----

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

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

| Connecticut                              | 06-1514263                |
|------------------------------------------|---------------------------|
| (State or other jurisdiction             | (I.R.S. Employer          |
| of incorporation or organization)        | Identification No.)  |
| 5 Bissell Street, Lakeville, CT          | 06039                     |
| (Address of principal executive offices) | (Zip code)                |

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L

|                         |                                                                                                                          | Page      |
|------------------------------|-------------------------------------------------------------------------------------------------------------------------------|-----------|
|                         |                                                                                                                          |      |
| PART I FINANCIAL INFORMATION |
|                         |                                                                                                                          |      |
| Item 1.                      | Financial Statements:                                                                                                         |      |
|                         |                                                                                                                          |      |
|                         | Consolidated Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010                                             | 3         |
|                         |                                                                                                                          |      |
|                         | Consolidated Statements of Income for the three and six month periods ended June 30, 2011 and 2010 (unaudited)                | 4         |
|                         |                                                                                                                          |      |
|                         | Consolidated Statements of Changes in Shareholders' Equity for the six month periods ended June 30, 2011 and 2010 (unaudited) |  5   |
|                         |                                                                                                                          |      |
|                         | Consolidated Statements of Cash Flows for the six month periods ended June 30, 2011 and 2010 (unaudited)                      | 6         |
|                         |                                                                                                                          |      |
|                         | Notes to Consolidated Financial Statements (unaudited)                                                                        | 7         |
|                         |                                                                                                                          |      |
| Item 2.                      | Management's Discussion and Analysis of Financial Condition and Results of Operations                                         |   21 |
|                         |                                                                                                                          |      |
| Item 3.                      | Quantitative and Qualitative Disclosures of Market Risk                                                                       | 39        |
|                         |                                                                                                                          |      |
| Item 4.                      | Controls and Procedures                                                                                                       | 40        |
|                         |                                                                                                                          |      |
| PART II Other Information    |
|                         |                                                                                                                          |      |
| Item 1.                      | Legal Proceedings                                                                                                             | 40        |
| Item 1A.                     | Risk Factors                                                                                                                  | 41        |
| Item 2.                      | Unregistered Sales of Equity Securities and Use of Proceeds                                                                   | 41        |
| Item 3.                      | Defaults upon Senior Securities                                                                                               | 41        |
| Item 4.                      | Removed and Reserved                                                                                                          | 41        |
| Item 5.                      | Other information                                                                                                             | 41        |
| Item 6.                      | Exhibits                                                                                                                      | 41        |

