennsylvania |   | 18431      |   |
|------------------------------------------|--------|------------|--------|
| (Address of principal executive offices) |   | (Zip Code) |   |

| (570) 253-1455                                             |
|------------------------------------------------------------|
| (Registrant’s telephone number, including area code) |

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

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

| Class                                   |   | Outstanding as of August 1, 2012 |   |
|-----------------------------------------|--------|----------------------------------|--------|
| Common stock, par value $0.10 per share |   |  3,277,607                  |   |

----

|       |                                                                                        |   PageNumber |
|------------|---------------------------------------------------------------------------------------------|------------------------|
| PART I -   | CONSOLIDATED FINANCIAL INFORMATION OF NORWOODFINANCIAL CORP.                                |                   |
|       |                                                                                        |                   |
| Item 1.    | Financial Statements                                                                        |   3          |
| Item 2.    | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 28                     |
| Item 3.    | Quantitative and Qualitative Disclosures about Market Risk                                  | 44                     |
| Item 4.    | Controls and Procedures                                                                     | 45                     |
| PART II -  | OTHER INFORMATION                                                                           |                   |
|       |                                                                                        |                   |
| Item 1.    | Legal Proceedings                                                                           | 45                     |
| Item 1A.   | Risk Factors                                                                                | 45                     |
| Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 45                     |
| Item 3.    | Defaults upon Senior Securities                                                             | 45                     |
| Item 4.    | Mine Safety Disclosures                                                                     | 45                     |
| Item 5.    | Other Information                                                                           | 45                     |
| Item 6.    | Exhibits                                                                                    | 46                     |
|       |                                                                                        |                   |
| Signatures |                                                                                        | 47                     |

----

|                                                                                                                                                                                                                                                                                          |   | June 30,2012 |       |   | December 31,2011 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|------------|--------|------------------|--------|
| ASSETS                                                                                                                                                                                                                                                                                        |   |         |       |   |             |   |
| Cash and due from banks                                                                                                                                                                                                                                                                       |   | $            | 9,135      |   |             | $      | 8,974 |   |
| Interest bearing deposits with banks                                                                                                                                                                                                                                                          |   |         | 15,261     |   |             |   | 12,449 |   |
|           Cash and cash equivalents                                                                                                                                                                                                         |   |         | 24,396     |   |             |   | 21,423 |   |
|                                                                                                                                                                                                                                                                                          |   |         |       |   |             |   |   |   |
| Securities available for sale, at fair value                                                                                                                                                                                                                                                  |   |         | 144,720    |   |             |   | 150,263 |   |
| Securities held to maturity, fair value 2012:   $177, 2011: $177                                                                                                                                                                                                               |   |         | 172        |   |             |   | 171 |   |
| Loans receivable (net of unearned income)                                                                                                                                                                                                                                                     |   |         | 479,421    |   |             |   | 457,907 |   |
|    Less:  Allowance for loan losses                                                                                                                                                                                                                                  |   |         | 5,775      |   |             |   | 5,458 |   |
| Net loans receivable                                                                                                                                                                                                                                                                          |   |         | 473,646    |   |             |   | 452,449 |   |
| Investment in Federal Home Loan Bank Stock, at cost                                                                                                                                                                                                                                           |   |         | 3,243      |   |             |   | 3,593 |   |
| Bank premises and equipment, net                                                                                                                                                                                                                                                              |   |         | 7,371      |   |             |   | 7,479 |   |
| Bank owned life insurance                                                                                                                                                                                                                                                                     |   |         | 12,119     |   |             |   | 11,887 |   |
| Accrued interest receivable                                                                                                                                                                                                                                                                   |   |         | 2,416      |   |             |   | 2,468 |   |
| Foreclosed real estate owned                                                                                                                                                                                                                                                                  |   |         | 1,268      |   |             |   | 2,910 |   |
| Goodwill                                                                                                                                                                                                                                                                                      |   |         | 9,715      |   |             |   | 9,715 |   |
| Other intangibles                                                                                                                                                                                                                                                                             |   |         | 720        |   |             |   | 800 |   |
| Other assets                                                                                                                                                                                                                                                                                  |   |         | 5,081      |   |             |   | 5,656 |   |
|     TOTAL ASSETS                                                                                                                                                                                                                                                          |   | $            | 684,867    |   |             | $      | 668,814 |   |
|                                                                                                                                                                                                                                                                                          |   |         |       |   |             |   |   |   |
| LIABILITIES                                                                                                                                                                                                                                                                                   |   |         |       |   |             |   |   |   |
|   Deposits:                                                                                                                                                                                                                                                                         |   |         |       |   |             |   |   |   |
|       Non-interest bearing demand                                                                                                                                                                                                                               |   | $            | 82,525     |   |             | $      | 71,959 |   |
|       Interest-bearing                                                                                                                                                                                                                                          |   |         | 451,632    |   |             |   | 453,808 |   |
|         Total deposits                                                                                                                                                                                                                                |   |         | 534,157    |   |             |   | 525,767 |   |
|   Short-term borrowings                                                                                                                                                                                                                                                             |   |         | 27,192     |   |             |   | 21,794 |   |
|   Other borrowings                                                                                                                                                                                                                                                                  |   |         | 27,579     |   |             |   | 27,670 |   |
|   Accrued interest payable                                                                                                                                                                                                                                                          |   |         | 1,335      |   |             |   | 1,321 |   |
|   Other liabilities                                                                                                                                                                                                                                                                 |   |         | 4,363      |   |             |   | 4,201 |   |
|     TOTAL LIABILITIES                                                                                                                                                                                                                                                     |   |         | 594,626    |   |             |   | 580,753 |   |
|                                                                                                                                                                                                                                                                                          |   |         |       |   |             |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                    |   |         |       |   |             |   |   |   |
|     Common stock, $.10 par value per share, authorized    10,000,000; shares issued 2012: 3,371,849 shares,    2011: 3,371,866 shares                                                                                             |   |         |   337 |   |             |   |   337 |   |
|     Surplus                                                                                                                                                                                                                                                               |   |         | 24,696     |   |             |   | 24,660 |   |
|     Retained  earnings                                                                                                                                                                                                                                          |   |         | 64,788     |   |             |   | 62,308 |   |
|     Treasury stock at cost: 2012: 94,242 shares,                                 2011: 87,370 shares |   |         | (2,739     | )      |             |   | (2,559 | ) |
|   Accumulated other comprehensive income                                                                                                                                                                                                                                            |   |         | 3,159      |   |             |   | 3,315 |   |
|      TOTAL STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                |   |         | 90,241     |   |             |   | 88,061 |   |
|      TOTAL LIABILITIES AND     STOCKHOLDERS’ EQUITY                                                                                                                                                                                   |   | $            | 684,867    |   |             | $      | 668,814 |   |

----

|                                                                   |   |  Three Months EndedJune 30, |   |   |  Six Months EndedJune 30, |   |
|------------------------------------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                                                                   |   |  2012                       |   |   |  2011                     |   |   |  2012 |   |   |  2011 |   |
| INTEREST INCOME                                                        |   |                             |   |   |                           |   |   |   |   |   |   |   |
|   Loans receivable, including fees                           |   | $                                | 6,431  |   |                           | $      | 5,468 |   |   | $ | 12,804 |   |   | $ | 10,396 |   |
|   Securities                                                 |   |                             | 1,007  |   |                           |   | 1,135 |   |   |   | 2,033 |   |   |   | 2,225 |   |
|   Other                                                      |   |                             | 7      |   |                           |   | 16 |   |   |   | 11 |   |   |   | 24 |   |
|   Total interest income                                      |   |                             | 7,445  |   |                           |   | 6,619 |   |   |   | 14,848 |   |   |   | 12,645 |   |
|                                                                   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| INTEREST EXPENSE                                                       |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|   Deposits                                                   |   |                             | 942    |   |                           |   | 932 |   |   |   | 1,903 |   |   |   | 1,817 |   |
|   Short-term borrowings                                      |   |                             | 13     |   |                           |   | 27 |   |   |   | 24 |   |   |   | 51 |   |
|   Other borrowings                                           |   |                             | 243    |   |                           |   | 342 |   |   |   | 487 |   |   |   | 678 |   |
|   Total interest expense                                     |   |                             | 1,198  |   |                           |   | 1,301 |   |   |   | 2,414 |   |   |   | 2,546 |   |
| NET INTEREST INCOME                                                    |   |                             | 6,247  |   |                           |   | 5,318 |   |   |   | 12,434 |   |   |   | 10,099 |   |
| PROVISION FOR LOAN LOSSES                                              |   |                             | 400    |   |                           |   | 430 |   |   |   | 750 |   |   |   | 650 |   |
| NET INTEREST INCOME AFTER  PROVISION FOR LOAN LOSSES         |   |                             | 5,847  |   |                           |   | 4,888 |   |   |   | 11,684 |   |   |   | 9,449 |   |
|                                                                   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME                                                           |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|   Service charges and fees                                   |   |                             | 559    |   |                           |   | 592 |   |   |   | 1,113 |   |   |   | 1,141 |   |
|   Income from fiduciary activities                           |   |                             | 80     |   |                           |   | 105 |   |   |   | 178 |   |   |   | 218 |   |
|   Net realized gains on sales of securities                  |   |                             | 285    |   |                           |   | 12 |   |   |   | 687 |   |   |   | 224 |   |
|   Gains on sale of loans and servicing rights                |   |                             | 66     |   |                           |   | 98 |   |   |   | 60 |   |   |   | 241 |   |
|   Other                                                      |   |                             | 216    |   |                           |   | 186 |   |   |   | 459 |   |   |   | 377 |   |
|   Total other income                                         |   |                             | 1,206  |   |                           |   | 993 |   |   |   | 2,497 |   |   |   | 2,201 |   |
|                                                                   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| OTHER EXPENSES                                                         |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|   Salaries and employee benefits                             |   |                             | 2,047  |   |                           |   | 1,832 |   |   |   | 4,198 |   |   |   | 3,533 |   |
|   Occupancy, furniture & equipment                       |   |                             | 490    |   |                           |   | 408 |   |   |   | 977 |   |   |   | 806 |   |
|   Data processing related                                    |   |                             | 216    |   |                           |   | 187 |   |   |   | 448 |   |   |   | 402 |   |
|   Taxes, other than income                                   |   |                             | 149    |   |                           |   | 143 |   |   |   | 301 |   |   |   | 272 |   |
|   Professional fees                                          |   |                             | 217    |   |                           |   | 126 |   |   |   | 426 |   |   |   | 281 |   |
|   Merger related expenses                                    |   |                             | -      |   |                           |   | 488 |   |   |   | 18 |   |   |   | 755 |   |
|   Federal Deposit Insurance Corporation insurance assessment |   |                             | 97     |   |                           |   | 95 |   |   |   | 196 |   |   |   | 215 |   |
|   Foreclosed real estate owned expense                       |   |                             | 85     |   |                           |   | 17 |   |   |   | 207 |   |   |   | 36 |   |
|   Other                                                      |   |                             | 656    |   |                           |   | 640 |   |   |   | 1,333 |   |   |   | 1,170 |   |
|   Total other expenses                                       |   |                             | 3,957  |   |                           |   | 3,936 |   |   |   | 8,104 |   |   |   | 7,470 |   |
|                                                                   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAXES                                             |   |                             | 3,096  |   |                           |   | 1,945 |   |   |   | 6,077 |   |   |   | 4,180 |   |
| INCOME TAX EXPENSE                                                     |   |                             | 838    |   |                           |   | 461 |   |   |   | 1,633 |   |   |   | 1,036 |   |
| NET INCOME                                                             |   | $                                | 2,258  |   |                           | $      | 1,484 |   |   | $ | 4,444 |   |   | $ | 3,144 |   |
|                                                                   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| BASIC EARNINGS PER SHARE                                               |   | $                                | .69    |   |                           | $      | .50 |   |   | $ | 1.35 |   |   | $ | 1.10 |   |
|                                                                   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED EARNINGS PER SHARE                                             |   | $                                | .69    |   |                           | $      | .50 |   |   | $ | 1.35 |   |   | $ | 1.10 |   |
|                                                                   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                     |   | Three Months EndedJune 30, |   |
|------------------------------------------------------------------------------------------|--------|----------------------------|--------|
|                                                                                     |   | 2012                       |   |   | 2011 |   |
|                                                                                     |   |                       |   |   |   |   |   |   |
| Net income                                                                               |   | $                          | 2,258  |   |   | $ | 1,484 |   |
| Other Comprehensive income:                                                              |   |                       |   |   |   |   |   |   |
|    Investment securities available for sale:                              |   |                       |   |   |   |   |   |   |
|        Unrealized holding gains                       |   |                       | 291    |   |   |   | 1,161 |   |
|              Tax effect |   |                       | (100   | ) |   |   | (395 | ) |
|    Reclassification of gains recognized in net income                     |   |                       | (285   | ) |   |   | (12 | ) |
|              Tax effect |   |                       | 97     |   |   |   | 4 |   |
|    Net of tax amount                                                      |   |                       | 3      |   |   |   | 4 |   |
| Comprehensive Income                                                                     |   | $                          | 2,261  |   |   | $ | 2,242 |   |
|                                                                                     |   |                       |   |   |   |   |   |   |

