| [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 5, 2011 |
|-----------------------------------------------|--------|----------------------------------|
|  Common stock, par value $0.10 per share |   |  3,292,366                  |
|                                          |

----

|       |                                                                                        |   PageNumber |
|------------|---------------------------------------------------------------------------------------------|------------------------|
| PART I -   | CONSOLIDATED FINANCIAL INFORMATION OF NORWOOD FINANCIAL CORP.                               |                   |
|       |                                                                                        |                   |
| Item 1.    | Financial Statements                                                                        |   3          |
| Item 2.    | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30                     |
| Item 3.    | Quantitative and Qualitative Disclosures about Market Risk                                  | 44                     |
| Item 4.    | Controls and Procedures                                                                     | 45                     |
| PART II -  | OTHER INFORMATION                                                                           |                   |
|       |                                                                                        |                   |
| Item 1.    | Legal Proceedings                                                                           | 46                     |
| Item 1A.   | Risk Factors                                                                                | 46                     |
| Item 2.    | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 46                     |
| Item 3.    | Defaults upon Senior Securities                                                             | 47                     |
| Item 4.    | Removed and Reserved                                                                        | 47                     |
| Item 5.    | Other Information                                                                           | 47                     |
| Item 6.    | Exhibits                                                                                    | 47                     |
|       |                                                                                        |                   |
| Signatures |                                                                                        | 49                     |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | June 30, |       |   | December 31, |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|------------|--------|--------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 2011     |       |   | 2010         |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     |       |   |         |   |
| Cash and due from banks                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $        | 9,269      |   |         | $      | 5,782 |   |
| Interest bearing deposits with banks                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |     | 34,213     |   |         |   | 7,843 |   |
| Federal funds sold                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |     | 1,729      |   |         |   | 3,000 |   |
|           Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                     |   |     | 45,211     |   |         |   | 16,625 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |     |       |   |         |   |   |   |
| Securities available for sale, at fair value                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     | 152,275    |   |         |   | 145,815 |   |
| Securities held to maturity, fair value 2011:   $178, 2010: $179                                                                                                                                                                                                                                                                                                                                                                                           |   |     | 170        |   |         |   | 170 |   |
| Loans receivable (net of unearned income)                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     | 464,646    |   |         |   | 356,855 |   |
|    Less:  Allowance for loan losses                                                                                                                                                                                                                                                                                                                                                                                                              |   |     | 5,267      |   |         |   | 5,616 |   |
| Net loans receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |     | 459,379    |   |         |   | 351,239 |   |
| Investment in Federal Home Loan Bank Stock, at cost                                                                                                                                                                                                                                                                                                                                                                                                                       |   |     | 3,981      |   |         |   | 3,361 |   |
| Bank premises and equipment, net                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |     | 7,672      |   |         |   | 4,904 |   |
| Bank owned life insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     | 11,648     |   |         |   | 8,249 |   |
| Accrued interest receivable                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     | 2,539      |   |         |   | 2,166 |   |
| Foreclosed real estate owned                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     | 1,755      |   |         |   | 748 |   |
| Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |     | 9,483      |   |         |   | 13 |   |
| Other intangibles                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |     | 881        |   |         |   | - |   |
| Other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     | 8,801      |   |         |   | 3,715 |   |
|     TOTAL ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $        | 703,795    |   |         | $      | 537,005 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |     |       |   |         |   |   |   |
| LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     |       |   |         |   |   |   |
|   Deposits:                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |     |       |   |         |   |   |   |
|       Non-interest bearing demand                                                                                                                                                                                                                                                                                                                                                                                                           |   | $        | 73,718     |   |         | $      | 62,238 |   |
|       Interest-bearing                                                                                                                                                                                                                                                                                                                                                                                                                      |   |     | 464,571    |   |         |   | 331,627 |   |
|         Total deposits                                                                                                                                                                                                                                                                                                                                                                                                            |   |     | 538,289    |   |         |   | 393,865 |   |
|   Short-term borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |     | 32,181     |   |         |   | 33,309 |   |
|   Other borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     | 42,761     |   |         |   | 38,000 |   |
|   Accrued interest payable                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |     | 1,473      |   |         |   | 1,536 |   |
|   Other liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |     | 4,456      |   |         |   | 2,597 |   |
|     TOTAL LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     | 619,160    |   |         |   | 469,307 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |     |       |   |         |   |   |   |
| STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |     |       |   |         |   |   |   |
|     Common stock, $.10 par value per share, authorized    10,000,000; shares issued 2011: 3,371,866 shares,                                                2010: 2,840,872 shares |   |     |   337 |   |         |   |   284 |   |
|     Surplus                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |     | 24,603     |   |         |   | 9,826 |   |
|     Retained  earnings                                                                                                                                                                                                                                                                                                                                                                                                                      |   |     | 60,036     |   |         |   | 58,648 |   |
|     Treasury stock at cost: 2011: 79,500 shares,                                           2010: 72,068 shares                                                                                                                      |   |     | (2,404     | )      |         |   | (2,197 | ) |
|   Accumulated other comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                        |   |     | 2,063      |   |         |   | 1,137 |   |
|      TOTAL STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                                                                            |   |     | 84,635     |   |         |   | 67,698 |   |
|      TOTAL LIABILITIES AND     STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                               |   | $        | 703,795    |   |         | $      | 537,005 |   |

----

|                                                                   |   | Three Months Ended |   |   | Six Months Ended |   |
|------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                                                   |   | June 30,           |   |   | June 30,         |   |
|                                                                   |   | 2011               |   |   | 2010             |   |   | 2011 |   |   | 2010 |   |
|                                                                   |   |               |   |   |             |   |   |   |   |   |   |   |
| INTEREST INCOME                                                        |   |               |   |   |             |   |   |   |   |   |   |   |
|   Loans receivable, including fees                           |   | $                  | 5,468  |   |             | $      | 5,218 |   |   | $ | 10,396 |   |   | $ | 10,628 |   |
|   Securities                                                 |   |               | 1,135  |   |             |   | 1,141 |   |   |   | 2,225 |   |   |   | 2,362 |   |
|   Other                                                      |   |               | 16     |   |             |   | 18 |   |   |   | 24 |   |   |   | 29 |   |
|   Total interest income                                      |   |               | 6,619  |   |             |   | 6,377 |   |   |   | 12,645 |   |   |   | 13,019 |   |
|                                                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INTEREST EXPENSE                                                       |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
|   Deposits                                                   |   |               | 932    |   |             |   | 1,102 |   |   |   | 1,817 |   |   |   | 2,301 |   |
|   Short-term borrowings                                      |   |               | 27     |   |             |   | 27 |   |   |   | 51 |   |   |   | 61 |   |
|   Other borrowings                                           |   |               | 342    |   |             |   | 416 |   |   |   | 678 |   |   |   | 828 |   |
|   Total interest expense                                     |   |               | 1,301  |   |             |   | 1,545 |   |   |   | 2,546 |   |   |   | 3,190 |   |
| NET INTEREST INCOME                                                    |   |               | 5,318  |   |             |   | 4,832 |   |   |   | 10,099 |   |   |   | 9,829 |   |
| PROVISION FOR LOAN LOSSES                                              |   |               | 430    |   |             |   | 150 |   |   |   | 650 |   |   |   | 480 |   |
| NET INTEREST INCOME AFTER  PROVISION FOR LOAN LOSSES         |   |               | 4,888  |   |             |   | 4,682 |   |   |   | 9,449 |   |   |   | 9,349 |   |
|                                                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME                                                           |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
|   Service charges and fees                                   |   |               | 592    |   |             |   | 570 |   |   |   | 1,141 |   |   |   | 1,093 |   |
|   Income from fiduciary activities                           |   |               | 105    |   |             |   | 93 |   |   |   | 218 |   |   |   | 179 |   |
|   Net realized gains on sales of securities                  |   |               | 12     |   |             |   | 64 |   |   |   | 224 |   |   |   | 219 |   |
|   Gains on sale of loans and servicing rights                |   |               | 98     |   |             |   | 130 |   |   |   | 241 |   |   |   | 205 |   |
|   Other                                                      |   |               | 186    |   |             |   | 159 |   |   |   | 377 |   |   |   | 322 |   |
|   Total other income                                         |   |               | 993    |   |             |   | 1,016 |   |   |   | 2,201 |   |   |   | 2,018 |   |
|                                                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| OTHER EXPENSES                                                         |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
|   Salaries and employee benefits                             |   |               | 1,832  |   |             |   | 1,572 |   |   |   | 3,533 |   |   |   | 3,187 |   |
|   Occupancy, furniture & equipment, net                  |   |               | 408    |   |             |   | 408 |   |   |   | 806 |   |   |   | 802 |   |
|   Data processing related                                    |   |               | 187    |   |             |   | 216 |   |   |   | 402 |   |   |   | 412 |   |
|   Taxes, other than income                                   |   |               | 143    |   |             |   | 150 |   |   |   | 272 |   |   |   | 297 |   |
|   Professional fees                                          |   |               | 126    |   |             |   | 138 |   |   |   | 281 |   |   |   | 277 |   |
|   Merger related expenses                                    |   |               | 488    |   |             |   | - |   |   |   | 755 |   |   |   | - |   |
|   Federal Deposit Insurance Corporation Insurance assessment |   |               | 95     |   |             |   | 118 |   |   |   | 215 |   |   |   | 236 |   |
|   Foreclosed real estate owned                               |   |               | 17     |   |             |   | 13 |   |   |   | 36 |   |   |   | 29 |   |
|   Other                                                      |   |               | 640    |   |             |   | 561 |   |   |   | 1,170 |   |   |   | 1,096 |   |
|   Total other expenses                                       |   |               | 3,936  |   |             |   | 3,176 |   |   |   | 7,470 |   |   |   | 6,336 |   |
|                                                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAXES                                             |   |               | 1,945  |   |             |   | 2,522 |   |   |   | 4,180 |   |   |   | 5,031 |   |
| INCOME TAX EXPENSE                                                     |   |               | 461    |   |             |   | 704 |   |   |   | 1,036 |   |   |   | 1,416 |   |
| NET INCOME                                                             |   | $                  | 1,484  |   |             | $      | 1,818 |   |   | $ | 3,144 |   |   | $ | 3,615 |   |
|                                                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| BASIC EARNINGS PER SHARE                                               |   | $                  | .50    |   |             | $      | .66 |   |   | $ | 1.10 |   |   | $ | 1.31 |   |
|                                                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| DILUTED EARNINGS PER SHARE                                             |   | $                  | .50    |   |             | $      | .66 |   |   | $ | 1.10 |   |   | $ | 1.31 |   |
|                                                                   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                                                                              |   |  Common Stock |      |   |   |   |   |  Retained |   |   |  Treasury Stock |   |   | AccumulatedOtherComprehensive |   |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|--------|--------|--------|--------|----------------|--------|--------|----------------------|--------|--------|-------------------------------|--------|--------|--------|--------|
|                                                                                                                                              |   | Shares             |      |   | Amount |   |   | Surplus        |   |   | Earnings             |   |   | Shares                        |   |   | Amount |   |   | Income |   |   | Total |   |
| Balance December 31, 2010                                                                                                                         |   |               | 2,840,872 |   |   | $      | 284    |           |   | $      | 9,826                |   |   | $                             | 58,648 |   |   |   | 72,068 |   |   | $ | (2,197 | ) |   | $ | 1,137 |   |   | $ | 67,698 |   |
| Comprehensive Income:                                                                                                                             |   |               |      |   |   |   |   |           |   |   |                 |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Net Income                                                                                                                            |   |               |      |   |   |   |   |           |   |   |                 |   |   |                          | 3,144  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 3,144 |   |
| Change in unrealized gains on securities available for sale, net of  reclassification adjustments and  tax  effects |   |               |      |   |   |   |   |           |   |   |                 |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   926 |   |   |   |   926 |   |
| Total comprehensive income                                                                                                                        |   |               |      |   |   |   |   |           |   |   |                 |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 4,070 |   |
|                                                                                                                                              |   |               |      |   |   |   |   |           |   |   |                 |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                              |   |               |      |   |   |   |   |           |   |   |                 |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash dividends declared $.29 per share                                                                                                            |   |               |      |   |   |   |   |           |   |   |                 |   |   |                          | (1,756 | )      |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,756 | ) |
| Acquisition of treasury stock                                                                                                           |   |               |      |   |   |   |   |           |   |   |                 |   |   |                          |   |   |   |   | 7,432 |   |   |   | (207 | ) |   |   |   |   |   |   | (207 | ) |
| Compensation expense related to stock options                                                                                                |   |               |      |   |   |   |   |           |   |   | 82                   |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 82 |   |
| Effect of North Penn acquisition                                                                                                                  |   |               | 530,994   |   |   |   | 53     |           |   |   | 14,695               |   |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 14,748 |   |
| Balance, June 30, 2011                                                                                                                            |   |               | 3,371,866 |   |   | $      | 337    |           |   | $      | 24,603               |   |   | $                             | 60,036 |   |   |   | 79,500 |   |   | $ | (2,404 | ) |   | $ | 2,063 |   |   | $ | 84,635 |   |