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A

r

E

|  in thousands (except share data)                            |   | June 30, 2011Unaudited |    |   | December 31, 2010  |   |
|------------------------------------------------------------------------|--------|------------------------|---------|--------|-------------------------|--------|
| ASSETS                                                                 |   |                   |    |   |                    |   |
| Cash and due from banks                                                |   | $                      | 7,570   |   |                    | $      | 6,694 |   |
| Interest bearing demand deposits with other banks                      |   |                   | 36,374  |   |                    |   | 20,214 |   |
| Total cash and cash equivalents                                        |   |                   | 43,944  |   |                    |   | 26,908 |   |
| Interest bearing time deposits with other banks                        |   |                   | -       |   |                    |   | 5,000 |   |
| Securities                                                             |   |                   |    |   |                    |   |   |   |
| Available-for-sale at fair value                                       |   |                   | 139,407 |   |                    |   | 147,422 |   |
| Held-to-maturity at amortized cost (fair value: $54 and $58)           |   |                   | 53      |   |                    |   | 56 |   |
| Federal Home Loan Bank of Boston stock at cost                         |   |                   | 6,032   |   |                    |   | 6,032 |   |
| Loans held-for-sale                                                    |   |                   | 146     |   |                    |   | 1,184 |   |
| Loans receivable, net (allowance for loan losses: $3,979 and $3,920)   |   |                   | 364,854 |   |                    |   | 352,449 |   |
| Investment in real estate                                              |   |                   | 75      |   |                    |   | 75 |   |
| Other real estate owned                                                |   |                   | 452     |   |                    |   | 610 |   |
| Bank premises and equipment, net                                       |   |                   | 12,307  |   |                    |   | 12,190 |   |
| Goodwill                                                               |   |                   | 9,829   |   |                    |   | 9,829 |   |
| Intangible assets (net of accumulated amortization: $1,412 and $1,301) |   |                   | 1,131   |   |                    |   | 1,242 |   |
| Accrued interest receivable                                            |   |                   | 2,086   |   |                    |   | 2,132 |   |
| Cash surrender value of life insurance policies                        |   |                   | 3,934   |   |                    |   | 3,854 |   |
| Deferred taxes                                                         |   |                   | 1,328   |   |                    |   | 2,540 |   |
| Other assets                                                           |   |                   | 2,737   |   |                    |   | 3,947 |   |
| Total Assets                                                           |   | $                      | 588,315 |   |                    | $      | 575,470 |   |
| LIABILITIES and SHAREHOLDERS' EQUITY                                   |   |                   |    |   |                    |   |   |   |
| Deposits                                                               |   |                   |    |   |                    |   |   |   |
| Demand (non-interest bearing)                                          |   | $                      | 78,985  |   |                    | $      | 71,565 |   |
| Demand (interest bearing)                                              |   |                   | 63,651  |   |                    |   | 63,258 |   |
| Money market                                                           |   |                   | 113,316 |   |                    |   | 77,089 |   |
| Savings and other                                                      |   |                   | 93,341  |   |                    |   | 93,324 |   |
| Certificates of deposit                                                |   |                   | 109,736 |   |                    |   | 125,053 |   |
| Total deposits                                                         |   |                   | 459,029 |   |                    |   | 430,289 |   |
| Repurchase agreements                                                  |   |                   | 12,359  |   |                    |   | 13,190 |   |
| Federal Home Loan Bank of Boston advances                              |   |                   | 55,460  |   |                    |   | 72,812 |   |
| Accrued interest and other liabilities                                 |   |                   | 3,358   |   |                    |   | 4,163 |   |
| Total Liabilities                                                      |   |                   | 530,206 |   |                    |   | 520,454 |   |
| Commitments and contingencies                                          |   |                   | -       |   |                    |   | - |   |
| Shareholders' Equity                                                   |   |                   |    |   |                    |   |   |   |
| Preferred stock - $.01 per share par value                             |   |                   |    |   |                    |   |   |   |
| Authorized: 25,000; Shares issued: 8,816;                              |   |                   |    |   |                    |   |   |   |
| Liquidation preference: $1,000 per share                               |   |                   | 8,749   |   |                    |   | 8,738 |   |
| Common stock - $.10 per share par value                                |   |                   |    |   |                    |   |   |   |
| Authorized: 3,000,000;                                                 |   |                   |    |   |                    |   |   |   |
| Issued: 1,688,731 and 1,687,661                                        |   |                   | 169     |   |                    |   | 168 |   |
| Common stock warrants outstanding                                      |   |                   | 112     |   |                    |   | 112 |   |
| Paid-in capital                                                        |   |                   | 13,227  |   |                    |   | 13,200 |   |
| Retained earnings                                                      |   |                   | 37,216  |   |                    |   | 36,567 |   |
| Accumulated other comprehensive loss, net                              |   |                   | (1,364  | )      |                    |   | (3,769 | ) |
| Total Shareholders' Equity                                             |   |                   | 58,109  |   |                    |   | 55,016 |   |
| Total Liabilities and Shareholders' Equity                             |   | $                      | 588,315 |   |                    | $      | 575,470 |   |