|                                                                                     |   | Six Months EndedJune 30, |   |
|------------------------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                                     |   | 2012                     |   |   | 2011 |   |
|                                                                                     |   |                     |   |   |   |   |
| Net income                                                                               |   | $                        | 4,444  |   |   | $ | 3,144 |   |
| Other Comprehensive income:                                                              |   |                     |   |   |   |   |   |   |
|    Investment securities available for sale:                              |   |                     |   |   |   |   |   |   |
|        Unrealized holding gains                       |   |                     | 445    |   |   |   | 1,627 |   |
|              Tax effect |   |                     | (148   | ) |   |   | (553 | ) |
|    Reclassification of gains recognized in net income                     |   |                     | (687   | ) |   |   | (224 | ) |
|              Tax effect |   |                     | 234    |   |   |   | 76 |   |
|    Net of tax amount                                                      |   |                     | (156   | ) |   |   | 926 |   |
| Comprehensive Income                                                                     |   | $                        | 4,288  |   |   | $ | 4,070 |   |
|                                                                                     |   |                     |   |   |   |   |   |   |

----

|                                                           |   |   Common Stock |      |   |   |   |   |   Retained |   |   |   Treasury Stock |   |   | AccumulatedOtherComprehensive |   |   |   |   |
|----------------------------------------------------------------|--------|--------------------------|-----------|--------|--------|--------|--------|----------------------|--------|--------|----------------------------|--------|--------|-------------------------------|--------|--------|--------|--------|
|                                                           |   | Shares                   |      |   | Amount |   |   | Surplus              |   |   | Earnings                   |   |   | Shares                        |   |   | Amount |   |   | Income |   |   | Total |   |
| Balance December 31, 2011                                      |   |                     | 3,371,866 |   |   | $      | 337    |                 |   | $      | 24,660                     |   |   | $                             | 62,308 |   |   |   | 87,370 |   |   | $ | (2,559 | ) |   | $ | 3,315 |   |   | $ | 88,061 |   |
|  Net Income                                               |   |                     |      |   |   |   |   |                 |   |   |                       |   |   |                          | 4,444  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 4,444 |   |
| Other comprehensive income                                     |   |                     |      |   |   |   |   |                 |   |   |                       |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   | (156 | ) |   |   | (156 | ) |
| Cash dividends declared $.60   per share        |   |                     |      |   |   |   |   |                 |   |   |                       |   |   |                          | (1,964 | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,964 | ) |
| Acquisition of  treasury  stock            |   |                     |      |   |   |   |   |                 |   |   |                       |   |   |                          |   |   |   |   | 11,647 |   |   |   | (320 | ) |   |   |   |   |   |   | (320 | ) |
| Compensation expense related to   stock options |   |                     |      |   |   |   |   |                 |   |   | 66                         |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 66 |   |
| Stock options exercised                                        |   |                     |      |   |   |   |   |                 |   |   | (41                        | )      |   |                          |   |   |   |   | (4,775 | ) |   |   | 140 |   |   |   |   |   |   |   | 99 |   |
| Tax benefit on stock options                                   |   |                     |      |   |   |   |   |                 |   |   | 11                         |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 11 |   |
| North Penn exchange adjustment                                 |   | (17)                     |      |   |   |   |   |                 |   |   |                       |   |   |                          |   |   |   |   |   |   |   |   |   |   |
| Balance, June 30, 2012                                         |   |                     | 3,371,849 |   |   | $      | 337    |                 |   | $      | 24,696                     |   |   | $                             | 64,788 |   |   |   | 94,242 |   |   | $ | (2,739 | ) |   | $ | 3,159 |   |   | $ | 90,241 |   |

----

| (dollars in thousands)                                                                       |   |
|---------------------------------------------------------------------------------------------------|--------|
|                                                                                              |   | Six Months Ended June 30,  |   |
|                                                                                              |   | 2012 |   |   | 2011 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                              |   |   |   |   |   |   |
| Net Income                                                                                        |   | $ | 4,444 |   |   | $ | 3,144 |   |
| Adjustments to reconcile net income to net cash provided by operating  activities:      |   |   |   |   |   |   |   |   |
|   Provision for loan losses                                                             |   |   | 750 |   |   |   | 650 |   |
|   Depreciation                                                                          |   |   | 280 |   |   |   | 226 |   |
|   Amortization of intangible assets                                                     |   |   | 80 |   |   |   | 27 |   |
|   Deferred income taxes                                                                 |   |   | (259 | ) |   |   | (8 | ) |
|   Net amortization of securities premiums and discounts                                 |   |   | 580 |   |   |   | 345 |   |
|   Net realized gain on sales of securities                                              |   |   | (687 | ) |   |   | (224 | ) |
|   Net increase in value of life insurance                                               |   |   | (263 | ) |   |   | (180 | ) |
|   Loss on sale of foreclosed real estate                                                |   |   | 27 |   |   |   | - |   |
|   Net gain on sale of mortgage loans                                                    |   |   | (74 | ) |   |   | (241 | ) |
|   Mortgage loans originated for sale                                                    |   |   | (2,269 | ) |   |   | (6,530 | ) |
|   Proceeds from sale of mortgage loans originated for sale                              |   |   | 2,343 |   |   |   | 6,771 |   |
|   Compensation expense related to stock options                                         |   |   | 66 |   |   |   | 82 |   |
|   Decrease (increase) in accrued interest receivable and other assets                   |   |   | 985 |   |   |   | (182 | ) |
|   (Decrease) increase in accrued interest payable and other liabilities                 |   |   | (1,441 | ) |   |   | 841 |   |
|     Net cash provided by operating activities                                 |   |   | 4,562 |   |   |   | 4,721 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                              |   |   |   |   |   |   |   |   |
|   Securities available for sale:                                                        |   |   |   |   |   |   |   |   |
|    Proceeds from sales                                                             |   |   | 18,349 |   |   |   | 10,344 |   |
|    Proceeds from maturities and principal reductions on mortgage-backed securities |   |   | 17,259 |   |   |   | 15,918 |   |
|    Purchases                                                                       |   |   | (28,582 | ) |   |   | (18,769 | ) |
|   Redemption of FHLB stock                                                              |   |   | 350 |   |   |   | 328 |   |
|   Net (increase) decrease in loans                                                      |   |   | (22,883 | ) |   |   | 8,527 |   |
|   Purchase of bank premises and equipment                                               |   |   | (172 | ) |   |   | (63 | ) |
|   Proceeds from sale of bank premises and equipment and foreclosed real estate          |   |   | 2,569 |   |   |   | - |   |
|   Acquisition, net of cash acquired                                                     |   |   | - |   |   |   | 4,544 |   |
|   Net cash (used in) provided by investing activities                                   |   |   | (13,110 | ) |   |   | 20,829 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                              |   |   |   |   |   |   |   |   |
|   Net increase in deposits                                                              |   |   | 8,390 |   |   |   | 8,990 |   |
|   Net increase (decrease) in short-term borrowings                                      |   |   | 5,398 |   |   |   | (1,128 | ) |
|   Repayments of other borrowings                                                        |   |   | (91 | ) |   |   | (3,015 | ) |
|   Stock options exercised                                                               |   |   | 99 |   |   |   | - |   |
|   Tax benefit of stock options exercised                                                |   |   | 11 |   |   |   | - |   |
|   Acquisition of treasury stock                                                         |   |   | (320 | ) |   |   | (207 | ) |
|   Cash dividends paid                                                                   |   |   | (1,966 | ) |   |   | (1,604 | ) |
|    Net cash provided by financing activities                                       |   |   | 11,521 |   |   |   | 3,036 |   |
|    Increase (decrease) in cash and cash equivalents                                |   |   | 2,973 |   |   |   | 28,586 |   |
|                                                                                              |   |   |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                    |   |   | 21,423 |   |   |   | 16,625 |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                                          |   | $ | 24,396 |   |   | $ | 45,211 |   |

----

| (dollars in thousands)                                                               |   |
|-------------------------------------------------------------------------------------------|--------|
|                                                                                      |   | Six Months ENded June 30,  |   |
|                                                                                      |   | 2012 |   |   | 2011 |   |
| Supplemental Disclosures of Cash Flow Information                                         |   |   |   |   |   |   |
| Cash payments for:                                                                        |   |   |   |   |   |   |
|    Interest paid to depositors and borrowers                               |   | $ | 2,398 |   |   | $ | 2,610 |   |
|    Income taxes paid, net of refunds                                       |   | $ | 1,559 |   |   | $ | 1,407 |   |
|  Supplemental Schedule of Noncash Investing Activities                               |   |   |   |   |   |   |   |   |
|   Investment purchases                                                          |   | $ | 1,619 |   |   |   | - |   |
|   Transfers of loans to foreclosed real estate and repossession of other assets |   | $ | 954 |   |   | $ | 1,036 |   |
|                                                                                      |   |   |   |   |   |   |   |   |

----

|                                            |   |  Three Months EndedJune 30, |   |   |  Six Months EndedJune 30, |   |
|-------------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                                            |   | 2012                             |   |   | 2011                           |   |   | 2012 |   |   | 2011 |   |
| Basic EPS weighted average shares outstanding   |   |                             | 3,276  |   |                           |   | 2,937 |   |   |   | 3,280 |   |   |   | 2,852 |   |
| Dilutive effect of stock options                |   |                             | 4      |   |                           |   | 2 |   |   |   | 3 |   |   |   | 3 |   |
| Diluted EPS weighted average shares outstanding |   |                             | 3,280  |   |                           |   | 2,939 |   |   |   | 3,283 |   |   |   | 2,855 |   |
|                                            |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |

----

|                           | Options                                                                   |   |   | Weighted Average Exercise PricePer Share |   | Weighted Average Remaining Contractual Term |   | Aggregate Intrinsic Value ($000) |       |
|--------------------------------|---------------------------------------------------------------------------|--------|--------|------------------------------------------|--------|---------------------------------------------|--------|----------------------------------|------------|
|                           |                                                                      |   |   |                                     |   |                                        |   |                             |       |   |   |   |   |
| Outstanding at January 1, 2012 | 209,914                                                                   |   |   | $                                        | 28.43  |                                        |   |  6.3                        |  Yrs. |   | $ | 113 |   |
| Granted                        | -                                                                         |   |   |                                     | -      |                                        |   |                             | -          |   |   | - |   |
| Exercised                      |            (4,775) |   |   |                                     | 20.72  |                                        |   | .8                               |  Yrs. |   |   | 31 |   |
| Forfeited                      | (12,225)                                                                  |   |   |                                     | 29.65  |                                        |   | 5.2                              |  Yrs. |   |   | - |   |
| Outstanding at June 30, 2012   | 192,914                                                                   |   |   |                                     | 28.54  |                                        |   | 5.9                              |  Yrs. |   |   | 170 |   |
|                           |                                                                      |   |   |                                     |   |                                        |   |                             |       |   |   |   |   |
| Exercisable at June 30, 2012   | 164,914                                                                   |   |   |                                     | 28.72  |                                        |   | 5.3                              |  Yrs. |   |   | 142 |   |

| (in thousands)                                     |   | June 30, |   |
|----------------------------------------------------|--------|----------|--------|
|                                               |   | 2012     |   |   | 2011 |   |
|  Unfunded availability under loan commitments |   | $        | 50,754 |   |   | $ | 43,395 |   |
| Unfunded commitments under lines of credit         |   |     | 37,462 |   |   |   | 28,910 |   |
| Standby letters of credit                          |   |     | 11,248 |   |   |   | 5,586 |   |
|                                               |   |     |   |   |   |   |   |   |
|                                               |   | $        | 99,464 |   |   | $ | 77,891 |   |