----

|                                                                                         |   | Six Months Ended |    |
|----------------------------------------------------------------------------------------------|--------|------------------|---------|
|                                                                                         |   | June 30,         |    |
|                                                                                         |   | 2011             |    |   | 2010 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                         |   |             |    |   |   |   |
| Net Income                                                                                   |   | $                | 3,144   |   |   | $ | 3,615 |   |
| Adjustments to reconcile net income to net cash provided by operating  activities: |   |             |    |   |   |   |   |   |
|   Provision for loan losses                                                        |   |             | 650     |   |   |   | 480 |   |
|   Depreciation                                                                     |   |             | 226     |   |   |   | 233 |   |
|   Amortization of intangible assets                                                |   |             | 27      |   |   |   | 26 |   |
|   Deferred income taxes                                                            |   |             | (8      | ) |   |   | 10 |   |
|   Net amortization of securities premiums and discounts                            |   |             | 345     |   |   |   | 141 |   |
|   Net realized gain on sales of securities                                         |   |             | (224    | ) |   |   | (219 | ) |
|   Net increase in investment in life insurance                                     |   |             | (180    | ) |   |   | (182 | ) |
|   Loss on sale of bank premises and equipment and foreclosed real estate           |   |             | -       |   |   |   | 10 |   |
|   Net gain on sale of mortgage loans and servicing rights                          |   |             | (241    | ) |   |   | (205 | ) |
|   Mortgage loans originated for sale                                               |   |             | (6,530  | ) |   |   | (10,451 | ) |
|   Proceeds from sale of mortgage loans originated for sale                         |   |             | 6,771   |   |   |   | 10,656 |   |
|   Compensation expense related to stock options                                    |   |             | 82      |   |   |   | 78 |   |
|   Decrease (increase) in accrued interest receivable and other assets         |   |             | (182    | )  |   |   | 745 |   |
|   Increase (decrease) in accrued interest payable and other liabilities            |   |             | 841     |   |   |   | (273 | ) |
|     Net cash provided by operating activities                            |   |             | 4,721   |   |   |   | 4,664 |   |
|                                                                                         |   |             |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                         |   |             |    |   |   |   |   |   |
|   Securities available for sale:                                                   |   |             |    |   |   |   |   |   |
|   Proceeds from sales                                                              |   |             | 10,344  |   |   |   | 12,611 |   |
|   Proceeds from maturities and principal reductions on mortgage-backed securities  |   |             | 15,918  |   |   |   | 32,567 |   |
|   Purchases                                                                        |   |             | (18,769 | ) |   |   | (54,926 | ) |
|   Securities held to maturity, proceeds from maturities                            |   |             | -       |   |   |   | 540 |   |
|   Redemption of FHLB stock                                                         |   |             | 328     |   |   |   | - |   |
|   Net decrease in loans                                                            |   |             | 8,527   |   |   |   | 8,928 |   |
|   Purchase of bank premises and equipment                                          |   |             | (63     | ) |   |   | (105 | ) |
|   Acquisition, net of cash and cash equivalents acquired                           |   |             | 4,544   |   |   |   | - |   |
|   Net cash provided by (used in) investing activities                              |   |             | 20,829  |   |   |   | (385 | ) |
|                                                                                         |   |             |    |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                         |   |             |    |   |   |   |   |   |
|   Net increase in deposits                                                         |   |             | 8,990   |   |   |   | 16,290 |   |
|   Net decrease in short-term borrowings                                            |   |             | (1,128  | ) |   |   | (1,425 | ) |
|   Repayments of other borrowings                                                   |   |             | (3,015  | ) |   |   | - |   |
|   Stock options exercised                                                          |   |             | -       |   |   |   | 89 |   |
|   Tax benefit of stock options exercised                                           |   |             | -       |   |   |   | 30 |   |
|   Acquisition of treasury stock                                                    |   |             | (207    | ) |   |   | (529 | ) |
|   Cash dividends paid                                                              |   |             | (1,604  | ) |   |   | (1,547 | ) |
|    Net cash  used in financing activities                           |   |             | 3,036   |   |   |   | 12,908 |   |
|    Increase in cash and cash equivalents                                      |   |             | 28,586  |   |   |   | 17,187 |   |
|                                                                                         |   |             |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                               |   |             | 16,625  |   |   |   | 17,355 |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                                     |   | $                | 45,211  |   |   | $ | 34,542 |   |

----

|                                            |   | Three Months Ended |   |   | Six Months Ended |   |
|-------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                            |   | June 30,           |   |   | June 30,         |   |
|                                            |   | 2011               |   |   | 2010             |   |   | 2011 |   |   | 2010 |   |
| Basic EPS weighted average shares outstanding   |   |               | 2,937  |   |             |   | 2,758 |   |   |   | 2,852 |   |   |   | 2,763 |   |
| Dilutive effect of stock options                |   |               | 2      |   |             |   | 4 |   |   |   | 3 |   |   |   | 4 |   |
| Diluted EPS weighted average shares outstanding |   |               | 2,939  |   |             |   | 2,762 |   |   |   | 2,855 |   |   |   | 2,767 |   |
|                                            |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |

----

|                           | Options                                                                   |   | Weighted Average Exercise PricePer Share | Weighted Average Remaining Contractual Term |   | Aggregate Intrinsic Value ($000) |        |
|--------------------------------|---------------------------------------------------------------------------|--------|------------------------------------------|---------------------------------------------|--------|----------------------------------|-------------|
|                           |                                                                      |   |                                     |                                        |   |                             |        |   |   |   |   |
| Outstanding at January 1, 2011 | 189,639                                                                   |   | $                                        | 28.52                                       |   |  6.6                        |   Yrs. |   | $ | 146 |   |
| Granted                        | 1,000                                                                     |   |                                     | 26.27                                       |   | 10.0                             |   Yrs. |   |   | - |   |
| Exercised                      |             - |   |                                     | -                                           |   | -                                |        |   |   | - |   |
| Outstanding at June 30, 2011   | 190,639                                                                   |   | $                                        | 28.51                                       |   | 6.0                              |   Yrs. |   | $ | 98 |   |
|                           |                                                                      |   |                                     |                                        |   |                             |        |   |   |   |   |
| Exercisable at June 30, 2011   | 162,639                                                                   |   | $                                        | 28.65                                       |   | 4.6                              |   Yrs. |   | $ | 98 |   |
|                           |                                                                      |   |                                     |                                        |   |                             |        |   |   |   |   |

----

| (in thousands)                                                       |   | Three Months Ended |   |   | Six Months Ended |   |
|----------------------------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                                                 |   | June 30,           |   |   | June 30,         |   |
|                                                                 |   | 2011               |   |   | 2010             |   |   | 2011 |   |   | 2010 |   |
| Unrealized holding gains  on available for sale securities |   | $                  | 1,161  |   |             | $      | 783 |   |   | $ | 1,627 |   |   | $ | 1,062 |   |
| Reclassification adjustment for gains  realized in income  |   |               | (12    | )      |             |   | (64 | ) |   |   | (224 | ) |   |   | (219 | ) |
| Net unrealized gains                                                 |   |               | 1,149  |   |             |   | 719 |   |   |   | 1,403 |   |   |   | 843 |   |
| Income tax expense                                                   |   |               | 391    |   |             |   | 244 |   |   |   | 477 |   |   |   | 287 |   |
| Other comprehensive income                                           |   | $                  | 758    |   |             | $      | 475 |   |   | $ | 926 |   |   | $ | 556 |   |
|                                                                 |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |

| (in thousands)                             |   | June 30 |   |
|--------------------------------------------|--------|---------|--------|
|                                       |   | 2011    |   |   | 2010 |   |
|  Commitments to grant loans           |   | $       | 43,395 |   |   | $ | 15,908 |   |
| Unfunded commitments under lines of credit |   |    | 28,910 |   |   |   | 33,915 |   |
| Standby letters of credit                  |   |    | 5,586  |   |   |   | 3,269 |   |
|                                       |   |    |   |   |   |   |   |   |
|                                       |   | $       | 77,891 |   |   | $ | 53,092 |   |