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I

|                                                                     |   | Three months ended |   |   | Six months ended |   |
|--------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
| Periods ended June 30, (in thousands except per share amounts) unaudited |   | 2011               |   |   | 2010             |   |   | 2011 |   |   | 2010 |   |
| Interest and dividend income                                             |   |               |   |   |             |   |   |   |   |   |   |   |
| Interest and fees on loans                                               |   | $                  | 4,695  |   |             | $      | 4,601 |   |   | $ | 9,359 |   |   | $ | 9,088 |   |
| Interest on debt securities                                              |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                  |   |               | 733    |   |             |   | 1,033 |   |   |   | 1,516 |   |   |   | 1,959 |   |
| Tax exempt                                                               |   |               | 554    |   |             |   | 559 |   |   |   | 1,108 |   |   |   | 1,119 |   |
| Other interest and dividends                                             |   |               | 38     |   |             |   | 38 |   |   |   | 75 |   |   |   | 84 |   |
| Total interest and dividend income                                       |   |               | 6,020  |   |             |   | 6,231 |   |   |   | 12,058 |   |   |   | 12,250 |   |
| Interest expense                                                         |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                 |   |               | 829    |   |             |   | 1,125 |   |   |   | 1,700 |   |   |   | 2,324 |   |
| Repurchase agreements                                                    |   |               | 12     |   |             |   | 19 |   |   |   | 27 |   |   |   | 46 |   |
| Federal Home Loan Bank of Boston advances                                |   |               | 562    |   |             |   | 761 |   |   |   | 1,207 |   |   |   | 1,518 |   |
| Total interest expense                                                   |   |               | 1,403  |   |             |   | 1,905 |   |   |   | 2,934 |   |   |   | 3,888 |   |
| Net interest income                                                      |   |               | 4,617  |   |             |   | 4,326 |   |   |   | 9,124 |   |   |   | 8,362 |   |
| Provision for loan losses                                                |   |               | 350    |   |             |   | 260 |   |   |   | 680 |   |   |   | 440 |   |
| Net interest and dividend income after provision for loan losses         |   |               | 4,267  |   |             |   | 4,066 |   |   |   | 8,444 |   |   |   | 7,922 |   |
| Non-interest income                                                      |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Trust and wealth advisory                                                |   |               | 596    |   |             |   | 491 |   |   |   | 1,263 |   |   |   | 1,036 |   |
| Service charges and fees                                                 |   |               | 522    |   |             |   | 499 |   |   |   | 1,022 |   |   |   | 952 |   |
| Gains on sales of mortgage loans, net                                    |   |               | 59     |   |             |   | 122 |   |   |   | 192 |   |   |   | 164 |   |
| Mortgage servicing, net                                                  |   |               | (5     | )      |             |   | 27 |   |   |   | 26 |   |   |   | 60 |   |
| Gains on securities, net                                                 |   |               | -      |   |             |   | 1 |   |   |   | 11 |   |   |   | 1 |   |
| Other                                                                    |   |               | 58     |   |             |   | 89 |   |   |   | 117 |   |   |   | 146 |   |
| Total non-interest income                                                |   |               | 1,230  |   |             |   | 1,229 |   |   |   | 2,631 |   |   |   | 2,359 |   |
| Non-interest expense                                                     |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Salaries                                                                 |   |               | 1,657  |   |             |   | 1,668 |   |   |   | 3,386 |   |   |   | 3,239 |   |
| Employee benefits                                                        |   |               | 650    |   |             |   | 586 |   |   |   | 1,283 |   |   |   | 1,216 |   |
| Premises and equipment                                                   |   |               | 568    |   |             |   | 495 |   |   |   | 1,151 |   |   |   | 1,011 |   |
| Data processing                                                          |   |               | 285    |   |             |   | 363 |   |   |   | 662 |   |   |   | 772 |   |
| Professional fees                                                        |   |               | 300    |   |             |   | 455 |   |   |   | 577 |   |   |   | 857 |   |
| Collections and OREO                                                     |   |               | 243    |   |             |   | 21 |   |   |   | 367 |   |   |   | 43 |   |
| FDIC insurance                                                           |   |               | 182    |   |             |   | 182 |   |   |   | 405 |   |   |   | 354 |   |
| Marketing and community support                                          |   |               | 92     |   |             |   | 59 |   |   |   | 160 |   |   |   | 121 |   |
| Amortization of intangibles                                              |   |               | 56     |   |             |   | 56 |   |   |   | 111 |   |   |   | 111 |   |
| Other                                                                    |   |               | 399    |   |             |   | 360 |   |   |   | 754 |   |   |   | 833 |   |
| Total non-interest expense                                               |   |               | 4,432  |   |             |   | 4,245 |   |   |   | 8,856 |   |   |   | 8,557 |   |
| Income before income taxes                                               |   |               | 1,065  |   |             |   | 1,050 |   |   |   | 2,219 |   |   |   | 1,724 |   |
| Income tax provision                                                     |   |               | 183    |   |             |   | 172 |   |   |   | 394 |   |   |   | 251 |   |
| Net income                                                               |   | $                  | 882    |   |             | $      | 878 |   |   | $ | 1,825 |   |   | $ | 1,473 |   |
| Net income available to common shareholders                              |   | $                  | 766    |   |             | $      | 763 |   |   | $ | 1,594 |   |   | $ | 1,243 |   |
|                                                                     |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted earnings per share                                     |   | $                  | 0.45   |   |             | $      | 0.45 |   |   | $ | 0.94 |   |   | $ | 0.74 |   |
| Common dividends per share                                               |   |               | 0.28   |   |             |   | 0.28 |   |   |   | 0.56 |   |   |   | 0.56 |   |