----

|                                                |   | June 30, 2012       |    |
|----------------------------------------------------------|--------|---------------------|---------|
|                                                     |   |  AmortizedCost |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   |  FairValue |   |
|                                                     |   | (In thousands)      |    |
| Available for Sale:                                      |   |                |    |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies                                 |   | $                   | 2,000   |   |   | $ | 7 |   |   | $ | (2 | ) |   | $ | 2,005 |   |
| States and political subdivisions                        |   |                | 54,163  |   |   |   | 2,648 |   |   |   | (42 | ) |   |   | 56,769 |   |
| Corporate obligations                                    |   |                | 8,635   |   |   |   | 215 |   |   |   | (5 | ) |   |   | 8,845 |   |
| Mortgage-backed securities-government sponsored entities |   |                | 74,944  |   |   |   | 1,970 |   |   |   | (25 | ) |   |   | 76,889 |   |
|                                                     |   |                | 139,742 |   |   |   | 4,840 |   |   |   | (74 | ) |   |   | 144,508 |   |
| Equity securities-financial services                     |   |                | 189     |   |   |   | 23 |   |   |   | - |   |   |   | 212 |   |
|                                                     |   | $                   | 139,931 |   |   | $ | 4,863 |   |   | $ | (74 | ) |   | $ | 144,720 |   |
| Held to Maturity:                                        |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| States and political subdivisions                        |   | $                   | 172     |   |   | $ | 5 |   |   | $ | - |   |   | $ | 177 |   |

|                                                          |   | December 31, 2011   |    |
|---------------------------------------------------------------|--------|---------------------|---------|
|                                                          |   |  AmortizedCost |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   |  FairValue |   |
|                                                          |   | (In Thousands)      |    |
| Available for Sale:                                           |   |                |    |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies                                      |   | $                   | 13,268  |   |   | $ | 130 |   |   | $ | - |   |   | $ | 13,398 |   |
| States and political subdivisions                             |   |                | 54,106  |   |   |   | 2,640 |   |   |   | - |   |   |   | 56,746 |   |
| Corporate obligations                                         |   |                | 8,733   |   |   |   | 130 |   |   |   | (54 | ) |   |   | 8,809 |   |
| Mortgage-backed securities-government sponsored entities |   |                | 68,886  |   |   |   | 2,081 |   |   |   | (2 | ) |   |   | 70,965 |   |
|                                                          |   |                | 144,993 |   |   |   | 4,981 |   |   |   | (56 | ) |   |   | 149,918 |   |
| Equity securities-financial services                          |   |                | 239     |   |   |   | 109 |   |   |   | (3 | ) |   |   | 345 |   |
|                                                          |   | $                   | 145,232 |   |   | $ | 5,090 |   |   | $ | (59 | ) |   | $ | 150,263 |   |
| Held to Maturity:                                             |   |                |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| States and political subdivisions                             |   | $                   | 171     |   |   | $ | 6 |   |   | $ | - |   |   | $ | 177 |   |

----

|                                                     |   | June 30, 2012       |   |
|----------------------------------------------------------|--------|---------------------|--------|
|                                                     |   | Less than 12 Months |   |   | 12 Months or More |   |   | Total |   |
|                                                     |   | Fair Value          |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
| U.S. Government Agencies                                 |   | $                   | 998    |   |   | $ | (2 | ) |   | $ | - |   |   | $ | - |   |   | $ | 998 |   |   | $ | (2 | ) |
| States and political subdivisions                        |   |                | 3,254  |   |   |   | (42 | ) |   |   | - |   |   |   | - |   |   |   | 3,254 |   |   |   | (42 | ) |
| Corporate obligations                                    |   |                | 1,457  |   |   |   | (5 | ) |   |   | - |   |   |   | - |   |   |   | 1,457 |   |   |   | (5 | ) |
| Mortgage-backed securities-government sponsored agencies |   |                | 6,563  |   |   |   | (25 | ) |   |   | - |   |   |   | - |   |   |   | 6,563 |   |   |   | (25 | ) |
|                                                     |   | $                   | 12,272 |   |   | $ | (74 | ) |   | $ | - |   |   | $ | - |   |   | $ | 12,272 |   |   | $ | (74 | ) |
|                                                     |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                |   | December 31, 2011   |         |
|----------------------------------------------------------|--------|---------------------|--------------|
|                                                     |   | Less than 12 Months |         |   | 12 Months or More |   |   | Total |   |
|                                                     |   | Fair Value          |         |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |   | Fair Value |   |   | Unrealized Losses |   |
|  Corporate obligations                              |   | $                   | 4,152        |   |   | $ | (54 | ) |   | $ | - |   |   | $ | - |   |   | $ | 4,152 |   |   | $ | (54 | ) |
| Mortgage-backed securities-government sponsored agencies |   |                |   2,495 |   |   |   | (2 | ) |   |   |   - |   |   |   |   - |   |   |   |   2,495 |   |   |   | (2 | ) |
| Equity securities-financial services                     |   |                |  34     |   |   |   | (2 | ) |   |   |  15 |   |   |   | (1 | ) |   |   |  49 |   |   |   | (3 | ) |
|                                                     |   | $                   | 6,681        |   |   | $ | (58 | ) |   | $ | 15 |   |   | $ | (1 | ) |   | $ | 6,696 |   |   | $ | (59 | ) |
|                                                     |   |                |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                          |   | Available for Sale |    |   | Held to Maturity |   |
|---------------------------------------------------------------|--------|--------------------|---------|--------|------------------|--------|
|                                                          |   | Amortized Cost     |    |   | Fair Value       |   |   | Amortized Cost |   |   | Fair Value |   |
|                                                          |   | (In Thousands)     |    |
|                                                          |   |               |    |   |             |   |   |   |   |   |   |   |
| Due in one year or less                                       |   | $                  | 10,209  |   |             | $      | 10,313 |   |   | $ | - |   |   | $ | - |   |
| Due after one year through five years                         |   |               | 7,466   |   |             |   | 7,690 |   |   |   | 172 |   |   |   | 177 |   |
| Due after five years through ten years                        |   |               | 17,363  |   |             |   | 18,255 |   |   |   | - |   |   |   | - |   |
| Due after ten years                                           |   |               | 29,760  |   |             |   | 31,361 |   |   |   | - |   |   |   | - |   |
|                                                          |   |               |    |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities-government sponsored agencies |   |               | 74,944  |   |             |   | 76,889 |   |   |   | - |   |   |   | - |   |
|                                                          |   | $                  | 139,742 |   |             | $      | 144,508 |   |   | $ | 172 |   |   | $ | 177 |   |

|                              |   | Three Months EndedJune 30, |   |   | Six Months EndedJune 30, |    |
|-----------------------------------|--------|----------------------------|--------|--------|--------------------------|---------|
|                              |   | 2012                       |   |   | 2011                     |    |   | 2012 |   |   | 2011 |   |
| Gross realized gains              |   | $                          | 285    |   |                     | $       | 15 |   |   | $ | 687 |   |   | $ | 228 |   |
| Gross realized losses             |   | -                          |   |   | (3                       | )  |   | - |   |   | (4 | )  |
| Net realized gain                 |   | $                          | 285    |   |                     | $       | 12 |   |   | $ | 687 |   |   | $ | 224 |   |
| Proceeds from sales of securities |   | $                          | 7,716  |   |                     | $       | 4,157 |   |   | $ | 18,349 |   |   | $ | 10,344 |   |

|                                                                                                       |   |  Types of loans   |                |   |   |                    |   |
|------------------------------------------------------------------------------------------------------------|--------|------------------------|---------------------|--------|--------|-------------------------|--------|
|                                                                                                       |   | (dollars in thousands) |                |   |   |                    |   |   |   |   |   |
|                                                                                                       |   |                   |                |   |   |                    |   |   |   |   |   |   |   |   |   |
|                                                                                                       |   |                   | June 30, 2012  |   |   |  December 31, 2011 |   |
| Real Estate-Residential                                                                                    |   | $                      | 148,051             |   |   |                    | 30.8   | % |   | $ | 148,148 |   |   |   | 32.3 | % |
|                 Commercial |   |                   | 275,258             |   |   |                    | 57.4   |   |   |   | 262,476 |   |   |   | 57.3 |   |
|                 Construction    |   |                   | 15,881              |   |   |                    | 3.3    |   |   |   | 11,087 |   |   |   | 2.4 |   |
| Commercial, financial and agricultural                                                                     |   |                   | 26,518              |   |   |                    | 5.5    |   |   |   | 22,684 |   |   |   | 5.0 |   |
| Consumer loans to individuals                                                                              |   |                   | 14,244              |   |   |                    | 3.0    |   |   |   | 13,934 |   |   |   | 3.0 |   |
|   Total loans                                                                                    |   |                   | 479,952             |   |   |                    | 100.0  | % |   |   | 458,329 |   |   |   | 100.0 | % |
|                                                                                                       |   |                   |                |   |   |                    |   |   |   |   |   |   |   |   |   |   |
|   Deferred fees (net)                                                                            |   |                   | (531                | )      |   |                    |   |   |   |   | (422 | ) |   |   |   |   |
|                                                                                                       |   |                   |                |   |   |                    |   |   |   |   |   |   |   |   |   |   |
|   Allowance for loan losses                                                                      |   |                   | (5,775              | )      |   |                    |   |   |   |   | (5,458 | ) |   |   |   |   |
|   Net loans receivable                                                                           |   | $                      | 473,646             |   |   |                    |   |   |   | $ | 452,449 |   |   |   |   |   |

----

| Balance at beginning of period |   | $      | 171    |   |
|--------------------------------|--------|--------|--------|--------|
| Accretion                      |   |   | (47    | )      |
| Reclassification and other     |   |   | -      |   |
| Balance at end of period       |   | $      | 124    |   |
|                           |   |   |   |   |

|                |   | June 30, 2012                                                            |   |   | December 31, 2011                                                        |   |
|---------------------|--------|--------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------|--------|
|                |   | Acquired Loans with Specific Evidence of Deterioration in Credit Quality |   |   | Acquired Loans with Specific Evidence of Deterioration in Credit Quality |   |
| Outstanding Balance |   | $                                                                        | 1,346  |   |                                                                     | $      | 1,412 |   |
| Carrying Amount     |   |                                                                     | 1,222  |   |                                                                     |   | 1,246 |   |

----

|                                                                  |   | Real Estate Loans    |              |   |       |   |
|----------------------------------------------------------------------------|--------|----------------------|-------------------|--------|------------|--------|
|                                                                       |   | Residential          |              |   | Commercial |   |   | Construction |   |   | Commercial Loans |   |   | Consumer Loans |   |   | Total |   |
| June 30, 2012                                                              |   |  (In thousands) |              |
|                                                                       |   |                 |              |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Individually evaluated for impairment                |   | $                    | -                 |   |       | $      | 12,501 |   |   | $ | - |   |   | $ | 385 |   |   | $ | - |   |   | $ | 12,886 |   |
|   Loans acquired with deteriorated credit quality |   |                 |     273 |   |       |   |     951 |   |   |   |     - |   |   |   |     - |   |   |   |     - |   |   |   |     1,224 |   |
|   Collectively evaluated for impairment                |   |                 |   147,778    |   |       |   |   261,806 |   |   |   |   15,881 |   |   |   |   26,133 |   |   |   |   14,244 |   |   |   |   465,842 |   |
|     Total loans                                   |   | $                    | 148,051           |   |       | $      | 275,258 |   |   | $ | 15,881 |   |   | $ | 26,518 |   |   | $ | 14,244 |   |   | $ | 479,952 |   |
|                                                                       |   |                 |              |   |       |   |
|                                                                       |   | Real Estate Loans    |              |   |       |   |
|                                                                       |   | Residential          |              |   | Commercial |   |   | Construction |   |   | Commerical Loans |   |   | Consumer Loans |   |   | Total |   |
| December 31, 2011                                                     |   |  (In thousands) |              |
|                                                                       |   |                 |              |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Individually evaluated for impairment                |   | $                    | -                 |   |       | $      | 11,786 |   |   | $ | - |   |   | $ | 598 |   |   | $ | - |   |   | $ | 12,384 |   |
|   Loans acquired with deteriorated credit quality                |   |                 | 343               |   |       |   | 903 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,246 |   |
|   Collectively evaluated for impairment                |   |                 |   147,805    |   |       |   |   249,787 |   |   |   |   11,087 |   |   |   |   22,086 |   |   |   |   13,934 |   |   |   |   444,699 |   |
|     Total Loans                                        |   | $                    | 148,148           |   |       | $      | 262,476 |   |   | $ | 11,087 |   |   | $ | 22,684 |   |   | $ | 13,934 |   |   | $ | 458,329 |   |