----

|                                                           |   | June 30, 2011  |    |
|----------------------------------------------------------------|--------|----------------|---------|
|                                                           |   | AmortizedCost  |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | FairValue |   |
|                                                           |   | (In Thousands) |    |
| Available for Sale:                                            |   |           |    |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies                                       |   | $              | 31,254  |   |   | $ | 393 |   |   | $ | (175 | ) |   | $ | 31,472 |   |
| States and political subdivisions                              |   |           | 50,590  |   |   |   | 970 |   |   |   | (252 | ) |   |   | 51,308 |   |
| Corporate obligations                                          |   |           | 7,747   |   |   |   | 251 |   |   |   | - |   |   |   | 7,998 |   |
| Mortgage-backed securities- government sponsored entities |   |           | 59,252  |   |   |   | 1,673 |   |   |   | (15 | ) |   |   | 60,910 |   |
|                                                           |   | $              | 148,843 |   |   | $ | 3,287 |   |   | $ | (442 | ) |   |   | 151,688 |   |
| Equity securities-financial services                           |   |           | 300     |   |   |   | 288 |   |   |   | (1 | ) |   |   | 587 |   |
|                                                           |   | $              | 149,143 |   |   | $ | 3,575 |   |   | $ | (443 | ) |   |   | 152,275 |   |
| Held to Maturity:                                              |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| States and political subdivisions                              |   | $              | 170     |   |   | $ | 8 |   |   | $ | - |   |   | $ | 178 |   |
|                                                           |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                                            |   | December 31, 2010 |    |
|---------------------------------------------------------------------------------|--------|-------------------|---------|
|                                                                            |   | AmortizedCost     |    |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | FairValue |   |
|                                                                            |   | (In Thousands)    |    |
| Available for Sale:                                                             |   |              |    |   |   |   |   |   |   |   |   |   |
| U.S. Government agencies                                                        |   | $                 | 30,194  |   |   | $ | 392 |   |   | $ | (318 | ) |   | $ | 30,268 |   |
| States and political subdivisions                                               |   |              | 49,880  |   |   |   | 510 |   |   |   | (624 | ) |   |   | 49,766 |   |
| Corporate obligations                                                           |   |              | 4,018   |   |   |   | 231 |   |   |   | - |   |   |   | 4,249 |   |
| Mortgage-backed securities-government    sponsored entities |   |              | 59,770  |   |   |   | 1,398 |   |   |   | (240 | ) |   |   | 60,928 |   |
|                                                                            |   |              | 143,862 |   |   |   | 2,531 |   |   |   | (1,182 | ) |   |   | 145,211 |   |
| Equity securities-financial services                                            |   |              | 224     |   |   |   | 381 |   |   |   | (1 | ) |   |   | 604 |   |
|                                                                            |   | $                 | 144,086 |   |   | $ | 2,912 |   |   | $ | (1,183 | ) |   | $ | 145,815 |   |
| Held to Maturity:                                                               |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| States and political subdivisions                                               |   | $                 | 170     |   |   | $ | 9 |   |   | $ | - |   |   | $ | 179 |   |
|                                                                            |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                     |   | June 30, 2011             |         |
|----------------------------------------------------------|--------|---------------------------|--------------|
|                                                     |   | 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                                 |   | $                         | 8,835        |   |   | $ | (175 | ) |   | $ | - |   |   | $ | - |   |   | $ | 8,835 |   |   | $ | (175 | ) |
| States and political subdivisions                        |   |                      | 13,294       |   |   |   | (252 | ) |   |   | - |   |   |   | - |   |   |   | 13,294 |   |   |   | (252 | ) |
| Mortgage-backed securities-government sponsored agencies |   |                      |   5,181 |   |   |   | (15 | ) |   |   |   - |   |   |   |   - |   |   |   |   5,181 |   |   |   | (15 | ) |
| Equity securities-financial services                     |   | $                         | -            |   |   | $ | 0 |   |   |   | 16 |   |   |   | (1 | ) |   |   | 16 |   |   |   | (1 | ) |
|                                                     |   | $                         | 27,310       |   |   | $ | (442 | ) |   | $ | 16 |   |   | $ | (1 | ) |   | $ | 27,326 |   |   | $ | (443 | ) |
|                                                     |   |                      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                     |   | December 31, 2010   |          |
|----------------------------------------------------------|--------|---------------------|---------------|
|                                                     |   | 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                           |   | $                   | 8,696         |   |   | $ | (318 | ) |   | $ | - |   |   | $ | - |   |   | $ | 8,696 |   |   | $ | (318 | ) |
| States and political subdivisions                        |   |                | 21,829        |   |   |   | (624 | ) |   |   | - |   |   |   | - |   |   |   | 21,829 |   |   |   | (624 | ) |
| Mortgage-backed securities-government sponsored agencies |   |                |   20,113 |   |   |   | (240 | ) |   |   |   - |   |   |   |   - |   |   |   |   20,113 |   |   |   | (240 | ) |
| Equity securities-financial services                     |   |                |  15      |   |   |   | (1 | ) |   |   |  - |   |   |   |  - |   |   |   |  15 |   |   |   | (1 | ) |
|                                                     |   | $                   | 50,653        |   |   | $ | (1,183 | ) |   | $ | - |   |   | $ | - |   |   | $ | 50,653 |   |   | $ | (1,183 | ) |
|                                                     |   |                |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                        |   |  Available for Sale |    |   |  Held to Maturity |   |
|---------------------------------------------------------------------------------------------|--------|--------------------------|---------|--------|------------------------|--------|
|                                                                                        |   | Amortized Cost           |    |   | Fair Value             |   |   | Amortized Cost |   |   | Fair Value |   |
|                                                                                        |   | (In Thousands)           |    |
|                                                                                        |   |                     |    |   |                   |   |   |   |   |   |   |   |
| Due in one year or less                                                                     |   | $                        | 996     |   |                   | $      | 1,001 |   |   | $ | - |   |   | $ | - |   |
| Due after one year through five years                                                       |   |                     | 32,796  |   |                   |   | 33,445 |   |   |   | 170 |   |   |   | 178 |   |
| Due after five years through ten years                                                      |   |                     | 27,013  |   |                   |   | 27,432 |   |   |   | - |   |   |   | - |   |
| Due after ten years                                                                         |   |                     | 28,786  |   |                   |   | 28,900 |   |   |   | - |   |   |   | - |   |
|                                                                                        |   |                     |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities-government      sponsored agencies |   |                     | 59,252  |   |                   |   | 60,910 |   |   |   | - |   |   |   | - |   |
|                                                                                        |   | $                        | 148,843 |   |                   | $      | 151,688 |   |   | $ | 170 |   |   | $ | 178 |   |

|                              |   | Three Months    |   |   | Six Months  |   |
|-----------------------------------|--------|----------------------|--------|--------|------------------|--------|
|                              |   | Ended June 30,  |   |   | Ended June 30,   |   |
|                              |   | 2011                 |   |   | 2010             |   |   | 2011 |   |   | 2010 |   |
| Gross realized gains              |   | $                    | 15     |   |             | $      | 64 |   |   | $ | 228 |   |   | $ | 219 |   |
| Gross realized losses             |   |                 | (3     | )      |             | ___-   |   |   |   | (4 | ) |   |   | - |   |
| Net realized gain                 |   | $                    | 12     |   |             | $      | 64 |   |   | $ | 224 |   |   | $ | 219 |   |
| Proceeds from sales of securities |   | $                    | 4,157  |   |             | $      | 3,774 |   |   | $ | 10,344 |   |   | $ | 12,611 |   |

| Real Estate –          |  Residential  |   | $       | 36,221 |   |
|----------------------------------------|--------------------|--------|---------|--------|--------|
|                                   |  Commercial   |   |    | 70,789 |   |
|                                   |  Construction |   |    | 358    |   |
| Commercial, financial and agricultural |               |   | 10,499  |   |
| Consumer loans to individuals          |               |   | 1,831   |   |
| Total loans                            |               | $      | 119,698 |   |

----

| Types of loans                                                                                             |   |          |    |
|------------------------------------------------------------------------------------------------------------|--------|---------------|---------|
| (dollars in thousands)                                                                                     |   |          |    |
|                                                                                                       |   | June 30, 2011 |    |   | December 31, 2010 |   |
|                                                                                                       |   |          |    |   |   |   |   |   |   |   |   |   |
| Real Estate-Residential                                                                                    |   | $             | 152,772 |   |   |   | 32.9 | % |   | $ | 124,562 |   |   |   | 34.9 | % |
|                 Commercial |   |          | 258,719 |   |   |   | 55.6 |   |   |   | 184,094 |   |   |   | 51.5 |   |
|                 Construction    |   |          | 11,832  |   |   |   | 2.6 |   |   |   | 12,638 |   |   |   | 3.5 |   |
| Commercial, financial and agricultural                                                                     |   |          | 27,215  |   |   |   | 5.8 |   |   |   | 22,386 |   |   |   | 6.3 |   |
| Consumer loans to individuals                                                                              |   |          | 14,544  |   |   |   | 3.1 |   |   |   | 13,668 |   |   |   | 3.8 |   |
|   Total loans                                                                                    |   |          | 465,082 |   |   |   | 100.0 | % |   |   | 357,348 |   |   |   | 100.0 | % |
|                                                                                                       |   |          |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Deferred fees (net)                                                                            |   |          | (436    | ) |   |   |   |   |   |   | (493 | ) |   |   |   |   |
|                                                                                                       |   |          | 464,646 |   |   |   |   |   |   |   | 356,855 |   |   |   |   |   |
|   Allowance for loan losses                                                                      |   |          | (5,267  | ) |   |   |   |   |   |   | (5,616 | ) |   |   |   |   |
|   Net loans receivable                                                                           |   | $             | 459,379 |   |   |   |   |   |   | $ | 351,239 |   |   |   |   |   |

----

|                     |   |   |   |  2011 |   |
|--------------------------|--------|--------|--------|------------|--------|
| (In thousands)           |   |   |   |       |   |
| Unpaid principal balance |   |   |   | $          | 1,936  |   |
| Interest                 |   |   |   |       | 1,669  |   |
| Contractual cash flows   |   |   |   |       | 3,605  |   |
| Non-accretable discount  |   |   |   |       | (1,724 | ) |
| Expected cash flows      |   |   |   |       | 1,881  |   |
| Accretable discount      |   |   |   |       | (329   | ) |
| Estimated fair value     |   |   |   | $          | 1,552  |   |

----

|                                                                                            |   |  Real Estate Loans |    |   |              |   |    |                |   |   |            |   |
|-------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-------------------|--------|---------|---------------------|--------|--------|-----------------|--------|
|                                                                                            |   |   Residential      |    |   |   Commercial |   |    |   Construction |   |   | CommercialLoans |   |   | ConsumerLoans |   |   |   Total |   |
| June 30, 2011                                                                                   |   |                    |    |   |              |   |    | (In thousands)      |   |   |            |   |   |   |   |
| Total Loans                                                                                     |   | $                       | 152,772 |   |              | $      | 258,719 |                |   | $      | 11,832          |   |   | $ | 27,215 |   |   | $ | 14,544 |   |   | $ | 465,082 |   |
|                                                                                            |   |                    |    |   |              |   |    |                |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                    |    |   |              |   |    |                |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                    |    |   |              |   |    |                |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Individually    evaluated for    impairment |   | $                       | -       |   |              | $      | 15,782  |                |   | $      | -               |   |   | $ | 508 |   |   | $ | - |   |   | $ | 16,290 |   |
|   Collectively    evaluated for    impairment |   | $                       | 152,772 |   |              | $      | 242,937 |                |   | $      | 11,832          |   |   | $ | 26,707 |   |   | $ | 14,544 |   |   | $ | 448,792 |   |

|                                                                                            |   | Real Estate Loans |    |   |              |   |    |                |   |   |            |   |
|-------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|-------------------|--------|---------|---------------------|--------|--------|-----------------|--------|
|                                                                                            |   | Residential       |    |   |   Commercial |   |    |   Construction |   |   | CommercialLoans |   |   | ConsumerLoans |   |   |   Total |   |
| December 31, 2010                                                                               |   |              |    |   |              |   |    | (In thousands)      |   |   |            |   |   |   |   |
| Total Loans                                                                                     |   | $                 | 124,562 |   |              | $      | 184,094 |                |   | $      | 12,638          |   |   | $ | 22,386 |   |   | $ | 13,668 |   |   | $ | 357,348 |   |
|                                                                                            |   |              |    |   |              |   |    |                |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |              |    |   |              |   |    |                |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |              |    |   |              |   |    |                |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Individually    evaluated for    impairment |   | $                 | -       |   |              | $      | 14,239  |                |   | $      | -               |   |   | $ | 513 |   |   | $ | - |   |   | $ | 14,752 |   |
|   Collectively    evaluated for    impairment |   | $                 | 124,562 |   |              | $      | 169,855 |                |   | $      | 12,638          |   |   | $ | 21,873 |   |   | $ | 13,668 |   |   | $ | 342,596 |   |