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|                                        |   | Common Stock |      |   | Preferred |   |   |   |   |   | Paid-in  |   |   | Retained |   |   | Accumulatedother comp- |   |   | Totalshare-holders' |   |
|---------------------------------------------|--------|--------------|-----------|--------|-----------|--------|--------|--------|--------|--------|----------|--------|--------|----------|--------|--------|------------------------|--------|--------|---------------------|--------|
| (dollars in thousands) unaudited            |   | Shares       |      |   | Amount    |   |   | Stock  |   |   | Warrants |   |   | capital  |   |   | earnings               |   |   | rehensive loss      |   |   | equity |   |
| Balances at December 31, 2009               |   |         | 1,686,701 |   |      | $      | 168    |   |   | $      | 8,717    |   |   | $        | 112    |   |                   | $      | 13,177 |                |   | $ | 35,259 |   |   | $ | (5,078 | ) |   | $ | 52,355 |   |
| Net income for period                       |   |         | -         |   |      |   | -      |   |   |   | -        |   |   |     | -      |   |                   |   | -      |                |   |   | 1,473 |   |   |   | - |   |   |   | 1,473 |   |
| Other comprehensive income, net of tax      |   |         | -         |   |      |   | -      |   |   |   | -        |   |   |     | -      |   |                   |   | -      |                |   |   | - |   |   |   | 1,703 |   |   |   | 1,703 |   |
| Total comprehensive income                  |   |         |      |   |      |   |   |   |   |   |     |   |   |     |   |   |                   |   |   |                |   |   |   |   |   |   |   |   |   |   | 3,176 |   |
| Amortization (accretion) of preferred stock |   |         | -         |   |      |   | -      |   |   |   | 10       |   |   |     | -      |   |                   |   | -      |                |   |   | (10 | ) |   |   | - |   |   |   | - |   |
| Common stock dividends paid                 |   |         | -         |   |      |   | -      |   |   |   | -        |   |   |     | -      |   |                   |   | -      |                |   |   | (945 | ) |   |   | - |   |   |   | (945 | ) |
| Preferred stock dividends paid              |   |         | -         |   |      |   | -      |   |   |   | -        |   |   |     | -      |   |                   |   | -      |                |   |   | (220 | ) |   |   | - |   |   |   | (220 | ) |
| Issuance of common stock for director fees  |   |         | 960       |   |      |   | -      |   |   |   | -        |   |   |     | -      |   |                   |   | 23     |                |   |   | - |   |   |   | - |   |   |   | 23 |   |
| Balances at June 30, 2010                   |   |         | 1,687,661 |   |      | $      | 168    |   |   | $      | 8,727    |   |   | $        | 112    |   |                   | $      | 13,200 |                |   | $ | 35,557 |   |   | $ | (3,375 | ) |   | $ | 54,389 |   |
|                                        |   |         |      |   |      |   |   |   |   |   |     |   |   |     |   |   |                   |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances at December 31, 2010               |   |         | 1,687,661 |   |      | $      | 168    |   |   | $      | 8,738    |   |   | $        | 112    |   |                   | $      | 13,200 |                |   | $ | 36,567 |   |   | $ | (3,769 | ) |   | $ | 55,016 |   |
| Net income for period                       |   |         | -         |   |      |   | -      |   |   |   | -        |   |   |     | -      |   |                   |   | -      |                |   |   | 1,825 |   |   |   | - |   |   |   | 1,825 |   |
| Other comprehensive income, net of tax      |   |         | -         |   |      |   | -      |   |   |   | -        |   |   |     | -      |   |                   |   | -      |                |   |   | - |   |   |   | 2,405 |   |   |   | 2,405 |   |
| Total comprehensive income                  |   |         |      |   |      |   |   |   |   |   |     |   |   |     |   |   |                   |   |   |                |   |   |   |   |   |   |   |   |   |   | 4,230 |   |
| Amortization (accretion) of preferred stock |   |         | -         |   |      |   | -      |   |   |   | 11       |   |   |     | -      |   |                   |   | -      |                |   |   | (11 | ) |   |   | - |   |   |   | - |   |
| Common stock dividends paid                 |   |         | -         |   |      |   | -      |   |   |   | -        |   |   |     | -      |   |                   |   | -      |                |   |   | (945 | ) |   |   | - |   |   |   | (945 | ) |
| Preferred stock dividends paid              |   |         | -         |   |      |   | -      |   |   |   | -        |   |   |     | -      |   |                   |   | -      |                |   |   | (220 | ) |   |   | - |   |   |   | (220 | ) |
| Issuance of common stock for director fees  |   |         | 1,070     |   |      |   | 1      |   |   |   | -        |   |   |     | -      |   |                   |   | 27     |                |   |   | - |   |   |   | - |   |   |   | 28 |   |
| Balances June 30, 2011                      |   |         | 1,688,731 |   |      | $      | 169    |   |   | $      | 8,749    |   |   | $        | 112    |   |                   | $      | 13,227 |                |   | $ | 37,216 |   |   | $ | (1,364 | ) |   | $ | 58,109 |   |