----

|                                                         |   |  RecordedInvestment |   |   | UnpaidPrincipalBalance |   |   |  AssociatedAllowance |   |   | AverageRecordedInvestment |   |   | InterestIncomeRecognized |   |
|-------------------------------------------------------------------|--------|--------------------------|--------|--------|------------------------|--------|--------|---------------------------|--------|--------|---------------------------|--------|--------|--------------------------|--------|
|                                                              |   | (In thousands)           |   |
| June 30, 2012With no related allowance recorded:                  |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |
| Real Estate Loans                                                 |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |
|     Residential                               |   | $                        | 273    |   |                   | $      | 297    |                      |   | $      | -                         |   |   | $                        | 289    |   |   | $ | 2 |   |
|     Commercial                                |   |                     | 5,420  |   |                   |   | 5,520  |                      |   |   | -                         |   |   |                     | 5,902  |   |   |   | 40 |   |
| Commercial Loans                                                  |   |                     | 385    |   |                   |   | 385    |                      |   |   | -                         |   |   |                     | 385    |   |   |   | - |   |
|           Total |   |                     | 6,078  |   |                   |   | 6,202  |                      |   |   | -                         |   |   |                     | 6,576  |   |   |   | 42 |   |
| With an allowance recorded:                                       |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |   |   |   |   |   |
| Real Estate Loans                                                 |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |   |   |   |   |   |
|     Commercial                                |   |                     | 8,031  |   |                   |   | 8,031  |                      |   |   | 1,120                     |   |   |                     | 7,379  |   |   |   | 106 |   |
|           Total |   |                     | 8,031  |   |                   |   | 8,031  |                      |   |   | 1,120                     |   |   |                     | 7,379  |   |   |   | 106 |   |
| Total:                                                            |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |   |   |   |   |   |
| Real Estate loans                                                 |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |   |   |   |   |   |
|     Residential                               |   |                     | 273    |   |                   |   | 297    |                      |   |   | -                         |   |   |                     | 289    |   |   |   | 2 |   |
|     Commercial                                |   |                     | 13,451 |   |                   |   | 13,551 |                      |   |   | 1,120                     |   |   |                     | 13,281 |   |   |   | 146 |   |
| Commercial Loans                                                  |   |                     | 385    |   |                   |   | 385    |                      |   |   | -                         |   |   |                     | 385    |   |   |   | - |   |
|       Total Impaired Loans          |   | $                        | 14,109 |   |                   | $      | 14,233 |                      |   | $      | 1,120                     |   |   | $                        | 13,955 |   |   | $ | 148 |   |

----

|                                                                        |   |  RecordedInvestment |   |   | UnpaidPrincipalBalance |   |   |  AssociatedAllowance |   |   | AverageRecordedInvestment |   |   | InterestIncomeRecognized |   |
|----------------------------------------------------------------------------------|--------|--------------------------|--------|--------|------------------------|--------|--------|---------------------------|--------|--------|---------------------------|--------|--------|--------------------------|--------|
|                                                                             |   | (In thousands)           |   |
| December 31, 2011With no related allowance recorded:                             |   |                     |   |   |                   |   |   |                      |   |   |                      |   |
| Real Estate Loans                                                                |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |
|     Residential                                              |   | $                        | 343    |   |                   | $      | 385    |                      |   | $      | -                         |   |   | $                        | 245    |   |   | $ | 7 |   |
|     Commercial                                               |   |                     | 5,866  |   |                   |   | 5,995  |                      |   |   | -                         |   |   |                     | 5,372  |   |   |   | 340 |   |
| Commercial Loans                                                                 |   |                     | 598    |   |                   |   | 598    |                      |   |   | -                         |   |   |                     | 496    |   |   |   | 10 |   |
|           Total                |   |                     | 6,807  |   |                   |   | 6,978  |                      |   |   | -                         |   |   |                     | 6,113  |   |   |   | 357 |   |
| With an allowance recorded:                                                      |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |   |   |   |   |   |
| Real Estate Loans                                                                |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |   |   |   |   |   |
|     Commercial                                               |   |                     | 6,823  |   |                   |   | 6,823  |                      |   |   | 1,231                     |   |   |                     | 9,670  |   |   |   | 204 |   |
|           Total                |   |                     | 6,823  |   |                   |   | 6,823  |                      |   |   | 1,231                     |   |   |                     | 9,670  |   |   |   | 204 |   |
| Total:                                                                           |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |   |   |   |   |   |
| Real Estate loans                                                                |   |                     |   |   |                   |   |   |                      |   |   |                      |   |   |                     |   |   |   |   |   |   |
|     Residential                                              |   |                     | 343    |   |                   |   | 385    |                      |   |   | -                         |   |   |                     | 245    |   |   |   | 7 |   |
|     Commercial                                               |   |                     | 12,689 |   |                   |   | 12,818 |                      |   |   | 1,231                     |   |   |                     | 15,042 |   |   |   | 544 |   |
| Commercial Loans                                                                 |   |                     | 598    |   |                   |   | 598    |                      |   |   | -                         |   |   |                     | 496    |   |   |   | 10 |   |
|           Total Impaired Loans |   | $                        | 13,630 |   |                   | $      | 13,801 |                      |   | $      | 1,231                     |   |   | $                        | 15,783 |   |   | $ | 561 |   |

----

|                                                              |   |  Pass |    |   | SpecialMention |   |   |  Substandard |   |   |  Doubtful |   |   |  Total |   |
|-------------------------------------------------------------------|--------|------------|---------|--------|----------------|--------|--------|-------------------|--------|--------|----------------|--------|--------|-------------|--------|
| June 30, 2012                                                     |   |       |    |   |           |   |   |              |   |   |           |   |   |        |   |
|   Commercial real estate loans                          |   | $          | 250,726 |   |           | $      | 9,825  |              |   | $      | 14,707         |   |   | $           | -      |   |   | $ | 275,258 |   |
| Commercial loans                                                  |   |       | 25,842  |   |           |   | 238    |              |   |   | 438            |   |   |        | -      |   |   |   | 26,518 |   |
|           Total |   | $          | 276,568 |   |           | $      | 10,063 |              |   | $      | 15,145         |   |   | $           | -      |   |   | $ | 301,776 |   |
|                                                              |   |       |    |   |           |   |   |              |   |   |           |   |   |        |   |   |   |   |   |   |

|                                                              |   |  Pass |    |   | SpecialMention |   |   |  Substandard |   |   |  Doubtful |   |   |  Total |   |
|-------------------------------------------------------------------|--------|------------|---------|--------|----------------|--------|--------|-------------------|--------|--------|----------------|--------|--------|-------------|--------|
| December 31, 2011                                            |   |       |    |   |           |   |   |              |   |   |           |   |   |        |   |
|   Commercial real estate loans                          |   | $          | 237,407 |   |           | $      | 11,009 |              |   | $      | 14,060         |   |   | $           | -      |   |   | $ | 262,476 |   |
| Commercial loans                                                  |   |       | 21,598  |   |           |   | 427    |              |   |   | 659            |   |   |        | -      |   |   |   | 22,648 |   |
|           Total |   | $          | 259,005 |   |           | $      | 11,436 |              |   | $      | 14,719         |   |   | $           | -      |   |   | $ | 285,160 |   |
|                                                              |   |       |    |   |           |   |   |              |   |   |           |   |   |        |   |   |   |   |   |   |

| June 30, 2012                       |   | Performing |    |   | Nonperforming |   |   | Total  |   |
|-------------------------------------|--------|------------|---------|--------|---------------|--------|--------|--------|--------|
| Residential real estate loans       |   | $          | 145,530 |   |          | $      | 2,521  |   |   | $ | 148,051 |   |
| Construction                        |   |       | 15,881  |   |          |   | -      |   |   |   | 15,881 |   |
| Consumer loans                      |   |       | 14,244  |   |          |   | -      |   |   |   | 14,244 |   |
|      Total |   | $          | 175,655 |   |          | $      | 2,521  |   |   | $ | 178,176 |   |
|                                |   |       |    |   |          |   |   |   |   |   |   |   |

| December 31, 2011                   |   | Performing |    |   | Nonperforming |   |   | Total  |   |
|-------------------------------------|--------|------------|---------|--------|---------------|--------|--------|--------|--------|
| Residential real estate loans       |   | $          | 145,061 |   |          | $      | 3,087  |   |   | $ | 148,148 |   |
| Construction                        |   |       | 11,087  |   |          |   | -      |   |   |   | 11,087 |   |
| Consumer loans                      |   |       | 13,934  |   |          |   | -      |   |   |   | 13,934 |   |
|      Total |   | $          | 170,082 |   |          | $      | 3,087  |   |   | $ | 173,169 |   |
|                                |   |       |    |   |          |   |   |   |   |   |   |   |

----

|                          |   | Current                               |    |   |  31-60 Days Past Due             |   |   |   61-90 Days Past Due       |   |   |   Greater than 90 Days Past Due and still accruing |   |   |     Non-Accrual |   |   |   Total Past Due and Non-Accrual |   |   |     Total Loans |   |
|-------------------------------|--------|---------------------------------------|---------|--------|--------------------------------------------|--------|--------|---------------------------------------|--------|--------|--------------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|--------------------------------------------|--------|--------|-------------------------------------|--------|
|  June 30, 2012           |   |                                  |    |   |                                       |   |   |                                  |   |   |                                                         |   |   |                                |   |   |                                       |   |   |                                |   |
| Real Estate loans             |   |                                  |    |   |                                       |   |   |                                  |   |   |                                                         |   |   |                                |   |   |                                       |   |   |                                |   |
|   Residential       |   | $                                     | 145,026 |   |                                       | $      | 435    |                                  |   | $      | 69                                                           |   |   | $                                   | -      |   |                                       | $      | 2,521  |                                |   | $ | 3,025 |   |   | $ | 148,051 |   |
|   Commercial        |   |                                  | 268,298 |   |                                       |   | 986    |                                  |   |   | -                                                            |   |   |                                | 2      |   |                                       |   | 5,972  |                                |   |   | 6,960 |   |   |   | 275,258 |   |
|   Construction      |   |                                  | 15,816  |   |                                       |   | 65     |                                  |   |   | -                                                            |   |   |                                | -      |   |                                       |   | -      |                                |   |   | 65 |   |   |   | 15,881 |   |
| Commercial  loans   |   |                                  | 26,131  |   |                                       |   | 2      |                                  |   |   | -                                                            |   |   |                                | -      |   |                                       |   | 385    |                                |   |   | 387 |   |   |   | 26,518 |   |
| Consumer  loans     |   |                                  | 14,144  |   |                                       |   | 87     |                                  |   |   | 12                                                           |   |   |                                | 1      |   |                                       |   | -      |                                |   |   | 100 |   |   |   | 14,244 |   |
|     Total |   | $                                     | 469,415 |   |                                       | $      | 1,575  |                                  |   | $      | 81                                                           |   |   | $                                   | 3      |   |                                       | $      | 8,878  |                                |   | $ | 10,537 |   |   | $ | 479,952 |   |
|                          |   |                                  |    |   |                                       |   |   |                                  |   |   |                                                         |   |   |                                |   |   |                                       |   |   |                                |   |   |   |   |   |   |   |   |
|                          |   |      Current |    |   |    31-60 Days Past Due |   |   |    61-90 Days Past Due |   |   |   Greater than 90 Days Past Due and still accruing |   |   |     Non-Accrual |   |   |   Total Past Due and Non-Accrual |   |   |     Total Loans |   |
|  December 31, 2011       |   |                                  |    |   |                                       |   |   |                                  |   |   |                                                         |   |   |                                |   |   |                                       |   |   |                                |   |   |   |   |   |   |   |   |
| Real Estate loans             |   |                                  |    |   |                                       |   |   |                                  |   |   |                                                         |   |   |                                |   |   |                                       |   |   |                                |   |   |   |   |   |   |   |   |
|   Residential       |   | $                                     | 143,550 |   |                                       | $      | 160    |                                  |   | $      | 1,351                                                        |   |   | $                                   | -      |   |                                       | $      | 3,087  |                                |   | $ | 4,598 |   |   | $ | 148,148 |   |
|   Commercial        |   |                                  | 255,613 |   |                                       |   | 1,015  |                                  |   |   | 1,524                                                        |   |   |                                | -      |   |                                       |   | 4,324  |                                |   |   | 6,863 |   |   |   | 262,476 |   |
|   Construction      |   |                                  | 10,532  |   |                                       |   | -      |                                  |   |   | 555                                                          |   |   |                                | -      |   |                                       |   | -      |                                |   |   | 555 |   |   |   | 11,087 |   |
| Commercial  loans   |   |                                  | 22,086  |   |                                       |   | 194    |                                  |   |   | -                                                            |   |   |                                | -      |   |                                       |   | 404    |                                |   |   | 598 |   |   |   | 22,684 |   |
| Consumer  loans     |   |                                  | 13,835  |   |                                       |   | 89     |                                  |   |   | 10                                                           |   |   |                                | -      |   |                                       |   | -      |                                |   |   | 99 |   |   |   | 13,934 |   |
|     Total |   | $                                     | 445,616 |   |                                       | $      | 1,458  |                                  |   | $      | 3,440                                                        |   |   | $                                   | -      |   |                                       | $      | 7,815  |                                |   | $ | 12,713 |   |   | $ | 458,329 |   |
|                          |   |                                  |    |   |                                       |   |   |                                  |   |   |                                                         |   |   |                                |   |   |                                       |   |   |                                |   |   |   |   |   |   |   |   |