----

|                                                                             |   | RecordedInvestment |   |   | UnpaidPrincipalBalance |   |   | AssociatedAllowance |   |   | AverageRecordedInvestment |   |   | InterestIncomeRecognized |   |
|----------------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|--------|---------------------|--------|--------|---------------------------|--------|--------|--------------------------|--------|
| June 30, 2011With no related allowance recorded:                                 |   | (In thousands)     |   |
| Real Estate Loans                                                                |   |               |   |   |                   |   |   |                |   |   |                      |   |   |                     |   |
|     Residential                                              |   | $                  | -      |   |                   | $      | -      |                |   | $      | -                         |   |   | $                        | -      |   |   | $ | - |   |
|     Construction                                             |   |               | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|     Commercial                                               |   |               | 4,981  |   |                   |   | 4,981  |                |   |   | -                         |   |   |                     | 4,135  |   |   |   | 135 |   |
| Commercial Loans                                                                 |   |               | 508    |   |                   |   | 508    |                |   |   | -                         |   |   |                     | 511    |   |   |   | - |   |
| Consumer Loans                                                                   |   |               | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|           Total                |   |               | 5,489  |   |                   |   | 5,489  |                |   |   | -                         |   |   |                     | 4,646  |   |   |   | 135 |   |
| With an allowance recorded:                                                      |   |               |   |   |                   |   |   |                |   |   |                      |   |   |                     |   |   |   |   |   |   |
| Real Estate Loans                                                                |   |               |   |   |                   |   |   |                |   |   |                      |   |   |                     |   |   |   |   |   |   |
|     Residential                                              |   |               | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|     Construction                                             |   |               | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|     Commercial                                               |   |               | 10,801 |   |                   |   | 10,801 |                |   |   | 1,678                     |   |   |                     | 11,370 |   |   |   | 92 |   |
| Commercial Loans                                                                 |   |               | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
| Consumer Loans                                                                   |   |               | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|           Total                |   |               | 10,801 |   |                   |   | 10,801 |                |   |   | 1,678                     |   |   |                     | 11,370 |   |   |   | 92 |   |
| Total:                                                                           |   |               |   |   |                   |   |   |                |   |   |                      |   |   |                     |   |   |   |   |   |   |
| Real Estate loans                                                                |   |               |   |   |                   |   |   |                |   |   |                      |   |   |                     |   |   |   |   |   |   |
|     Residential                                              |   |               | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|     Construction                                             |   |               | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|     Commercial                                               |   |               | 15,782 |   |                   |   | 15,782 |                |   |   | 1,678                     |   |   |                     | 15,505 |   |   |   | 227 |   |
| Commercial Loans                                                                 |   |               | 508    |   |                   |   | 508    |                |   |   | -                         |   |   |                     | 511    |   |   |   | - |   |
| Consumer Loans                                                                   |   |               | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|           Total Impaired Loans |   | $                  | 16,290 |   |                   | $      | 16,290 |                |   | $      | 1,678                     |   |   | $                        | 16,016 |   |   | $ | 227 |   |

----

|                                                                             |   | RecordedInvestment   |   |   | UnpaidPrincipalBalance |   |   | AssociatedAllowance |   |   | AverageRecordedInvestment |   |   | InterestIncomeRecognized |   |
|----------------------------------------------------------------------------------|--------|----------------------|--------|--------|------------------------|--------|--------|---------------------|--------|--------|---------------------------|--------|--------|--------------------------|--------|
| December 31, 2010With no related allowance recorded:                             |   |  (In thousands) |   |
| Real Estate Loans                                                                |   |                 |   |   |                   |   |   |                |   |   |                      |   |   |                     |   |
|     Residential                                              |   | $                    | -      |   |                   | $      | -      |                |   | $      | -                         |   |   | $                        | -      |   |   | $ | - |   |
|     Construction                                             |   |                 | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|     Commercial                                               |   |                 | 5,598  |   |                   |   | 5,598  |                |   |   | -                         |   |   |                     | 5,088  |   |   |   | 266 |   |
| Commercial Loans                                                                 |   |                 | 513    |   |                   |   | 513    |                |   |   | -                         |   |   |                     | 115    |   |   |   | - |   |
| Consumer Loans                                                                   |   |                 | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|           Total                |   |                 | 6,111  |   |                   |   | 6,111  |                |   |   | -                         |   |   |                     | 5,203  |   |   |   | 266 |   |
| With an allowance recorded:                                                      |   |                 |   |   |                   |   |   |                |   |   |                      |   |   |                     |   |   |   |   |   |   |
| Real Estate Loans                                                                |   |                 |   |   |                   |   |   |                |   |   |                      |   |   |                     |   |   |   |   |   |   |
|     Residential                                              |   |                 | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|     Construction                                             |   |                 | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|     Commercial                                               |   |                 | 8,641  |   |                   |   | 8,548  |                |   |   | 1,648                     |   |   |                     | 4,734  |   |   |   | 119 |   |
| Commercial Loans                                                                 |   |                 | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | 159    |   |   |   | - |   |
| Consumer Loans                                                                   |   |                 | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|           Total                |   |                 | 8,641  |   |                   |   | 8,548  |                |   |   | 1,648                     |   |   |                     | 4,893  |   |   |   | 119 |   |
| Total:                                                                           |   |                 |   |   |                   |   |   |                |   |   |                      |   |   |                     |   |   |   |   |   |   |
| Real Estate loans                                                                |   |                 |   |   |                   |   |   |                |   |   |                      |   |   |                     |   |   |   |   |   |   |
|     Residential                                              |   |                 | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|     Construction                                             |   |                 | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|     Commercial                                               |   |                 | 14,239 |   |                   |   | 14,146 |                |   |   | 1,648                     |   |   |                     | 9,822  |   |   |   | 385 |   |
| Commercial Loans                                                                 |   |                 | 513    |   |                   |   | 513    |                |   |   | -                         |   |   |                     | 274    |   |   |   | - |   |
| Consumer Loans                                                                   |   |                 | -      |   |                   |   | -      |                |   |   | -                         |   |   |                     | -      |   |   |   | - |   |
|           Total Impaired Loans |   | $                    | 14,752 |   |                   | $      | 14,659 |                |   | $      | 1,648                     |   |   | $                        | 10,096 |   |   | $ | 385 |   |

----

|                                                              |   | Pass   |    |   | SpecialMention |   |   | Substandard |   |   | Doubtful |   |   | Loss   |   |   | Total  |   |
|-------------------------------------------------------------------|--------|--------|---------|--------|----------------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|--------|--------|--------|
| June 30, 2011                                                     |   |   |    |   |           |   |   |        |   |   |     |   |   |   |   |   |   |   |
| Commercial real estate loans                                      |   | $      | 233,564 |   |           | $      | 3,859  |        |   | $      | 21,296   |   |   | $      | -      |   |   | $      | - |   |   | $ | 258,719 |   |
| Commercial loans                                                  |   |   | 27,207  |   |           |   | -      |        |   |   | 8        |   |   |   | -      |   |   |   | - |   |   |   | 27,215 |   |
|           Total |   | $      | 260,771 |   |           | $      | 3,859  |        |   | $      | 21,304   |   |   | $      | -      |   |   | $      | - |   |   | $ | 285,934 |   |

|                                                              |   | Pass   |    |   | SpecialMention |   |   | Substandard |   |   | Doubtful |   |   | Loss   |   |   | Total  |   |
|-------------------------------------------------------------------|--------|--------|---------|--------|----------------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|--------|--------|--------|
| December 31,  2010                                      |   |   |    |   |           |   |   |        |   |   |     |   |   |   |   |   |   |   |
| Commercial real estate loans                                      |   | $      | 165,226 |   |           | $      | 1,780  |        |   | $      | 17,088   |   |   | $      | -      |   |   | $      | - |   |   | $ | 184,094 |   |
| Commercial loans                                                  |   |   | 21,759  |   |           |   | 75     |        |   |   | 552      |   |   |   | -      |   |   |   | - |   |   |   | 22,386 |   |
|           Total |   | $      | 186,985 |   |           | $      | 1,855  |        |   | $      | 17,640   |   |   | $      | -      |   |   | $      | - |   |   | $ | 206,480 |   |

| June 30, 2011                       |   | Performing |    |   | Nonperforming |   |   | Total  |   |
|-------------------------------------|--------|------------|---------|--------|---------------|--------|--------|--------|--------|
| Residential real estate loans       |   | $          | 150,907 |   |          | $      | 1,865  |   |   | $ | 152,772 |   |
| Construction                        |   |       | 11,832  |   |          |   | -      |   |   | $ | 11,832 |   |
| Consumer loans                      |   |       | 14,511  |   |          |   | 33     |   |   | $ | 14,544 |   |
|      Total |   | $          | 177,250 |   |          | $      | 1,898  |   |   | $ | 179,148 |   |

| December 31, 2010                   |   | Performing |    |   | Nonperforming |   |   | Total  |   |
|-------------------------------------|--------|------------|---------|--------|---------------|--------|--------|--------|--------|
| Residential real estate loans       |   | $          | 123,623 |   |          | $      | 939    |   |   | $ | 124,562 |   |
| Construction                        |   |       | 12,638  |   |          |   | -      |   |   | $ | 12,638 |   |
| Consumer loans                      |   |       | 13,668  |   |          |   | -      |   |   | $ | 13,668 |   |
|      Total |   | $          | 149,929 |   |          | $      | 939    |   |   | $ | 150,868 |   |

----

|                          |   |     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, 2011           |   |                            |    |   |                            |   |   |                            |   |   |                                                   |   |   |                          |   |   |                                 |   |   |                          |   |
| Real Estate loans             |   |                            |    |   |                            |   |   |                            |   |   |                                                   |   |   |                          |   |   |                                 |   |   |                          |   |
|    Residential |   | $                               | 150,300 |   |                            | $      | 461    |                            |   | $      | 146                                                    |   |   | $                             | -      |   |                                 | $      | 1,865  |                          |   | $ | 2,472 |   |   | $ | 152,772 |   |
|   Construction      |   |                            | 11,566  |   |                            |   | 266    |                            |   |   | -                                                      |   |   |                          | -      |   |                                 |   | -      |                          |   |   | 266 |   |   |   | 11,832 |   |
|   Commercial        |   |                            | 251,068 |   |                            |   | 1,224  |                            |   |   | -                                                      |   |   |                          | -      |   |                                 |   | 6,427  |                          |   |   | 7,651 |   |   |   | 258,719 |   |
| Commercial  loans   |   |                            | 26,536  |   |                            |   | 171    |                            |   |   | -                                                      |   |   |                          | -      |   |                                 |   | 508    |                          |   |   | 679 |   |   |   | 27,215 |   |
| Consumer  loans     |   |                            | 14,402  |   |                            |   | 80     |                            |   |   | 29                                                     |   |   |                          | -      |   |                                 |   | 33     |                          |   |   | 142 |   |   |   | 14,544 |   |
|     Total |   | $                               | 453,872 |   |                            | $      | 2,202  |                            |   | $      | 175                                                    |   |   | $                             | -      |   |                                 | $      | 8,833  |                          |   | $ | 11,210 |   |   | $ | 465,082 |   |
|                          |   |                            |    |   |                            |   |   |                            |   |   |                                                   |   |   |                          |   |   |                                 |   |   |                          |   |   |   |   |   |   |   |   |

|                          |   |     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, 2010       |   |                            |    |   |                            |   |   |                            |   |   |                                                   |   |   |                          |   |   |                                 |   |   |                          |   |
| Real Estate loans             |   |                            |    |   |                            |   |   |                            |   |   |                                                   |   |   |                          |   |   |                                 |   |   |                          |   |
|    Residential |   | $                               | 123,177 |   |                            | $      | 407    |                            |   | $      | -                                                      |   |   | $                             | 39     |   |                                 | $      | 939    |                          |   | $ | 1,385 |   |   | $ | 124,562 |   |
|   Construction      |   |                            | 12,622  |   |                            |   | 16     |                            |   |   | -                                                      |   |   |                          | -      |   |                                 |   | -      |                          |   |   | 16 |   |   |   | 12,638 |   |
|   Commercial        |   |                            | 176,981 |   |                            |   | 3,047  |                            |   |   | 1,478                                                  |   |   |                          | -      |   |                                 |   | 2,588  |                          |   |   | 7,113 |   |   |   | 184,094 |   |
| Commercial  loans   |   |                            | 21,858  |   |                            |   | 15     |                            |   |   | -                                                      |   |   |                          | -      |   |                                 |   | 513    |                          |   |   | 528 |   |   |   | 22,386 |   |
| Consumer  loans     |   |                            | 13,642  |   |                            |   | 24     |                            |   |   | 2                                                      |   |   |                          | -      |   |                                 |   | -      |                          |   |   | 26 |   |   |   | 13,668 |   |
|     Total |   | $                               | 348,280 |   |                            | $      | 3,509  |                            |   | $      | 1,480                                                  |   |   | $                             | 39     |   |                                 | $      | 4,040  |                          |   | $ | 9,068 |   |   | $ | 357,348 |   |
|                          |   |                            |    |   |                            |   |   |                            |   |   |                                                   |   |   |                          |   |   |                                 |   |   |                          |   |   |   |   |   |   |   |   |

----

|                                     | Three Months Ended     |   |   | Six Months Ended |
|------------------------------------------|------------------------|--------|--------|------------------|
|                                     | June 30,               |   |   | June 30,         |
|                                     | 2011                   |   | 2010   |             |   | 2011 |   | 2010 |
|                                     | (dollars in thousands) |
| Allowance balance at beginning of period | $                      | 5,780  |   | $                | 5,362 |   |   | $ | 5,616 |   | $5,453 |
| Charge-offs:                             |                   | (958   | )      |             | (95 | ) |   |   | (1,033 | ) | (524) |
| Recoveries:                              |                   | 15     |   |             | 4 |   |   |   | 34 |   | 12 |
| Provision expense                        |                   | 430    |   |             | 150 |   |   |   | 650 |   | 480 |
| Allowance balance at end of period       | $                      | 5,267  |   | $                | 5,421 |   |   | $ | 5,267 |   | $5,421 |

| (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 |   |
|                                                            |   |                   |   |   |                  |   |   |         |   |   |             |   |   |     |   |   |   |   |   |   |   |   |   |   |

----

|   | Level 1: | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.                                        |
|--------|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |     |                                                                                                                                                                             |
|   | Level 2: | Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.            |
|   |     |                                                                                                                                                                             |
|   | Level 3: | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity). |

|                                                                | Fair Value Measurement Reporting Date Using |                 |
|---------------------------------------------------------------------|---------------------------------------------|----------------------|
|     Description                                 |    Total                     |                 |   | (Level 1)Quoted Prices inActive MarketsFor IdenticalAssets |   |   | (Level 2)Significant OtherObservableInputs |   |   | (Level 3)Significant UnobservableInputs |   |
|                                                                |                                        |  (In thousands) |   |
| June 30, 2011                                                       |                                        |                 |   |   |   |   |   |   |   |   |   |   |
| Available for Sale:                                                 |                                        |                 |   |   |   |   |   |   |   |   |   |   |
| US Government agencies                                              |                                        | $                    | 31,472 |   |   | $ | - |   |   | $ | 31,472 |   |   | $ | - |   |
| States and political subdivisions                                   |                                        |                 | 51,308 |   |   |   | - |   |   |   | 51,308 |   |   |   | - |   |
| Corporate obligations                                               |                                        |                 | 7,998 |   |   |   | - |   |   |   | 7,998 |   |   |   | - |   |
| Mortgage-backed securities-government  sponsored agencies |                                        |                 | 60,910 |   |   |   | - |   |   |   | 60,910 |   |   |   | - |   |
| Equity securities-financial services                                |                                        |                 | 587 |   |   |   | 587 |   |   |   | - |   |   | - |   |
| Total                                                               |                                        | $                    | 152,275 |   |   | $ | 587 |   |   | $ | 151,688 |   |   | $ | - |   |
|                                                                |                                        |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010                                                   |                                        |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for Sale:                                                 |                                        |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US Government agencies                                              |                                        | $                    | 30,268 |   |   | $ | - |   |   | $ | 30,268 |   |   | $ | - |   |
| States and political subdivisions                                   |                                        |                 | 49,766 |   |   |   | - |   |   |   | 49,766 |   |   |   | - |   |
| Corporate obligations                                               |                                        |                 | 4,249 |   |   |   | - |   |   |   | 4,249 |   |   |   | - |   |
| Mortgage-backed securities-government  sponsored agencies |                                        |                 | 60,928 |   |   |   | - |   |   |   | 60,928 |   |   |   | - |   |
| Equity securities-financial services                                |                                        |                 | 604 |   |   |   | 604 |   |   | - |   |   | - |   |
| Total                                                               |                                        | $                    | 145,815 |   |   | $ | 604 |   |   | $ | 145,211 |   |   | $ | - |   |

----

|                         |   |  Fair Value Measurement Reporting Date using |   |
|------------------------------|--------|---------------------------------------------------|--------|
|                         |   |                                              |   |   | (Level 1) |   |   | (Level 2) |   |   |   |   |
| (In thousands)               |   |                                              |   |   | Quoted Prices in |   |   | Significant |   |   | (Level 3) |   |
|                         |   |                                              |   |   | Active Markets |   |   | Other |   |   | Significant |   |
|                         |   |                                              |   |   | For Identical |   |   | Observable |   |   | Unobservable |   |
| Description                  |   | Total                                             |   |   | Assets |   |   | Inputs |   |   | Inputs |   |
| June 30, 2011                |   |                                              |   |
| Impaired Loans               |   | $                                                 | 14,612 |   |   | $ | - |   |   | $ | - |   |   | $ | 14,612 |   |
| Foreclosed Real Estate Owned |   |                                              | 1,755  |   |   |   | - |   |   |   | - |   |   |   | 1,755 |   |
|                         |   | $                                                 | 16,367 |   |   | $ | - |   |   | $ | - |   |   | $ | 16,367 |   |
|                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010            |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Impaired Loans               |   | $                                                 | 13,104 |   |   | $ | - |   |   | $ | 7,038 |   |   | $ | 6,066 |   |
| Foreclosed Real Estate Owned |   |                                              | 748    |   |   |   | - |   |   |   | 748 |   |   |   | - |   |
|                         |   | $                                                 | 13,852 |   |   | $ | - |   |   | $ | 7,786 |   |   | $ | 6,066 |   |

----

----

|                                                                                                                                      |   | June 30, 2011  |     |   | December 31, 2010 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|----------|--------|-------------------|--------|
|                                                                                                                                      |   | CarryingAmount |     |   | FairValue         |   |   | CarryingAmount |   |   | FairValue |   |
|                                                                                                                                      |   | (In Thousands) |     |
| Financial assets:                                                                                                                         |   |           |     |   |              |   |   |   |   |   |   |   |
| Cash and due from banks, interest-  bearing deposits with banks and  federal funds sold                               |   | $              | 45,211   |   |              | $      | 45,211 |   |   | $ | 16,625 |   |   | $ | 16,625 |   |
| Securities                                                                                                                                |   |           | 152,445  |   |              |   | 152,453 |   |   |   | 145,985 |   |   |   | 145,994 |   |
| Loans receivable, net                                                                                                                     |   |           | 459,379  |   |              |   | 472,687 |   |   |   | 351,239 |   |   |   | 358,873 |   |
| Mortgage servicing rights                                                                                                                 |   |           | 301      |   |              |   | 314 |   |   |   | 250 |   |   |   | 274 |   |
| Investment in FHLB stock                                                                                                                  |   |           | 3,981    |   |              |   | 3,981 |   |   |   | 3,361 |   |   |   | 3,361 |   |
| Accrued interest receivable                                                                                                               |   |           | 2,539    |   |              |   | 2,539 |   |   |   | 2,166 |   |   |   | 2,166 |   |
|                                                                                                                                      |   |           |     |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:                                                                                                                    |   |           |     |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                                                  |   |           | 538,289  |   |              |   | 541,633 |   |   |   | 393,865 |   |   |   | 395,157 |   |
| Short-term borrowings                                                                                                                     |   |           | 32,181   |   |              |   | 32,181 |   |   |   | 33,309 |   |   |   | 33,309 |   |
| Other borrowings                                                                                                                          |   |           | 42,761   |   |              |   | 44,911 |   |   |   | 38,000 |   |   |   | 40,413 |   |
| Accrued interest payable                                                                                                                  |   |           | 1,473    |   |              |   | 1,473 |   |   |   | 1,536 |   |   |   | 1,536 |   |
|                                                                                                                                      |   |           |     |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Off-balance sheet financial instruments: Commitments to extend credit and     outstanding letters of credit |   |           |   - |   |              |   |   - |   |   |   |   - |   |   |   |   - |   |

----

----

----

----

|                                                                            |   |   |    |   |   |   |
|---------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Purchase Price Consideration in Common Stock (1)                                |   |   |    |   |   |   |
| North Penn common shares settled for stock                                      |   |   | 777,927 |   |   |   |   |
| Exchange Ratio                                                                  |   |   | 0.6829  |   |   |   |   |
| Norwood shares issued                                                           |   |   | 531,246 |   |   |   |   |
| Value assigned to Norwood common share                                          |   | $      | 27.76   |   |   |   |   |
| Purchase price assigned to North Penn common shares exchanged for Norwood stock |   |   |    |   |   | $      | 14,748 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| Purchase Price Consideration-Cash for Common Stock (1)                          |   |   |    |   |   |   |   |   |
| North Penn shares exchanged for cash                                            |   |   | 471,446 |   |   |   |   |   |
| Purchase price paid to each North Penn common share exchanged for cash          |   | $      | 19.12   |   |   |   |   |   |
| Purchase price assigned to North Penn common shares exchanged for cash          |   |   |    |   |   |   | 9,014 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| Purchase Price Consideration-Cash for Unallocated ESOP Shares (1)               |   |   |    |   |   |   |   |   |
| North Penn Unallocated ESOP Shares Outstanding                                  |   |   | 85,471  |   |   |   |   |   |
| Unallocated ESOP Shares settlement price per share                              |   | $      | 19.12   |   |   |   |   |   |
| Purchase price assigned to North Penn unallocated ESOP shares settled for cash  |   |   |    |   |   |   | 1,634 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| Total Purchase Price                                                            |   |   |    |   |   |   | 25,396 |   |
|                                                                            |   |   |    |   |   |   |   |   |
| Net Assets Acquired:                                                            |   |   |    |   |   |   |   |   |
|                                                                            |   |   |    |   |   |   |   |   |
| North Penn shareholders’ equity                                           |   | $      | 18,195  |   |   |   |   |   |
| North Penn goodwill and intangibles                                             |   |   | -       |   |   |   |   |   |
|                                                                            |   |   |    |   |   |   |   |   |
| Adjustments to reflect assets acquired at fair value:                           |   |   |    |   |   |   |   |   |
| Investments                                                                     |   |   | -       |   |   |   |   |   |
| Loans                                                                           |   |   | (3,525  | )      |   |   |   |   |
| Allowance for loan losses                                                       |   |   | 1,570   |   |   |   |   |   |
| Core deposit intangible                                                         |   |   | 895     |   |   |   |   |   |
| Premises & equipment                                                        |   |   | (783    | )      |   |   |   |   |
| Deferred tax assets                                                             |   |   | 1,152   |   |   |   |   |   |
|                                                                            |   |   |    |   |   |   |   |   |
| Adjustments to reflect liabilities acquired at fair value:                      |   |   |    |   |   |   |   |   |
| Time deposits                                                                   |   |   | (815    | )      |   |   |   |   |
| Borrowings                                                                      |   |   | (776    | )      |   |   |   |   |
|                                                                            |   |   |    |   |   |   | 15,913 |   |
| Goodwill resulting from merger                                                  |   |   |    |   |   | $      | 9,483 |   |