----

| (In thousands)                                            |   |  ResidentialReal Estate |   |   |  CommercialReal Estate |   |   |   Construction |   |   |    Commercial |   |   |   Consumer |            |   |   Total |   |
|-----------------------------------------------------------|--------|------------------------------|--------|--------|-----------------------------|--------|--------|--------------------------|--------|--------|------------------------------|--------|--------|----------------------|-----------------|--------|-------------------|--------|
| Beginning balance, December 31, 2011                      |   | $                            | 1,257  |   |                        | $      | 3,838  |                     |   | $      | 72                           |   |   | $                    | 147             |   |              | $      | 144 |   |   | $ | 5,458 |   |
| Charge Offs                                               |   |                         | (308   | )      |                        |   | (96    | )                        |   |   | (7                           | )      |   |                 | -               |   |              |   | (33 | ) |   |   | (444 | ) |
| Recoveries                                                |   |                         | 1      |   |                        |   | -      |                     |   |   | -                            |   |   |                 | -               |   |              |   | 10 |   |   |   | 11 |   |
| Provision Expense                                         |   |                         | 609    |   |                        |   | (51    | )                        |   |   | 22                           |   |   |                 | 116             |   |              |   | 54 |   |   |   | 750 |   |
| Ending balance, June 30, 2012                        |   | $                            | 1,559  |   |                        | $      | 3,691  |                     |   | $      | 87                           |   |   | $                    | 263             |   |              | $      | 175 |   |   | $ | 5,775 |   |
| Ending balance individually evaluated for impairment |   | $                            | -      |   |                        | $      | 1,120  |                     |   |   |     -              |   |   |                 |     - |   |              |   |     - |   |   | $ | 1,120 |   |
| Ending balance collectively evaluated for impairment |   | $                            | 1,559  |   |                        | $      | 2,571  |                     |   | $      | 87                           |   |   | $                    | 263             |   |              | $      | 175 |   |   | $ | 4,655 |   |
|                                                      |   |                         |   |   |                        |   |   |                     |   |   |                         |   |   |                 |            |   |              |   |   |   |   |   |   |   |

| (In thousands)                                            |   |  ResidentialReal Estate |   |   |  CommercialReal Estate |   |   |   Construction |   |   |    Commercial |   |   |   Consumer |            |   |   Total |   |
|-----------------------------------------------------------|--------|------------------------------|--------|--------|-----------------------------|--------|--------|--------------------------|--------|--------|------------------------------|--------|--------|----------------------|-----------------|--------|-------------------|--------|
| Beginning balance, December 31, 2010                      |   | $                            | 1,167  |   |                        | $      | 3,976  |                     |   | $      | 110                          |   |   | $                    | 171             |   |              | $      | 192 |   |   | $ | 5,616 |   |
| Charge Offs                                               |   |                         | (226   | )      |                        |   | (764   | )                        |   |   | -                            |   |   |                 | (2              | )      |              |   | (41 | ) |   |   | (1,033 | ) |
| Recoveries                                                |   |                         | 7      |   |                        |   | -      |                     |   |   | -                            |   |   |                 | 5               |   |              |   | 22 |   |   |   | 34 |   |
| Provision Expense                                         |   |                         | 148    |   |                        |   | 463    |                     |   |   | (19                          | )      |   |                 | 84              |   |              |   | (26 | ) |   |   | 650 |   |
| Ending balance,  June 30, 2011                       |   | $                            | 1,096  |   |                        | $      | 3,675  |                     |   | $      | 91                           |   |   | $                    | 258             |   |              | $      | 147 |   |   | $ | 5,267 |   |
| Ending balance individually evaluated for impairment |   | $                            | -      |   |                        | $      | 1,678  |                     |   |   |     -              |   |   |                 |     - |   |              |   |     - |   |   | $ | 1,678 |   |
| Ending balance collectively evaluated for impairment |   | $                            | 1,096  |   |                        | $      | 1,997  |                     |   | $      | 91                           |   |   | $                    | 258             |   |              | $      | 147 |   |   | $ | 3,589 |   |
|                                                      |   |                         |   |   |                        |   |   |                     |   |   |                         |   |   |                 |            |   |              |   |   |   |   |   |   |   |

----

----

|                                                          | Fair Value Measurement Using |   |
|---------------------------------------------------------------|------------------------------|--------|
| Description                                                   | Total                        |   |   | (Level 1) |   |   | (Level 2) |   |   | (Level 3) |   |
| (In thousands)                                                |                         |
| June 30, 2012                                                 |                         |   |   |   |   |   |   |   |   |   |   |   |
| Available for Sale:                                           |                         |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies                                      |                         | $      | 2,005 |   |   | $ | - |   |   | $ | 2,005 |   |   | $ | - |   |
| States and political subdivisions                             |                         |   | 56,769 |   |   |   | - |   |   |   | 56,769 |   |   |   | - |   |
| Corporate obligations                                         |                         |   | 8,845 |   |   |   | - |   |   |   | 8,845 |   |   |   | - |   |
| Mortgage-backed securities-government sponsored agencies |                         |   | 76,889 |   |   |   | - |   |   |   | 76,889 |   |   |   | - |   |
| Equity securities-financial services                          |                         |   | 212 |   |   |   | 212 |   |   |   | - |   |   | - |   |
| Total                                                         |                         | $      | 144,720 |   |   | $ | 212 |   |   | $ | 144,508 |   |   | $ | - |   |
|                                                          |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2011                                             |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for Sale:                                           |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies                                      |                         | $      | 13,398 |   |   | $ | - |   |   | $ | 13,398 |   |   | $ | - |   |
| States and political subdivisions                             |                         |   | 56,746 |   |   |   | - |   |   |   | 56,746 |   |   |   | - |   |
| Corporate obligations                                         |                         |   | 8,809 |   |   |   | - |   |   |   | 8,809 |   |   |   | - |   |
| Mortgage-backed securities-government sponsored agencies |                         |   | 70,965 |   |   |   | - |   |   |   | 70,965 |   |   |   | - |   |
| Equity securities-financial services                          |                         |   | 345 |   |   |   | 345 |   |   | - |   |   | - |   |
| Total                                                         |                         | $      | 150,263 |   |   | $ | 345 |   |   | $ | 149,918 |   |   | $ | - |   |

|                         |   |   |   |   | Fair Value Measurement using |   |
|------------------------------|--------|--------|--------|--------|-----------------------------------|--------|
|                         |   |   |   |   |                              |   |   |   |   |   |   |   |
| (In thousands)               |   |   |   |   |                              |   |   |   |   |   |   |   |
|                         |   |   |   |   |                              |   |   |   |   |   |   |   |
|                         |   |   |   |   |                              |   |   |   |   |   |   |   |
| Description                  |   | Total  |   |   | (Level 1)                         |   |   | (Level 2) |   |   | (Level 3) |   |
| June 30, 2012                |   |   |   |
| Impaired Loans               |   | $      | 12,990 |   |                              | $      | - |   |   | $ | - |   |   | $ | 12,990 |   |
| Foreclosed Real Estate Owned |   |   | 1,268  |   |                              |   | - |   |   |   | - |   |   |   | 1,268 |   |
|                         |   | $      | 14,258 |   |                              | $      | - |   |   | $ | - |   |   | $ | 14,258 |   |
|                         |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2011            |   |   |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |
| Impaired Loans               |   | $      | 12,399 |   |                              | $      | - |   |   | $ | - |   |   | $ | 12,399 |   |
| Foreclosed Real Estate Owned |   |   | 2,910  |   |                              |   | - |   |   |   | - |   |   |   | 2,910 |   |
|                         |   | $      | 15,309 |   |                              | $      | - |   |   | $ | - |   |   | $ | 15,309 |   |

----

|                         | Quantitative Information about Level 3 Fair Value Measurements |
|------------------------------|----------------------------------------------------------------|
|  (In thousands)         | Fair ValueEstimate                                             | Valuation Techniques | UnobservableInput | Range(WeightedAverage) |
| June 30, 2012                |                                                           |   |   |   |
|  Impaired loans         |  $12,990                                                  | Appraisal ofcollateral(1) | Appraisaladjustments(2)   |  0-20%   |
| Foreclosed real estate owned |   $1,268                                             | Appraisal ofcollateral(1)(3) | Liquidationexpenses(2) | 20%  |

| (1) | Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level 3 inputs which are not identifiable, less any associated allowance.                                                                       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal. |
| (3) | Includes qualitative adjustments by management and estimated liquidation expenses.                                                                                                                                                                                              |

----

----

|                                                                                                                                     |   | Fair Value Measurements at June 30, 2012 |     |   |                               |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|----------|--------|------------------------------------|--------|
|                                                                                                                                     |   |    Carrying Amount        |     |   |     Fair Value |   |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   |  Significant Unobservable Inputs(Level 3) |   |
| Financial assets:                                                                                                                        |   |                                     |     |   |                               |   |   |   |   |   |   |   |   |   |   |
| Cash and due from banks, interest-bearing deposits with   banks and federal funds sold                                    |   | $                                        | 24,396   |   |                               | $      | 24,396 |   |   | $ | 24,396 |   |   | $ | - |   |   | $ | - |   |
| Securities                                                                                                                               |   |                                     | 144,892  |   |                               |   | 144,897 |   |   |   | 212 |   |   |   | 144,685 |   |   |   | - |   |
| Loans receivable, net                                                                                                                    |   |                                     | 473,646  |   |                               |   | 483,418 |   |   |   | - |   |   |   | - |   |   |   | 483,418 |   |
| Mortgage servicing rights                                                                                                                |   |                                     | 288      |   |                               |   | 286 |   |   |   | 286 |   |   |   | - |   |   |   | - |   |
| Investment in FHLB stock                                                                                                                 |   |                                     | 3,243    |   |                               |   | 3,243 |   |   |   | 3,243 |   |   |   | - |   |   |   | - |   |
| Bank owned life insurance                                                                                                                |   |                                     | 12,119   |   |                               |   | 12,119 |   |   |   | 12,119 |   |   |   | - |   |   |   | - |   |
| Accrued interest receivable                                                                                                              |   |                                     | 2,416    |   |                               |   | 2,416 |   |   |   | 2,416 |   |   |   | - |   |   |   | - |   |
|                                                                                                                                     |   |                                     |     |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                                                                                                   |   |                                     |     |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                                                 |   |                                     | 534,157  |   |                               |   | 535,878 |   |   |   | 319,552 |   |   |   | - |   |   |   | 216,326 |   |
| Short-term borrowings                                                                                                                    |   |                                     | 27,192   |   |                               |   | 27,192 |   |   |   | 27,192 |   |   |   | - |   |   |   | - |   |
| Other borrowings                                                                                                                         |   |                                     | 27,579   |   |                               |   | 30,947 |   |   |   | - |   |   |   | - |   |   |   | 30,947 |   |
| Accrued interest payable                                                                                                                 |   |                                     | 1,335    |   |                               |   | 1,335 |   |   |   | 1,335 |   |   |   | - |   |   |   | - |   |
|                                                                                                                                     |   |                                     |     |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Off-balance sheet financial instruments  Commitments to extend credit and outstanding    letters of credit |   |                                     |   - |   |                               |   |   - |   |   |   |   - |   |   |   |   - |   |   |   |   - |   |