----

| Total purchase price                          |   |   |    |   | $      | 25,396 |   |
|-----------------------------------------------|--------|--------|---------|--------|--------|--------|--------|
|                                          |   |   |    |   |   |   |   |
| Net Assets Acquired:                          |   |   |    |   |   |   |   |
|   Cash                              |   | $      | 15,192  |   |   |   |   |   |
|   Securities held to maturity       |   |   | -       |   |   |   |   |   |
|   Securities available for sale     |   |   | 12,671  |   |   |   |   |   |
|   Restricted investments            |   |   | 985     |   |   |   |   |   |
|   Loans                             |   |   | 118,336 |   |   |   |   |   |
|   Accrued interest receivable       |   |   | 566     |   |   |   |   |   |
|   Premises & equipment, net     |   |   | 2,931   |   |   |   |   |   |
|   Core deposit intangible           |   |   | 895     |   |   |   |   |   |
|   Deferred tax assets               |   |   | 2,947   |   |   |   |   |   |
|   Other assets                      |   |   | 5,403   |   |   |   |   |   |
|   Time deposits                     |   |   | (51,936 | )      |   |   |   |   |
|   Deposits other than time deposits |   |   | (83,498 | )      |   |   |   |   |
|   Borrowings                        |   |   | (7,776  | )      |   |   |   |   |
|   Accrued interest payable          |   |   | (203    | )      |   |   |   |   |
|   Other liabilities                 |   |   | (600    | )      |   |   |   |   |
|                                          |   |   |    |   |   |   | 15,913 |   |
| Goodwill resulting from North Penn Merger     |   |   |    |   |   | $      | 9,483  |   |

| 2011   | $      | 95,000  |   |
|--------|--------|---------|--------|
| 2012   |   | 153,000 |   |
| 2013   |   | 137,000 |   |
| 2014   |   | 121,000 |   |
| 2015   |   | 104,000 |   |
| 2016   |   | 88,000  |   |
| 2017   |   | 72,000  |   |
| 2018   |   | 56,000  |   |
| 2019   |   | 39,000  |   |
| 2020   |   | 23,000  |   |
| 2021   |   | 7,000   |   |
|   | $      | 895,000 |   |

----

|   | • | 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, 2011 |    |   | December 31, 2010 |   |
|----------------------------------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
| (dollars in thousands)                                               |   | Amount        |    |   | % of portfolio    |   |   | Amount |   |   | % of portfolio |   |
|                                                                 |   |          |    |   |              |   |   |   |   |   |   |   |
| US Government agencies                                               |   | $             | 31,472  |   |              |   | 20.6 | % |   | $ | 30,268 |   |   |   | 20.7 | % |
| States and political subdivisions                                    |   |          | 51,478  |   |              |   | 33.8 |   |   |   | 49,936 |   |   |   | 34.2 |   |
| Corporate obligations                                                |   |          | 7,998   |   |              |   | 5.2 |   |   |   | 4,249 |   |   |   | 2.9 |   |
| Mortgage-backed securities-  government sponsored entities |   |          | 60,910  |   |              |   |  40.0 |   |   |   |  60,928 |   |   |   |  41.8 |   |
| Equity securities-financial services                                 |   |          | 587     |   |              |   |  0.4 |   |   |   |  604 |   |   |   |  0.4 |   |
|   Total                                                    |   | $             | 152,445 |   |              |   | 100.0 | % |   | $ | 145,985 |   |   |   | 100.0 | % |

----

|                                             |   | June 30, |       |    | December 31,  |   |
|--------------------------------------------------|--------|----------|------------|---------|--------------------|--------|
| (dollars in thousands)                           |   | 2011     |       |    | 2010               |   |
| Loans accounted for on a non-accrual basis:      |   |     |       |    |               |   |
|     Commercial and all other |   | $        | 508        |    |               | $      | 513 |   |
|     Real Estate              |   |     | 8,287      |    |               |   | 3,527 |   |
|     Consumer                 |   |     | 38         |    |               |   |  - |   |
|        Total  |   |     | 8,833      |    |               |   | 4,040 |   |
|                                             |   |     |       |    |               |   |   |   |
| Accruing loans which are contractually           |   |     |       |    |               |   |   |   |
|     past due 90 days or more |   |     | -          |    |               |   |  39 |   |
| Total non-performing loans                       |   |     | 8,833      |    |               |   | 4,079 |   |
| Foreclosed real estate                           |   |     | 1,755      |    |               |   |  748 |   |
| Total non-performing assets                      |   | $        | 10,588     |    |               | $      | 4,827 |   |
| Allowance for loans losses                  |   | $        | 5,267      |    |               | $      | 5,616 |   |
| Coverage of non-performing loans                 |   |     |   .60 | x  |               |   | 1.38 | x  |
| Non-performing loans to total loans              |   |     | 1.90       | %       |               |   | 1.14 | % |
| Non-performing loans to total assets             |   |     | 1.26       | %       |               |   | .76 | % |
| Non-performing assets to total assets            |   |     | 1.50       | %       |               |   | .90 | % |

| (dollars in thousands)              |   | June 30, 2011 |    |   | December 31, 2010 |   |
|-------------------------------------|--------|---------------|---------|--------|-------------------|--------|
|                                |   |          |    |   |              |   |
| Non-interest bearing demand         |   | $             | 73,718  |   |              | $      | 62,238 |   |
| Interest bearing demand             |   |          | 56,610  |   |              |   | 38,168 |   |
| Money market deposit accounts       |   |          | 95,628  |   |              |   | 70,812 |   |
| Savings                             |   |          | 100,497 |   |              |   | 50,341 |   |
| Time deposits <$100,000          |   |          | 143,474 |   |              |   | 112,291 |   |
| Time deposits >$100,000          |   |          | 68,362  |   |              |   |  60,015 |   |
|                                |   |          |    |   |              |   |   |   |
|      Total |   | $             | 538,289 |   |              | $      | 393,865 |   |
|                                |   |          |    |   |              |   |   |   |

----

|                                           |   | June 30,  |   |   |  December 31, |   |
|------------------------------------------------|--------|----------------|--------|--------|--------------------|--------|
|                                           |   | 2011           |   |   | 2010               |   |
| (dollars in thousands)                         |   |           |   |   |               |   |
| Securities sold under agreements to repurchase |   | $              | 31,983 |   |               | $      | 33,110 |   |
| U.S. Treasury demand notes                     |   |           | 198    |   |               |   |  199 |   |
|                                           |   | $              | 32,181 |   |               | $      | 33,309 |   |

|                                        |   |          |   |   |  December 31, |   |
|---------------------------------------------|--------|---------------|--------|--------|--------------------|--------|
|                                        |   | June 30, 2011 |   |   | 2010               |   |
| Notes with the FHLB:                        |   |          |   |   |               |   |
| Convertible note due January 2011 at 5.24%  |   | $             | -      |   |               | $      | 3,000 |   |
| Convertible note due August 2011 at 2.69%   |   |          | 10,000 |   |               |   | 10,000 |   |
| Fixed rate note due September 2011 at 4.06% |   |          | 5,000  |   |               |   | 5,000 |   |
| 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%      |   |          | 7,761  |   |               |   | - |   |
| Convertible note due January 2017 at 4.71%  |   |          | 10,000 |   |               |   | 10,000 |   |
|                                        |   | $             | 42,761 |   |               | $      | 38,000 |   |

----

|                                       |   | June 30,  |   |   | December 31,  |   |
|--------------------------------------------|--------|----------------|--------|--------|--------------------|--------|
|                                       |   | 2011           |   |   | 2010               |   |
|                                       |   | (in thousands) |   |
| Commitments to grant loans                 |   | $              | 43,395 |   |               | $      | 21,448 |   |
| Unfunded commitments under lines of credit |   |           | 28,910 |   |               |   | 30,311 |   |
| Standby letters of credit                  |   |           | 5,586  |   |               |   |  3,605 |   |
|                                       |   |           |   |   |               |   |   |   |
|                                       |   | $              | 77,891 |   |               | $      | 55,364 |   |

|                                                    |   | June 30,  |         |   | December 31,  |   |
|---------------------------------------------------------|--------|----------------|--------------|--------|--------------------|--------|
|                                                    |   | 2011           |         |   | 2010               |   |
|                                                    |   |           |         |   |               |   |   |   |
| Tier 1 Capital                                     |   |           |         |   |               |   |   |   |
|     (To average assets)        |   |           | 12.37%  |   |               |   | 12.41%  |   |
| Tier 1 Capital                                     |   |           |         |   |               |   |   |   |
|     (To risk-weighted assets)  |   |           | 15.18%  |   |               |   | 18.44%  |   |
| Total Capital                                      |   |           |         |   |               |   |   |   |
|     (To risk-weighted assets)  |   |           | 16.31%  |   |               |   | 19.74%  |   |