----

|                                                                                                                                      |   | Fair Value Measurements at December 31, 2011 |     |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|----------|
|                                                                                                                                      |   | Carrying Amount                              |     |   | Fair Value |   |
| Financial assets:                                                                                                                         |   |                                         |     |   |   |   |
| Cash and due from banks, interest-  bearing deposits with banks and  federal funds sold                               |   | $                                            | 21,423   |   |   | $ | 21,423 |   |
| Securities                                                                                                                                |   |                                         | 150,434  |   |   |   | 150,440 |   |
| Loans receivable, net                                                                                                                     |   |                                         | 452,449  |   |   |   | 463,118 |   |
| Mortgage servicing rights                                                                                                                 |   |                                         | 302      |   |   |   | 308 |   |
| Investment in FHLB stock                                                                                                                  |   |                                         | 3,593    |   |   |   | 3,593 |   |
| Bank owned life insurance                                                                                                                 |   |                                         | 11,887   |   |   |   | 11,887 |   |
| Accrued interest receivable                                                                                                               |   |                                         | 2,468    |   |   |   | 2,468 |   |
|                                                                                                                                      |   |                                         |     |   |   |   |   |   |
| Financial liabilities:                                                                                                                    |   |                                         |     |   |   |   |   |   |
| Deposits                                                                                                                                  |   |                                         | 525,767  |   |   |   | 527,707 |   |
| Short-term borrowings                                                                                                                     |   |                                         | 21,794   |   |   |   | 21,794 |   |
| Other borrowings                                                                                                                          |   |                                         | 27,670   |   |   |   | 30,002 |   |
| Accrued interest payable                                                                                                                  |   |                                         | 1,321    |   |   |   | 1,321 |   |
|                                                                                                                                      |   |                                         |     |   |   |   |   |   |
| Off-balance sheet financial instruments: Commitments to extend credit and     outstanding letters of credit |   |                                         |   - |   |   |   |   - |   |

----

----

|   | • | our ability to realize the anticipated benefits from our acquisition of North Penn Bancorp, Inc. |
|--------|---------|--------------------------------------------------------------------------------------------------|
|   | • | our ability to effectively manage future growth                                                  |
|   | • | loan losses in excess of our allowance                                                           |
|   | • | risks inherent in commercial lending                                                             |
|   | • | real estate collateral which is subject to declines in value                                     |
|   | • | potential other-than-temporary impairments                                                       |
|   | • | higher deposit insurance premiums                                                                |
|   | • | soundness of other financial institutions                                                        |
|   | • | increased compliance burden under new financial reform legislation                               |
|   | • | risk of failure to stabilize the financial system                                                |
|   | • | current market volatility                                                                        |
|   | • | potential liquidity risk                                                                         |
|   | • | availability of capital                                                                          |

----

|   | • | regional economic factors                                         |
|--------|---------|-------------------------------------------------------------------|
|   | • | loss of senior officers                                           |
|   | • | comparatively low legal lending limits                            |
|   | • | limited market for the Company’s stock                      |
|   | • | restrictions on ability to pay dividends                          |
|   | • | common stock may lose value                                       |
|   | • | competitive environment                                           |
|   | • | issuing additional shares may dilute ownership                    |
|   | • | extensive and complex governmental regulation and associated cost |
|   | • | interest rate risks                                               |

----

----

|                                                                 |   | June 30, 2012 |    |   | December 31, 2011 |   |
|----------------------------------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
| (dollars in thousands)                                               |   | Amount        |    |   | % of portfolio    |   |   | Amount |   |   | % of portfolio |   |
|                                                                 |   |          |    |   |              |   |   |   |   |   |   |   |
| U.S. Government agencies                                             |   | $             | 2,005   |   |              |   | 1.4 | % |   | $ | 13,398 |   |   |   | 8.9 | % |
| States and political subdivisions                                    |   |          | 56,941  |   |              |   | 39.3 |   |   |   | 56,917 |   |   |   | 37.8 |   |
| Corporate obligations                                                |   |          | 8,845   |   |              |   | 6.1 |   |   |   | 8,809 |   |   |   | 5.9 |   |
| Mortgage-backed securities-  government sponsored entities |   |          | 76,889  |   |              |   |  53.1 |   |   |   | 70,965 |   |   |   |  47.2 |   |
| Equity securities-financial services                                 |   |          | 212     |   |              |   |  0.1 |   |   |   |  345 |   |   |   |  0.2 |   |
|   Total                                                    |   | $             | 144,892 |   |              |   | 100.0 | % |   | $ | 150,434 |   |   |   | 100.0 | % |

----

| (dollars in thousands)                                     |   | June 30, 2012 |      |   | December 31, 2011 |   |
|------------------------------------------------------------|--------|---------------|-----------|--------|-------------------|--------|
|   Loans accounted for on a non-accrual basis:    |   |          |      |   |              |   |
|    Commercial and all other                 |   | $             | 385       |   |              | $      | 404 |   |
|    Real Estate                              |   |          | 8,493     |   |              |   | 7,411 |   |
|    Total                                    |   |          | 8,878     |   |              |   | 7,815 |   |
|                                                       |   |          |      |   |              |   |   |   |
| Accruing loans which are contractually                     |   |          |      |   |              |   |   |   |
|   past due 90 days or more                       |   |          | 3         |   |              |   |  - |   |
| Total non-performing loans                                 |   |          | 8,881     |   |              |   | 7,815 |   |
| Foreclosed real estate                                     |   |          | 1,268     |   |              |   |  2,910 |   |
| Total non-performing assets                                |   | $             | 10,149    |   |              | $      | 10,725 |   |
| Allowance for loans lossesCoverage of non-performing loans |   | $             | 5,775.65x |   |              | $      | 5,458  .70x |   |
| Non-performing loans to total loans                        |   |          | 1.85      | %      |              |   | 1.71 | % |
| Non-performing loans to total assets                       |   |          | 1.30      | %      |              |   | 1.17 | % |
| Non-performing assets to total assets                      |   |          | 1.48      | %      |              |   | 1.60 | % |

| (dollars in thousands)              |   | June 30, 2012 |    |   | December 31, 2011 |   |
|-------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                |   |          |    |   |              |   |
| Non-interest bearing demand         |   | $             | 82,525  |   |              | $      | 71,959 |   |
| Interest bearing demand             |   |          | 50,001  |   |              |   | 51,161 |   |
| Money market deposit accounts       |   |          | 118,003 |   |              |   | 114,007 |   |
| Savings                             |   |          | 69,023  |   |              |   | 66,866 |   |
| Time deposits <$100,000          |   |          | 144,862 |   |              |   | 141,220 |   |
| Time deposits >$100,000          |   |          | 69,743  |   |              |   |  80,554 |   |
|                                |   |          |    |   |              |   |   |   |
|      Total |   | $             | 534,157 |   |              | $      | 525,767 |   |

----

|                                       |   | June 30, 2012 |   |   | December 31, 2011 |   |
|--------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Notes with the FHLB:                       |   |          |   |   |              |   |
| Convertible note due October 2012 at 4.37% |   | $             | 5,000  |   |              | $      | 5,000 |   |
| Convertible note due May 2013 at 3.015%    |   |          | 5,000  |   |              |   | 5,000 |   |
| Fixed rate note due July 2015 at 4.34%     |   |          | 7,579  |   |              |   | 7,670 |   |
| Convertible note due January 2017 at 4.71% |   |          | 10,000 |   |              |   | 10,000 |   |
|                                       |   | $             | 27,579 |   |              | $      | 27,670 |   |

|                                         |   | June 30, 2012  |   |   | December 31, 2011 |   |
|----------------------------------------------|--------|----------------|--------|--------|-------------------|--------|
|                                         |   | (in thousands) |   |
| Unfunded availability under loan commitments |   | $              | 50,754 |   |              | $      | 43,081 |   |
| Unfunded commitments under lines of credit   |   |           | 37,462 |   |              |   | 29,255 |   |
| Standby letters of credit                    |   |           | 11,248 |   |              |   | 11,892 |   |
|                                         |   |           |   |   |              |   |   |   |
|                                         |   | $              | 99,464 |   |              | $      | 84,228 |   |
|                                         |   |           |   |   |              |   |   |   |

----

|                                                                             |   |   |  June 30, 2012 |   | December 31, 2011 |
|----------------------------------------------------------------------------------|--------|--------|---------------------|--------|-------------------|
|  Tier 1 Capital                                                             |   |   |                |   |              |
|          (To average assets)        |   |   |   11.50%  |   |  11.29%      |
|  Tier 1 Capital                                                             |   |   |                |   |              |
|          (To risk-weighted assets)       |   |   |  15.75%        |   |  15.86%      |
|  Total Capital                                                              |   |   |                |   |              |
|          (To risk-weighted assets)  |   |   |  16.93%        |   |  17.04%      |
|                                                                             |   |   |                |   |              |
|                                                                             |   |   |                |   |              |