----

----

| (Tax-Equivalent Basis, dollars in thousands)                                            |   |  Three Months Ended June 30, |    |
|-----------------------------------------------------------------------------------------|--------|-----------------------------------|---------|
|                                                                                    |   |  2011                        |    |   |  2010 |   |
|                                                                                    |   | AverageBalance(2)                 |    |   |  Interest(1) |   |   | Average Rate(3) |   |   | AverageBalance(2) |   |   |  Interest(1) |   |   | Average Rate(3) |   |
| Assets                                                                                  |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                                |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold                                                                      |   | $                                 | 615     |   |   | $ | - |   |   |   | 0.07 | % |   | $ | 3,000 |   |   | $ | 2 |   |   |   | 0.33 | % |
|   Interest bearing deposits with banks                                        |   |                              | 25,136  |   |   |   | 16 |   |   |   | 0.25 |   |   |   | 22,263 |   |   |   | 15 |   |   |   | 0.27 |   |
|    Securities held-to-maturity                                           |   |                              | 170     |   |   |   | 4 |   |   |   | 9.41 |   |   |   | 169 |   |   |   | 3 |   |   |   | 8.12 |   |
|    Securities available for sale:                                        |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Taxable                                                   |   |                              | 101,963 |   |   |   | 695 |   |   |   | 2.73 |   |   |   | 95,367 |   |   |   | 782 |   |   |   | 3.28 |   |
|      Tax-exempt(1)                                             |   |                              | 46,847  |   |   |   | 662 |   |   |   | 5.65 |   |   |   | 36,795 |   |   |   | 541 |   |   |   | 5.88 |   |
|         Total securities available for sale (1) |   |                              | 148,810 |   |   |   | 1,357 |   |   |   | 3.65 |   |   |   | 132,162 |   |   |   | 1,323 |   |   |   | 4.00 |   |
|      Loans receivable (1) (4) (5)                              |   |                              | 387,203 |   |   |   | 5,517 |   |   |   | 5.70 |   |   |   | 353,468 |   |   |   | 5,267 |   |   |   | 5.96 |   |
|         Total interest earning assets           |   |                              | 561,934 |   |   |   | 6,894 |   |   |   | 4.91 |   |   |   | 511,062 |   |   |   | 6,610 |   |   |   | 5.17 |   |
| Non-interest earning assets:                                                            |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Cash and due from banks                                               |   |                              | 7,443   |   |   |   |   |   |   |   |   |   |   |   | 7,295 |   |   |   |   |   |   |   |   |   |
|    Allowance for loan losses                                             |   |                              | (5,753  | ) |   |   |   |   |   |   |   |   |   |   | (5,414 | ) |   |   |   |   |   |   |   |   |
|    Other assets                                                          |   |                              | 33,047  |   |   |   |   |   |   |   |   |   |   |   | 22,129 |   |   |   |   |   |   |   |   |   |
|         Total non-interest earning assets       |   |                              | 34,737  |   |   |   |   |   |   |   |   |   |   |   | 24,010 |   |   |   |   |   |   |   |   |   |
| Total Assets                                                                            |   | $                                 | 596,671 |   |   |   |   |   |   |   |   |   |   | $ | 535,072 |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                                    |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                                           |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Interest bearing demand and money     market |   | $                                 | 126,053 |   |   |   | 132 |   |   |   | 0.42 |   |   | $ | 108,011 |   |   |   | 97 |   |   |   | 0.36 |   |
|    Savings                                                               |   |                              | 68,622  |   |   |   | 53 |   |   |   | 0.31 |   |   |   | 48,355 |   |   |   | 29 |   |   |   | 0.24 |   |
|    Time                                                                  |   |                              | 185,475 |   |   |   | 747 |   |   |   | 1.61 |   |   |   | 181,163 |   |   |   | 921 |   |   |   | 2.03 |   |
|       Total interest bearing deposits                     |   |                              | 380,150 |   |   |   | 932 |   |   |   | 0.98 |   |   |   | 337,529 |   |   |   | 1,047 |   |   |   | 1.24 |   |
| Short-term borrowings                                                                   |   |                              | 30,634  |   |   |   | 27 |   |   |   | 0.35 |   |   |   | 22,605 |   |   |   | 81 |   |   |   | 1.43 |   |
| Other borrowings                                                                        |   |                              | 37,563  |   |   |   | 342 |   |   |   | 3.64 |   |   |   | 43,000 |   |   |   | 416 |   |   |   | 3.87 |   |
|    Total interest bearing liabilities                                    |   |                              | 448,347 |   |   |   | 1,301 |   |   |   | 1.16 |   |   |   | 403,134 |   |   |   | 1,544 |   |   |   | 1.53 |   |
| Non-interest bearing liabilities:                                                       |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Demand deposits                                                       |   |                              | 67,922  |   |   |   |   |   |   |   |   |   |   |   | 61,528 |   |   |   |   |   |   |   |   |   |
|    Other liabilities                                                     |   |                              | 4,881   |   |   |   |   |   |   |   |   |   |   |   | 4,306 |   |   |   |   |   |   |   |   |   |
|       Total non-interest bearing liabilities              |   |                              | 72,803  |   |   |   |   |   |   |   |   |   |   |   | 65,834 |   |   |   |   |   |   |   |   |   |
|    Stockholders' equity                                                  |   |                              | 75,521  |   |   |   |   |   |   |   |   |   |   |   | 66,104 |   |   |   |   |   |   |   |   |   |
| Total Liabilities and Stockholders' Equity                                              |   | $                                 | 596,671 |   |   |   |   |   |   |   |   |   |   | $ | 535,072 |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (tax equivalent basis)                                              |   |                              |    |   |   |   | 5,593 |   |   |   | 3.75 | % |   |   |   |   |   |   | 5,066 |   |   |   | 3.64 | % |
| Tax-equivalent basis adjustment                                                         |   |                              |    |   |   |   | (275 | ) |   |   |   |   |   |   |   |   |   |   | (234 | ) |   |   |   |   |
| Net interest income                                                                     |   |                              |    |   |   | $ | 5,318 |   |   |   |   |   |   |   |   |   |   | $ | 4,832 |   |   |   |   |   |
| Net interest margin (tax equivalent basis)                                              |   |                              |    |   |   |   |   |   |   |   | 3.98 | % |   |   |   |   |   |   |   |   |   |   | 3.96 | % |

----

|                                       |   | Increase/(Decrease)                                                                         |   |
|--------------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|
|                                       |   | Three months ended June 30, 2011 Compared toThree months ended June 30, 2010Variance due to |   |
|                                       |   | Volume                                                                                      |   |   | Rate |   |   | Net |   |
|                                       |   | (dollars in thousands)                                                                      |   |
| Interest earning assets:                   |   |                                                                                        |   |   |   |   |   |   |   |
| Federal funds sold                         |   | $                                                                                           | (1     | ) |   | $ | (1 | ) |   | $ | (2 | ) |
| Interest bearing deposits with banks       |   |                                                                                        | 6      |   |   |   | (5 | ) |   |   | 1 |   |
| Securities held to maturity                |   |                                                                                        | -      |   |   |   | 1 |   |   |   | 1 |   |
| Securities available for sale:             |   |                                                                                        |   |   |   |   |   |   |   |   |   |   |
| Taxable                                    |   |                                                                                        | 282    |   |   |   | (369 | ) |   |   | (87 | ) |
| Tax-exempt securities                      |   |                                                                                        | 254    |   |   |   | (133 | ) |   |   | 121 |   |
| Total securities                           |   |                                                                                        | 536    |   |   |   | (502 | ) |   |   | 34 |   |
| Loans receivable                           |   |                                                                                        | 1,432  |   |   |   | (1,181 | ) |   |   | 251 |   |
| Total interest earning assets              |   |                                                                                        | 1,973  |   |   |   | (1,688 | ) |   |   | 284 |   |
|                                       |   |                                                                                        |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:              |   |                                                                                        |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand and money market   |   |                                                                                        | 18     |   |   |   | 17 |   |   |   | 35 |   |
| Savings                                    |   |                                                                                        | 14     |   |   |   | 10 |   |   |   | 24 |   |
| Time                                       |   |                                                                                        | 139    |   |   |   | (314 | ) |   |   | (174 | ) |
| Total interest bearing deposits            |   |                                                                                        | 171    |   |   |   | (287 | ) |   |   | (115 | ) |
| Short-term borrowings                      |   |                                                                                        | 138    |   |   |   | (192 | ) |   |   | (54 | ) |
| Other borrowings                           |   |                                                                                        | (50    | ) |   |   | (24 | ) |   |   | (74 | ) |
| Total interest bearing liabilities         |   |                                                                                        | 259    |   |   |   | (503 | ) |   |   | (243 | ) |
| Net interest income (tax-equivalent basis) |   | $                                                                                           | 1,713  |   |   | $ | (1,186 | ) |   | $ | 527 |   |
|                                       |   |                                                                                        |   |   |   |   |   |   |   |   |   |   |

----

| (dollars in thousands)                                 |   | Three months endedJune 30, 2011 to June 30, 2010 |   |
|--------------------------------------------------------|--------|--------------------------------------------------|--------|
| Net income three months ended June 30, 2010            |   | $                                                | 1,818  |   |
| Change due to:                                         |   |                                             |   |   |
| Net interest income                                    |   |                                             | 486    |   |
| Provision for loan losses                              |   |                                             | (280   | ) |
| Gain on sales of loans and securities                  |   |                                             | (84    | ) |
| Other income                                           |   |                                             | 61     |   |
| Salaries and employee benefits                         |   |                                             | (260   | ) |
| Occupancy, furniture and equipment                     |   |                                             | -      |   |
| Merger related expenses                                |   |                                             | (488   | ) |
| All other expenses                                     |   |                                             | (12    | ) |
| Income tax expense                                     |   |                                             | 243    |   |
|                                                   |   |                                             |   |   |
| Net income three months ended  June 30, 2011 |   | $                                                | 1,484  |   |
|                                                   |   |                                             |   |   |

----

----

| (Tax-Equivalent Basis, dollars in thousands)                                            |   |   Six Months Ended June 30, |    |
|-----------------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                                    |   | 2011                             |    |   | 2010 |   |
|                                                                                    |   | Average Balance(2)               |    |   | Interest(1) |   |   | AverageRate(3) |   |   | AverageBalance(2) |   |   | Interest(1) |   |   | AverageRate(3) |   |
| Assets                                                                                  |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                                                                |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Federal funds sold                                                                |   | $                                | 392     |   |   | $ | - |   |   |   | 0.12 | % |   | $ | 3,000 |   |   | $ | 5 |   |   |   | 0.33 | % |
|    Interest bearing deposits with banks                                  |   |                             | 17,890  |   |   |   | 24 |   |   |   | 0.27 |   |   |   | 16,805 |   |   |   | 24 |   |   |   | 0.28 |   |
|    Securities held-to-maturity (1)                                       |   |                             | 170     |   |   |   | 7 |   |   |   | 8.24 |   |   |   | 392 |   |   |   | 17 |   |   |   | 8.61 |   |
|    Securities available for sale:                                        |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Taxable                                                   |   |                             | 99,738  |   |   |   | 1,345 |   |   |   | 2.70 |   |   |   | 96,425 |   |   |   | 1,685 |   |   |   | 3.49 |   |
|      Tax-exempt (1)                                            |   |                             | 46,739  |   |   |   | 1,326 |   |   |   | 5.67 |   |   |   | 34,384 |   |   |   | 1,009 |   |   |   | 5.87 |   |
|         Total securities available for sale (1) |   |                             | 146,477 |   |   |   | 2,671 |   |   |   | 3.65 |   |   |   | 130,809 |   |   |   | 2,694 |   |   |   | 4.12 |   |
|      Loans receivable (4) (5)                                  |   |                             | 370,255 |   |   |   | 10,487 |   |   |   | 5.66 |   |   |   | 356,088 |   |   |   | 10,718 |   |   |   | 6.02 |   |
|         Total interest earning assets           |   |                             | 535,184 |   |   |   | 13,189 |   |   |   | 4.93 |   |   |   | 507,094 |   |   |   | 13,458 |   |   |   | 5.31 |   |
| Non-interest earning assets:                                                            |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Cash and due from banks                                               |   |                             | 7,122   |   |   |   |   |   |   |   |   |   |   |   | 7,027 |   |   |   |   |   |   |   |   |   |
|    Allowance for loan losses                                             |   |                             | (5,747  | ) |   |   |   |   |   |   |   |   |   |   | (5,426 | ) |   |   |   |   |   |   |   |   |
|    Other assets                                                          |   |                             | 27,365  |   |   |   |   |   |   |   |   |   |   |   | 22,176 |   |   |   |   |   |   |   |   |   |
|    Total non-interest earning assets                                     |   |                             | 28,740  |   |   |   |   |   |   |   |   |   |   |   | 23,777 |   |   |   |   |   |   |   |   |   |
| Total Assets                                                                            |   | $                                | 563,924 |   |   |   |   |   |   |   |   |   |   | $ | 530,871 |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                                    |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                                           |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Interest bearing demand and money     market |   | $                                | 117,545 |   |   |   | 240 |   |   |   | 0.41 |   |   | $ | 102,643 |   |   |   | 297 |   |   |   | 0.58 |   |
|    Savings                                                               |   |                             | 60,022  |   |   |   | 78 |   |   |   | 0.26 |   |   |   | 47,218 |   |   |   | 57 |   |   |   | 0.24 |   |
|    Time                                                                  |   |                             | 179,234 |   |   |   | 1,499 |   |   |   | 1.67 |   |   |   | 184,047 |   |   |   | 1,947 |   |   |   | 2.12 |   |
|       Total interest bearing deposits                     |   |                             | 356,801 |   |   |   | 1,817 |   |   |   | 1.02 |   |   |   | 333,908 |   |   |   | 2,301 |   |   |   | 1.38 |   |
| Short-term borrowings                                                                   |   |                             | 29,234  |   |   |   | 51 |   |   |   | 0.35 |   |   |   | 23,717 |   |   |   | 61 |   |   |   | 0.51 |   |
| Other borrowings                                                                        |   |                             | 36,588  |   |   |   | 678 |   |   |   | 3.71 |   |   |   | 43,000 |   |   |   | 827 |   |   |   | 3.85 |   |
|    Total interest bearing liabilities                                    |   |                             | 422,623 |   |   |   | 2,546 |   |   |   | 1.20 |   |   |   | 400,625 |   |   |   | 3,189 |   |   |   | 1.59 |   |
| Non-interest bearing liabilities:                                                       |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Demand deposits                                                       |   |                             | 64,907  |   |   |   |   |   |   |   |   |   |   |   | 60,057 |   |   |   |   |   |   |   |   |   |
|    Other liabilities                                                     |   |                             | 4,750   |   |   |   |   |   |   |   |   |   |   |   | 4,289 |   |   |   |   |   |   |   |   |   |
|       Total non-interest bearing liabilities              |   |                             | 69,657  |   |   |   |   |   |   |   |   |   |   |   | 64,346 |   |   |   |   |   |   |   |   |   |
|    Stockholders' equity                                                  |   |                             | 71,644  |   |   |   |   |   |   |   |   |   |   |   | 65,900 |   |   |   |   |   |   |   |   |   |
| Total Liabilities and Stockholders' Equity                                              |   | $                                | 563,924 |   |   |   |   |   |   |   |   |   |   | $ | 530,871 |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income (tax equivalent basis)                                              |   |                             |    |   |   |   | 10,643 |   |   |   | 3.72 | % |   |   |   |   |   |   | 10,269 |   |   |   | 3.72 | % |
| Tax-equivalent basis adjustment                                                         |   |                             |    |   |   |   | (544 | ) |   |   |   |   |   |   |   |   |   |   | (440 | ) |   |   |   |   |
| Net interest income                                                                     |   |                             |    |   |   | $ | 10,099 |   |   |   |   |   |   |   |   |   |   | $ | 9,829 |   |   |   |   |   |
| Net interest margin (tax equivalent basis)                                              |   |                             |    |   |   |   |   |   |   |   | 3.98 | % |   |   |   |   |   |   |   |   |   |   | 4.05 | % |