----

----

| (Tax-Equivalent Basis, dollars in thousands)                                            |   |  Three Months Ended June 30, |    |
|-----------------------------------------------------------------------------------------|--------|-----------------------------------|---------|
|                                                                                    |   |  2012                        |    |   |  2011 |   |
|                                                                                    |   | AverageBalance(2)                 |    |   |  Interest(1) |   |   | Average Rate(3) |   |   | AverageBalance(2) |   |   |  Interest(1) |   |   | Average Rate(3) |   |
| Assets                                                                                  |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                                |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold                                                                      |   | $                                 | -       |   |   | $ | - |   |   |   | 0.00 | % |   | $ | 615 |   |   | $ | - |   |   |   | 0.00 | % |
|   Interest bearing deposits with banks                                        |   |                              | 11,261  |   |   |   | 7 |   |   |   | 0.25 |   |   |   | 25,136 |   |   |   | 16 |   |   |   | 0.25 |   |
|    Securities held-to-maturity                                           |   |                              | 172     |   |   |   | 3 |   |   |   | 6.98 |   |   |   | 170 |   |   |   | 4 |   |   |   | 9.41 |   |
|    Securities available for sale:                                        |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Taxable                                                   |   |                              | 89,790  |   |   |   | 527 |   |   |   | 2.35 |   |   |   | 101,963 |   |   |   | 695 |   |   |   | 2.73 |   |
|      Tax-exempt (1)                                            |   |                              | 52,197  |   |   |   | 722 |   |   |   | 5.53 |   |   |   | 46,847 |   |   |   | 662 |   |   |   | 5.65 |   |
|         Total securities available for sale (1) |   |                              | 141,987 |   |   |   | 1,249 |   |   |   | 3.52 |   |   |   | 148,810 |   |   |   | 1,357 |   |   |   | 3.65 |   |
|      Loans receivable (1) (4) (5)                              |   |                              | 481,524 |   |   |   | 6,504 |   |   |   | 5.40 |   |   |   | 387,203 |   |   |   | 5,517 |   |   |   | 5.70 |   |
|         Total interest earning assets           |   |                              | 634,944 |   |   |   | 7,763 |   |   |   | 4.89 |   |   |   | 561,934 |   |   |   | 6,894 |   |   |   | 4.91 |   |
| Non-interest earning assets:                                                            |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Cash and due from banks                                               |   |                              | 9,077   |   |   |   |   |   |   |   |   |   |   |   | 7,443 |   |   |   |   |   |   |   |   |   |
|    Allowance for loan losses                                             |   |                              | (5,776  | ) |   |   |   |   |   |   |   |   |   |   | (5,753 | ) |   |   |   |   |   |   |   |   |
|    Other assets                                                          |   |                              | 43,844  |   |   |   |   |   |   |   |   |   |   |   | 33,047 |   |   |   |   |   |   |   |   |   |
|         Total non-interest earning assets       |   |                              | 47,145  |   |   |   |   |   |   |   |   |   |   |   | 34,737 |   |   |   |   |   |   |   |   |   |
| Total Assets                                                                            |   | $                                 | 682,089 |   |   |   |   |   |   |   |   |   |   | $ | 596,671 |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                                    |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                                           |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Interest bearing demand and money market                              |   | $                                 | 169,343 |   |   |   | 135 |   |   |   | 0.32 |   |   | $ | 126,053 |   |   |   | 132 |   |   |   | 0.42 |   |
|    Savings                                                               |   |                              | 68,947  |   |   |   | 25 |   |   |   | 0.15 |   |   |   | 68,622 |   |   |   | 53 |   |   |   | 0.31 |   |
|    Time                                                                  |   |                              | 223,147 |   |   |   | 782 |   |   |   | 1.40 |   |   |   | 185,475 |   |   |   | 747 |   |   |   | 1.61 |   |
|       Total interest bearing deposits                     |   |                              | 461,437 |   |   |   | 942 |   |   |   | 0.82 |   |   |   | 380,150 |   |   |   | 932 |   |   |   | 0.98 |   |
| Short-term borrowings                                                                   |   |                              | 19,346  |   |   |   | 13 |   |   |   | 0.27 |   |   |   | 30,634 |   |   |   | 27 |   |   |   | 0.35 |   |
| Other borrowings                                                                        |   |                              | 27,605  |   |   |   | 243 |   |   |   | 3.52 |   |   |   | 37,563 |   |   |   | 342 |   |   |   | 3.64 |   |
|    Total interest bearing liabilities                                    |   |                              | 508,388 |   |   |   | 1,198 |   |   |   | 0.94 |   |   |   | 448,347 |   |   |   | 1,301 |   |   |   | 1.16 |   |
| Non-interest bearing liabilities:                                                       |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Demand deposits                                                       |   |                              | 79,378  |   |   |   |   |   |   |   |   |   |   |   | 67,922 |   |   |   |   |   |   |   |   |   |
|    Other liabilities                                                     |   |                              | 4,069   |   |   |   |   |   |   |   |   |   |   |   | 4,881 |   |   |   |   |   |   |   |   |   |
|       Total non-interest bearing liabilities              |   |                              | 83,447  |   |   |   |   |   |   |   |   |   |   |   | 72,803 |   |   |   |   |   |   |   |   |   |
|    Stockholders' equity                                                  |   |                              | 90,254  |   |   |   |   |   |   |   |   |   |   |   | 75,521 |   |   |   |   |   |   |   |   |   |
| Total Liabilities and Stockholders' Equity                                              |   | $                                 | 682,089 |   |   |   |   |   |   |   |   |   |   | $ | 596,671 |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (tax equivalent basis)                                              |   |                              |    |   |   |   | 6,565 |   |   |   | 3.95 | % |   |   |   |   |   |   | 5,593 |   |   |   | 3.75 | % |
| Tax-equivalent basis adjustment                                                         |   |                              |    |   |   |   | (318 | ) |   |   |   |   |   |   |   |   |   |   | (275 | ) |   |   |   |   |
| Net interest income                                                                     |   |                              |    |   |   | $ | 6,247 |   |   |   |   |   |   |   |   |   |   | $ | 5,318 |   |   |   |   |   |
| Net interest margin (tax equivalent basis)                                              |   |                              |    |   |   |   |   |   |   |   | 4.14 | % |   |   |   |   |   |   |   |   |   |   | 3.98 | % |

| (1) | Interest and yields are presented on a tax-equivalent basis using a marginal tax rate of 34%. |
|-----|-----------------------------------------------------------------------------------------------|
| (2) | Average balances have been calculated based on daily balances.                                |
| (3) | Annualized                                                                                    |
| (4) | Loan balances include non-accrual loans and are net of unearned income.                       |
| (5) | Loan yields include the effect of amortization of deferred fees, net of costs.                |

----

|                                       |   | Increase/(Decrease)                                                                                          |   |
|--------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------|--------|
|                                       |   | Three months ended June 30, 2012 Compared to Three months ended June 30, 2011 Variance due to |   |
|                                       |   | Volume                                                                                                       |   |   | Rate |   |   | Net |   |
|                                       |   | (dollars in thousands)                                                                                       |   |
| Interest earning assets:                   |   |                                                                                                         |   |   |   |   |   |   |   |
| Interest bearing deposits with banks       |   | $                                                                                                            | (9     | ) |   | $ | - |   |   | $ | (9 | ) |
| Securities held to maturity                |   |                                                                                                         | -      |   |   |   | (1 | ) |   |   | (1 | ) |
| Securities available for sale:             |   |                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Taxable                                    |   |                                                                                                         | (78    | ) |   |   | (90 | ) |   |   | (168 | ) |
| Tax-exempt securities                      |   |                                                                                                         | 145    |   |   |   | (85 | ) |   |   | 60 |   |
| Total securities                           |   |                                                                                                         | 67     |   |   |   | (175 | ) |   |   | (108 | ) |
| Loans receivable                           |   |                                                                                                         | 2,705  |   |   |   | (1,718 | ) |   |   | 987 |   |
| Total interest earning assets              |   |                                                                                                         | 2,763  |   |   |   | (1,894 | ) |   |   | 869 |   |
|                                       |   |                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:              |   |                                                                                                         |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand and money market   |   |                                                                                                         | 150    |   |   |   | (147 | ) |   |   | 3 |   |
| Savings                                    |   |                                                                                                         | 2      |   |   |   | (30 | ) |   |   | (28 | ) |
| Time                                       |   |                                                                                                         | 495    |   |   |   | (460 | ) |   |   | 35 |   |
| Total interest bearing deposits            |   |                                                                                                         | 647    |   |   |   | (637 | ) |   |   | 10 |   |
| Short-term borrowings                      |   |                                                                                                         | (9     | ) |   |   | (5 | ) |   |   | (14 | ) |
| Other borrowings                           |   |                                                                                                         | (88    | ) |   |   | (11 | ) |   |   | (99 | ) |
| Total interest bearing liabilities         |   |                                                                                                         | 550    |   |   |   | (653 | ) |   |   | (103 | ) |
| Net interest income (tax-equivalent basis) |   | $                                                                                                            | 2,213  |   |   | $ | (1,241 | ) |   | $ | 972 |   |
|                                       |   |                                                                                                         |   |   |   |   |   |   |   |   |   |   |

----

| (dollars in thousands)                      |   | Three months endedJune 30, 2012 to June 30, 2011 |   |
|---------------------------------------------|--------|--------------------------------------------------|--------|
| Net income three months ended June 30, 2011 |   | $                                                | 1,484  |   |
| Change due to:                              |   |                                             |   |   |
| Net interest income                         |   |                                             | 929    |   |
| Provision for loan losses                   |   |                                             | 30     |   |
| Gain on sales of loans and securities       |   |                                             | 241    |   |
| Other income                                |   |                                             | (28    | ) |
| Salaries and employee benefits              |   |                                             | (215   | ) |
| Occupancy, furniture and equipment          |   |                                             | (82    | ) |
| Merger related expenses                     |   |                                             | 488    |   |
| Foreclosed real estate expense              |   |                                             | (68    | ) |
| All other expenses                          |   |                                             | (144   | ) |
| Income tax expense                          |   |                                             | (377   | ) |
|                                        |   |                                             |   |   |
| Net income three months ended June 30, 2012 |   | $                                                | 2,258  |   |
|                                        |   |                                             |   |   |

----

----

| (Tax-Equivalent Basis, dollars in thousands)                                            |   |  Six Months Ended June 30, |    |
|-----------------------------------------------------------------------------------------|--------|---------------------------------|---------|
|                                                                                    |   |  2012                      |    |   |  2011 |   |
|                                                                                    |   | Average Balance(2)         |    |   |  Interest(1) |   |   | Average Rate(3) |   |   | AverageBalance(2) |   |   |  Interest(1) |   |   | Average Rate(3) |   |
| Assets                                                                                  |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                                |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold                                                                      |   | $                               | -       |   |   | $ | - |   |   |   | 0.00 | % |   | $ | 392 |   |   | $ | - |   |   |   | 0.00 | % |
|   Interest bearing deposits with banks                                        |   |                            | 8,490   |   |   |   | 11 |   |   |   | 0.26 |   |   |   | 17,890 |   |   |   | 24 |   |   |   | 0.27 |   |
|    Securities held-to-maturity                                           |   |                            | 171     |   |   |   | 5 |   |   |   | 5.85 |   |   |   | 170 |   |   |   | 7 |   |   |   | 8.24 |   |
|    Securities available for sale:                                        |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Taxable                                                   |   |                            | 91,280  |   |   |   | 1,060 |   |   |   | 2.32 |   |   |   | 99,738 |   |   |   | 1,345 |   |   |   | 2.70 |   |
|      Tax-exempt (1)                                            |   |                            | 52,966  |   |   |   | 1,467 |   |   |   | 5.54 |   |   |   | 46,739 |   |   |   | 1,326 |   |   |   | 5.67 |   |
|         Total securities available for sale (1) |   |                            | 144,246 |   |   |   | 2,527 |   |   |   | 3.50 |   |   |   | 146,477 |   |   |   | 2,671 |   |   |   | 3.65 |   |
|      Loans receivable (1) (4) (5)                              |   |                            | 475,730 |   |   |   | 12,941 |   |   |   | 5.44 |   |   |   | 370,255 |   |   |   | 10,487 |   |   |   | 5.66 |   |
|         Total interest earning assets           |   |                            | 628,637 |   |   |   | 15,484 |   |   |   | 4.93 |   |   |   | 535,184 |   |   |   | 13,189 |   |   |   | 4.93 |   |
| Non-interest earning assets:                                                            |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Cash and due from banks                                               |   |                            | 8,688   |   |   |   |   |   |   |   |   |   |   |   | 7,122 |   |   |   |   |   |   |   |   |   |
|    Allowance for loan losses                                             |   |                            | (5,660  | ) |   |   |   |   |   |   |   |   |   |   | (5,747 | ) |   |   |   |   |   |   |   |   |
|    Other assets                                                          |   |                            | 44,964  |   |   |   |   |   |   |   |   |   |   |   | 27,365 |   |   |   |   |   |   |   |   |   |
|         Total non-interest earning assets       |   |                            | 47,992  |   |   |   |   |   |   |   |   |   |   |   | 28,740 |   |   |   |   |   |   |   |   |   |
| Total Assets                                                                            |   | $                               | 676,629 |   |   |   |   |   |   |   |   |   |   | $ | 563,924 |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                                    |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                                           |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Interest bearing demand and money market                              |   | $                               | 167,452 |   |   |   | 274 |   |   |   | 0.33 |   |   | $ | 117,545 |   |   |   | 240 |   |   |   | 0.41 |   |
|    Savings                                                               |   |                            | 68,430  |   |   |   | 50 |   |   |   | 0.15 |   |   |   | 60,022 |   |   |   | 78 |   |   |   | 0.26 |   |
|    Time                                                                  |   |                            | 224,553 |   |   |   | 1,579 |   |   |   | 1.41 |   |   |   | 179,234 |   |   |   | 1,499 |   |   |   | 1.67 |   |
|       Total interest bearing deposits                     |   |                            | 460,435 |   |   |   | 1,903 |   |   |   | 0.83 |   |   |   | 356,801 |   |   |   | 1,817 |   |   |   | 1.02 |   |
| Short-term borrowings                                                                   |   |                            | 18,902  |   |   |   | 24 |   |   |   | 0.25 |   |   |   | 29,234 |   |   |   | 51 |   |   |   | 0.35 |   |
| Other borrowings                                                                        |   |                            | 27,628  |   |   |   | 487 |   |   |   | 3.53 |   |   |   | 36,588 |   |   |   | 678 |   |   |   | 3.71 |   |
|    Total interest bearing liabilities                                    |   |                            | 506,965 |   |   |   | 2,414 |   |   |   | 0.95 |   |   |   | 422,623 |   |   |   | 2,546 |   |   |   | 1.20 |   |
| Non-interest bearing liabilities:                                                       |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Demand deposits                                                       |   |                            | 75,728  |   |   |   |   |   |   |   |   |   |   |   | 64,907 |   |   |   |   |   |   |   |   |   |
|    Other liabilities                                                     |   |                            | 4,019   |   |   |   |   |   |   |   |   |   |   |   | 4,750 |   |   |   |   |   |   |   |   |   |
|       Total non-interest bearing liabilities              |   |                            | 79,747  |   |   |   |   |   |   |   |   |   |   |   | 69,657 |   |   |   |   |   |   |   |   |   |
|    Stockholders' equity                                                  |   |                            | 89,917  |   |   |   |   |   |   |   |   |   |   |   | 71,644 |   |   |   |   |   |   |   |   |   |
| Total Liabilities and Stockholders' Equity                                              |   | $                               | 676,629 |   |   |   |   |   |   |   |   |   |   | $ | 563,924 |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (tax equivalent basis)                                              |   |                            |    |   |   |   | 13,070 |   |   |   | 3.97 | % |   |   |   |   |   |   | 10,643 |   |   |   | 3.72 | % |
| Tax-equivalent basis adjustment                                                         |   |                            |    |   |   |   | (636 | ) |   |   |   |   |   |   |   |   |   |   | (544 | ) |   |   |   |   |
| Net interest income                                                                     |   |                            |    |   |   | $ | 12,434 |   |   |   |   |   |   |   |   |   |   | $ | 10,099 |   |   |   |   |   |
| Net interest margin (tax equivalent basis)                                              |   |                            |    |   |   |   |   |   |   |   | 4.16 | % |   |   |   |   |   |   |   |   |   |   | 3.98 | % |

| (1) | Interest and yields are presented on a tax-equivalent basis using a marginal tax rate of 34%. |
|-----|-----------------------------------------------------------------------------------------------|
| (2) | Average balances have been calculated based on daily balances.                                |
| (3) | Annualized                                                                                    |
| (4) | Loan balances include non-accrual loans and are net of unearned income.                       |
| (5) | Loan yields include the effect of amortization of deferred fees, net of costs.                |