----

|                                       |   | Increase/(Decrease)Six Months Ended June 30, 2011 Compared toSix Months Ended June 30, 2010Variance due to |   |
|--------------------------------------------|--------|------------------------------------------------------------------------------------------------------------|--------|
|                                       |   | Volume                                                                                                     |   |   | Rate |   |   | Net |   |
|                                       |   | (dollars in thousands)                                                                                     |   |
| Interest earning assets:                   |   |                                                                                                       |   |   |   |   |   |   |   |
| Federal funds sold                         |   | $                                                                                                          | (3     | ) |   | $ | (2 | ) |   | $ | (5 | ) |
| Interest bearing deposits with banks       |   |                                                                                                       | 3      |   |   |   | (3 | ) |   |   | - |   |
| Securities held to maturity                |   |                                                                                                       | (9     | ) |   |   | (1 | ) |   |   | (10 | ) |
| Securities available for sale:             |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |
| Taxable                                    |   |                                                                                                       | 157    |   |   |   | (497 | ) |   |   | (340 | ) |
| Tax-exempt securities                      |   |                                                                                                       | 413    |   |   |   | (96 | ) |   |   | 317 |   |
| Total securities                           |   |                                                                                                       | 570    |   |   |   | (593 | ) |   |   | (23 | ) |
| Loans receivable                           |   |                                                                                                       | 926    |   |   |   | (1,157 | ) |   |   | (231 | ) |
| Total interest earning assets              |   |                                                                                                       | 1,487  |   |   |   | (1,756 | ) |   |   | (269 | ) |
|                                       |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:              |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand and money market   |   |                                                                                                       | 97     |   |   |   | (154 | ) |   |   | (57 | ) |
| Savings                                    |   |                                                                                                       | 16     |   |   |   | 5 |   |   |   | 21 |   |
| Time                                       |   |                                                                                                       | (50    | ) |   |   | (398 | ) |   |   | (448 | ) |
| Total interest bearing deposits            |   |                                                                                                       | 63     |   |   |   | (547 | ) |   |   | (484 | ) |
| Short-term borrowings                      |   |                                                                                                       | 28     |   |   |   | (38 | ) |   |   | (10 | ) |
| Other borrowings                           |   |                                                                                                       | (120   | ) |   |   | (29 | ) |   |   | (149 | ) |
| Total interest bearing liabilities         |   |                                                                                                       | (29    | ) |   |   | (614 | ) |   |   | (643 | ) |
| Net interest income (tax-equivalent basis) |   | $                                                                                                          | 1,516  |   |   | $ | (1,142 | ) |   | $ | 374 |   |

----

|                                                 |   | Six Months Ended              |   |
|------------------------------------------------------|--------|-------------------------------|--------|
|                                                 |   | June 30, 2011 toJune 30, 2010 |   |
| (dollars in thousands)                               |   |                          |   |
| Net income six months ended June 30, 2010            |   | $                             | 3,615  |   |
|                                                 |   |                          |   |   |
| Change due to:                                       |   |                          |   |   |
| Net interest income                                  |   |                          | 270    |   |
| Provision for loan losses                            |   |                          | (170   | ) |
| Gain on sales of loans and securities                |   |                          | 41     |   |
| Other income                                         |   |                          | 142    |   |
| Salaries and employee benefits                       |   |                          | (346   | ) |
| Occupancy, furniture and equipment expense, net      |   |                          | (4     | ) |
| Merger related expenses                              |   |                          | (755   | ) |
| All other expenses                                   |   |                          | (29    | ) |
| Income tax expense                                   |   |                          | 380    |   |
|                                                 |   |                          |   |   |
| Net income six months ended  June 30, 2011 |   | $                             | 3,144  |   |
|                                                 |   |                          |   |   |

----

----

|                                             |   | 3 Months |    |   | 3-12 Months |   |    | 1 to 3 Years |   |   | Over3 Years |   |   | Total  |    |
|--------------------------------------------------|--------|----------|---------|--------|-------------|--------|---------|--------------|--------|--------|-------------|--------|--------|--------|---------|
| Federal funds sold and interest bearing deposits |   | $        | 35,692  |   |        | $      | 250     |         |   | $      | -           |   |   | $      | -       |   |   | $ | 35,942 |   |
| Securities                                       |   |     | 9,171   |   |        |   | 24,849  |         |   |   | 46,739      |   |   |   | 71,686  |   |   |   | 152,445 |   |
| Loans Receivable                                 |   |     | 120,098 |   |        |   | 87,355  |         |   |   | 142,539     |   |   |   | 114,654 |   |   |   | 464,646 |   |
|   Total RSA                            |   |     | 164,961 |   |        |   | 112,454 |         |   |   | 189,278     |   |   |   | 186,340 |   |   |   | 653,033 |   |
|                                             |   |     |    |   |        |   |    |         |   |   |        |   |   |   |    |   |   |   |   |   |
| Non-maturity interest-bearing deposits           |   |     | 39,435  |   |        |   | 43,139  |         |   |   | 113,772     |   |   |   | 56,389  |   |   |   | 252,735 |   |
| Time Deposits                                    |   |     | 35,581  |   |        |   | 80,619  |         |   |   | 66,986      |   |   |   | 26,650  |   |   |   | 211,836 |   |
| Other                                            |   |     | 22,403  |   |        |   | 10,793  |         |   |   | 23,986      |   |   |   | 17,760  |   |   |   | 74,942 |   |
|   Total RSL                            |   |     | 97,419  |   |        |   | 134,551 |         |   |   | 206,744     |   |   |   | 100,799 |   |   |   | 539,513 |   |
|                                             |   |     |    |   |        |   |    |         |   |   |        |   |   |   |    |   |   |   |   |   |
| Interest Sensitivity Gap                         |   | $        | 67,542  |   |        | $      | (22,097 | )            |   | $      | (17,466     | )      |   | $      | 85,541  |   |   | $ | 113,520 |   |
| Cumulative Gap                                   |   |     | 67,542  |   |        |   | 45,445  |         |   |   | 27,979      |   |   |   | 113,520 |   |   |   |   |   |
| RSA/RSL-cumulative                               |   |     | 169.3   | %      |        |   | 119.6   | %            |   |   | 106.4       | %      |   |   | 121.0   | % |   |   |   |   |
|                                             |   |     |    |   |        |   |    |         |   |   |        |   |   |   |    |   |   |   |   |   |
| December 31, 2010                                |   |     |    |   |        |   |    |         |   |   |        |   |   |   |    |   |   |   |   |   |
|                                             |   |     |    |   |        |   |    |         |   |   |        |   |   |   |    |   |   |   |   |   |
| Interest Sensitivity Gap                         |   | $        | 41,341  |   |        | $      | (33,613 | )            |   | $      | 10,969      |   |   | $      | 92,050  |   |   | $ | 110,747 |   |
| Cumulative Gap                                   |   |     | 41,341  |   |        |   | 7,728   |         |   |   | 18,697      |   |   |   | 110,747 |   |   |   |   |   |
| RSA/RSL-cumulative                               |   |     | 162.9   | %      |        |   | 103.9   | %            |   |   | 105.5       | %      |   |   | 127.5   | % |   |   |   |   |

----

|                            |   | Issuer Purchases of Equity Securities |   |
|---------------------------------|--------|--------------------------------------------|--------|
|                            |   |   Total numberof sharespurchased |   |   |   Average pricepaid pershare |   |   | Total number ofshares purchasedas part of publiclyannounced plansor programs |   |   | Maximum numberof shares (or approximatedollar value) that may yet be purchasedunder the plansor programs (2) |   |
|                            |   |                                       |   |   |   |   |   |   |   |   |   |   |
| April 1–April 30, 2011(1) |   |                                       | 468    |   |   | $ | 27.77 |   |   |   | 0 |   |   |   | 85,532 |   |
| May 1–May 31, 2011        |   |                                       | 0      |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
| June 1 – June 30, 2011(1) |   |                                       | 72     |   |   |   |  27.77 |   |   |   | 0 |   |   |   | 85,460 |   |
|                            |   |                                       | 540    |   |   | $ | 27.77 |   |   |   | 0 |   |   |   | 85,460 |   |
|                            |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| 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 (4)                                                                  |
| 10.4      | Salary Continuation Agreement between the Bank and William W. Davis, Jr. (3)                                   |
| 10.5      | Salary Continuation Agreement between the Bank and Lewis J. Critelli (3)                                       |
| 10.6      | Salary Continuation Agreement between the Bank and Edward C. Kasper (3)                                        |
| 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)                        |
| 10.13     | First and Second Amendments to Salary Continuation Agreement with Edward C. Kasper (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)                                                         |

| (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.                                                                                                    |
|   |                                                                                                                                                                                                                               |

----

| (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.                                                       |
|   |                                                                                                                                                                                  |

----

|   |           |   | NORWOOD FINANCIAL CORP. |
|--------|----------------|--------|-------------------------|
|   |           |   |                    |   |
| Date:  | August 9, 2011 |   | By:                     | /s/ Lewis J. Critelli |
|   |           |   |                    | Lewis J. Critelli |
|   |           |   |                    | President and Chief Executive Officer |
|   |           |   |                    | (Principal Executive Officer) |
|   |           |   |                    |   |
|   |           |   |                    |   |
|   |           |   |                    |   |
| Date:  | August 9, 2011 |   | By:                     | /s/ William S. Lance |
|   |           |   |                    | William S. Lance |
|   |           |   |                    | Senior Vice President, and Chief Financial Officer |
|   |           |   |                    | (Principal Financial Officer) |

----