----

|                                                               |   | Increase/(Decrease)                                                                                      |   |
|--------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|--------|
|                                                               |   | Six months ended June 30, 2012 Compared to Six months ended June 30, 2011 Variance due to |   |
|                                                               |   | Volume                                                                                                   |   |   | Rate |   |   | Net |   |
|                                                               |   | (dollars in thousands)                                                                                   |   |
| Interest earning assets:                                           |   |                                                                                                     |   |   |   |   |   |   |   |
| Interest bearing deposits with banks.............. |   | $                                                                                                        | (12    | ) |   | $ | (1 | ) |   | $ | (13 | ) |
| Securities held to maturity............................            |   |                                                                                                     | -      |   |   |   | (2 | ) |   |   | (2 | ) |
| Securities available for sale:                                     |   |                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| Taxable...................................................         |   |                                                                                                     | (108   | ) |   |   | (177 | ) |   |   | (285 | ) |
| Tax-exempt securities..................................            |   |                                                                                                     | 227    |   |   |   | (86 | ) |   |   | 141 |   |
| Total securities..........................................         |   |                                                                                                     | 119    |   |   |   | (263 | ) |   |   | (144 | ) |
| Loans receivable........................................           |   |                                                                                                     | 3,613  |   |   |   | (1,159 | ) |   |   | 2,454 |   |
| Total interest earning assets...........................           |   |                                                                                                     | 3,720  |   |   |   | (1,425 | ) |   |   | 2,295 |   |
|                                                               |   |                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                      |   |                                                                                                     |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand and money market....                   |   |                                                                                                     | 153    |   |   |   | (119 | ) |   |   | 34 |   |
| Savings................................................            |   |                                                                                                     | 26     |   |   |   | (54 | ) |   |   | (28 | ) |
| Time...................................................            |   |                                                                                                     | 635    |   |   |   | (555 | ) |   |   | 80 |   |
| Total interest bearing deposits.......................             |   |                                                                                                     | 814    |   |   |   | (728 | ) |   |   | 86 |   |
| Short-term borrowings................................              |   |                                                                                                     | (15    | ) |   |   | (12 | ) |   |   | (27 | ) |
| Other borrowings......................................             |   |                                                                                                     | (159   | ) |   |   | (32 | ) |   |   | (191 | ) |
| Total interest bearing liabilities.....................            |   |                                                                                                     | 640    |   |   |   | (772 | ) |   |   | (132 | ) |
| Net interest income (tax-equivalent basis).........                |   | $                                                                                                        | 3,080  |   |   | $ | (653 | ) |   | $ | 2,427 |   |
|                                                               |   |                                                                                                     |   |   |   |   |   |   |   |   |   |   |

----

| (dollars in thousands)                    |   | Six months endedJune 30, 2012 to June 30, 2011 |   |
|-------------------------------------------|--------|------------------------------------------------|--------|
| Net income six months ended June 30, 2011 |   | $                                              | 3,144  |   |
| Change due to:                            |   |                                           |   |   |
| Net interest income                       |   |                                           | 2,335  |   |
| Provision for loan losses                 |   |                                           | (100   | ) |
| Gain on sales of loans and securities     |   |                                           | 282    |   |
| Other income                              |   |                                           | 14     |   |
| Salaries and employee benefits            |   |                                           | (665   | ) |
| Occupancy, furniture and equipment        |   |                                           | (171   | ) |
| Merger related expenses                   |   |                                           | 737    |   |
| Foreclosed real estate expense            |   |                                           | (171   | ) |
| All other expenses                        |   |                                           | (364   | ) |
| Income tax expense                        |   |                                           | (597   | ) |
|                                      |   |                                           |   |   |
| Net income six months ended June 30, 2012 |   | $                                              | 4,444  |   |
|                                      |   |                                           |   |   |

----

----

|                                             |   | 3 Months |    |   | 3-12 Months |   |    | 1 to 3 Years |   |   | Over3 Years |   |   | Total  |    |
|--------------------------------------------------|--------|----------|---------|--------|-------------|--------|---------|--------------|--------|--------|-------------|--------|--------|--------|---------|
| Federal funds sold and interest bearing deposits |   | $        | 15,261  |   |        | $      | -       |         |   | $      | -           |   |   | $      | -       |   |   | $ | 15,261 |   |
| Securities                                       |   |     | 9,739   |   |        |   | 27,455  |         |   |   | 49,910      |   |   |   | 57,788  |   |   |   | 144,892 |   |
| Loans Receivable                                 |   |     | 126,744 |   |        |   | 95,598  |         |   |   | 159,818     |   |   |   | 97,261  |   |   |   | 479,421 |   |
|   Total RSA                            |   |     | 151,744 |   |        |   | 123,053 |         |   |   | 209,728     |   |   |   | 155,049 |   |   |   | 639,574 |   |
|                                             |   |     |    |   |        |   |    |         |   |   |        |   |   |   |    |   |   |   |   |   |
| Non-maturity interest-bearing deposits           |   |     | 37,834  |   |        |   | 42,986  |         |   |   | 113,510     |   |   |   | 42,697  |   |   |   | 237,027 |   |
| Time Deposits                                    |   |     | 31,379  |   |        |   | 80,762  |         |   |   | 70,659      |   |   |   | 31,805  |   |   |   | 214,605 |   |
| Other                                            |   |     | 6,080   |   |        |   | 19,784  |         |   |   | 11,900      |   |   |   | 17,007  |   |   |   | 54,771 |   |
|   Total RSL                            |   |     | 75,293  |   |        |   | 143,532 |         |   |   | 196,069     |   |   |   | 91,509  |   |   |   | 506,403 |   |

----

| Interest Sensitivity Gap |   | $      | 76,451 |   |   | $      | (20,479 | )      |   | $      | 13,659 |   |   | $      | 63,540  |   |   | $      | 133,171 |   |
|--------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|---------|--------|
| Cumulative Gap           |   |   | 76,451 |   |   |   | 55,972  |   |   |   | 69,631 |   |   |   | 133,171 |   |   |   |    |   |
| RSA/RSL-cumulative       |   |   | 201.5  | %      |   |   | 125.6   | %      |   |   | 116.8  | %      |   |   | 126.3   | %      |   |   |    |   |
|                     |   |   |   |   |   |   |    |   |   |   |   |   |   |   |    |   |   |   |    |   |
| December 31, 2011        |   |   |   |   |   |   |    |   |   |   |   |   |   |   |    |   |   |   |    |   |
|                     |   |   |   |   |   |   |    |   |   |   |   |   |   |   |    |   |   |   |    |   |
| Interest Sensitivity Gap |   | $      | 76,745 |   |   | $      | (21,350 | )      |   | $      | (6,566 | )      |   | $      | 68,689  |   |   | $      | 117,518 |   |
| Cumulative Gap           |   |   | 76,745 |   |   |   | 55,395  |   |   |   | 48,829 |   |   |   | 117,518 |   |   |   |    |   |
| RSA/RSL-cumulative       |   |   | 213.2  | %      |   |   | 125.2   | %      |   |   | 111.8  | %      |   |   | 125.3   | %      |   |   |    |   |

----

| No.       | Description                                                                                                    |
|-----------|----------------------------------------------------------------------------------------------------------------|
|      |                                                                                                           |
| 3(i)      | Articles of Incorporation of Norwood Financial Corp.(1)                                                        |
| 3(ii)     | Bylaws of Norwood Financial Corp. (2)                                                                          |
| 4.0       | Specimen Stock Certificate of Norwood Financial Corp. (1)                                                      |
| 10.1      | Employment Agreement with Lewis J. Critelli (2)                                                                |
| 10.2      | Change in Control Severance Agreement with William S. Lance(2)                                                 |
| 10.3      | Norwood Financial Corp. Stock Option Plan (3)                                                                  |
| 10.4      | Salary Continuation Agreement between the Bank and William W. Davis, Jr. (4)                                   |
| 10.5      | Salary Continuation Agreement between the Bank and Lewis J. Critelli (4)                                       |
| 10.7      | 1999 Directors Stock Compensation Plan (3)                                                                     |
| 10.8      | Salary Continuation Agreement between the Bank and Joseph A. Kneller (5)                                       |
| 10.9      | Salary Continuation Agreement between the Bank and John H. Sanders (5)                                         |
| 10.10     | 2006 Stock Option Plan (6)                                                                                     |
| 10.11     | First and Second Amendments to Salary Continuation Agreement with William W. Davis, Jr. (7)                    |
| 10.12     | First and Second Amendments to Salary Continuation Agreement with Lewis J. Critelli (7)                        |
| 10.14     | First and Second Amendments to Salary Continuation Agreement with Joseph A. Kneller (7)                        |
| 10.15     | First and Second Amendments to Salary Continuation Agreement with John H. Sanders (7)                          |
| 31        | Rule 13a-14(a)/15d-14(a) Certification of CEO and CFO                                                          |
| 32        | Certification pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of Sarbanes Oxley Act of 2002 |
| 101  | Interactive Data Files *                                                                                  |   |

| * | To be filed by amendment as permitted by Rule 405(a)(2)(iv) of Regulation S-T. |
|---|--------------------------------------------------------------------------------|

| (1) | Incorporated herein by reference into this document from the Exhibits to Form 10, Registration Statement initially filed with the Commission on April 29, 1996, Registration No. 0-28364 |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated by reference into this document from the identically numbered exhibits to the Registrant’s Form 10-K filed with the Commission on March 15, 2010. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Incorporated herein by reference to the identically numbered exhibits of the Registrant’s Form 10-K filed with the Commission on March 23, 2000. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Incorporated by reference into this document from the Exhibits to Form S-8 filed with the Commission on August 14, 1998, File No. 333-61487. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Incorporated herein by reference to the identically numbered exhibit to the Registrant’s Form 10-K filed with the Commission on March 22, 2004. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Incorporated by reference to this document from Exhibit 4.1 to Registrant’s Registration Statement on Form S-8 (File No. 333-134831) filed with the Commission on June 8, 2006. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Incorporated herein by reference from the Exhibits to the Registrant’s Current Report on Form 8-K filed on April 4, 2006. |
|-----|---------------------------------------------------------------------------------------------------------------------------------|

----

| Date:  |  August 8, 2012 | By:    |   | /s/ Lewis J. Critelli                 |   |
|--------|----------------------|--------|--------|---------------------------------------|--------|
|   |                 |   |   | Lewis J. Critelli                     |   |
|   |                 |   |   | President and Chief Executive Officer |   |
|   |                 |   |   | (Principal Executive Officer)         |   |

| Date:  |  August 8, 2012 | By:    |   | /s/ William S. Lance                                 |   |
|--------|----------------------|--------|--------|------------------------------------------------------|--------|
|   |                 |   |   | William S. Lance                                     |   |
|   |                 |   |   | Executive Vice President and Chief Financial Officer |   |
|   |                 |   |   | (Principal Financial Officer)                   |   |

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