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E

| Six months ended June 30, (in thousands) unaudited                                |   | 2011   |    |   | 2010   |   |
|-----------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Operating Activities                                                              |   |   |    |   |   |   |
| Net income                                                                        |   | $      | 1,825   |   |   | $      | 1,473 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |   |    |   |   |   |   |   |
| (Accretion), amortization and depreciation                                        |   |   |    |   |   |   |   |   |
| Securities                                                                        |   |   | 163     |   |   |   | 305 |   |
| Bank premises and equipment                                                       |   |   | 414     |   |   |   | 396 |   |
| Core deposit intangible                                                           |   |   | 111     |   |   |   | 111 |   |
| Mortgage servicing rights                                                         |   |   | 114     |   |   |   | 74 |   |
| Fair value adjustment on loans                                                    |   |   | 22      |   |   |   | 22 |   |
| Gain of calls of securities available-for-sale                                    |   |   | (11     | )      |   |   | (1 | ) |
| Write down of other real estate owned                                             |   |   | 163     |   |   |   | - |   |
| Provision for loan losses                                                         |   |   | 680     |   |   |   | 440 |   |
| Decrease in loans held-for-sale                                                   |   |   | 1,038   |   |   |   | 152 |   |
| Increase in deferred loan origination fees and costs, net                         |   |   | (116    | )      |   |   | (44 | ) |
| Mortgage servicing rights originated                                              |   |   | (106    | )      |   |   | (112 | ) |
| Decrease (increase) in mortgage servicing rights impairment reserve               |   |   | 15      |   |   |   | (5 | ) |
| Decrease (increase) in interest receivable                                        |   |   | 45      |   |   |   | (74 | ) |
| Deferred tax benefit                                                              |   |   | (27     | )      |   |   | (42 | ) |
| Decrease in prepaid expenses                                                      |   |   | 391     |   |   |   | 415 |   |
| Increase in cash surrender value of life insurance policies                       |   |   | (80     | )      |   |   | (84 | ) |
| Decrease (increase) in income tax receivable                                      |   |   | 715     |   |   |   | (194 | ) |
| Decrease in other assets                                                          |   |   | 17      |   |   |   | 40 |   |
| (Decrease) increase in accrued expenses                                           |   |   | (29     | )      |   |   | 46 |   |
| Decrease in interest payable                                                      |   |   | (128    | )      |   |   | (85 | ) |
| (Decrease) increase in other liabilities                                          |   |   | (613    | )      |   |   | 130 |   |
| Issuance of shares for directors’ fee                                       |   |   | 27      |   |   |   | 23 |   |
| Net cash provided by operating activities                                         |   |   | 4,631   |   |   |   | 2,986 |   |
| Investing Activities                                                              |   |   |    |   |   |   |   |   |
| Proceeds from maturities of interest-bearing time deposits                        |   |   | 5,000   |   |   |   | - |   |
| Purchases of securities available-for-sale                                        |   |   | (15,034 | )      |   |   | (37,987 | ) |
| Proceeds from calls of securities available-for-sale                              |   |   | 19,000  |   |   |   | 12,190 |   |
| Proceeds from maturities of securities available-for-sale                         |   |   | 7,507   |   |   |   | 17,645 |   |
| Proceeds from maturities of securities held-to-maturity                           |   |   | 3       |   |   |   | 3 |   |
| Loan originations and principle collections, net                                  |   |   | (13,326 | )      |   |   | (15,029 | ) |
| Recoveries of loans previously charged-off                                        |   |   | 22      |   |   |   | 14 |   |
| Proceeds from sale of other real estate owned                                     |   |   | 308     |   |   |   | - |   |
| Capital expenditures                                                              |   |   | (467    | )      |   |   | (1,416 | ) |
| Net cash provided (utilized) by investing activities                              |   |   | 3,013   |   |   |   | (24,580 | ) |
| Financing Activities                                                              |   |   |    |   |   |   |   |   |
| Increase in deposit transaction accounts, net                                     |   |   | 44,058  |   |   |   | 27,560 |   |
| Decrease in time deposits, net                                                    |   |   | (15,318 | )      |   |   | (21,772 | ) |
| Decrease in securities sold under agreements to repurchase, net                   |   |   | (831    | )      |   |   | (3,295 | ) |
| Principal payments on Federal Home Loan Bank of Boston advances                   |   |   | (17,352 | )      |   |   | (1,418 | ) |
| Common stock dividends paid                                                       |   |   | (945    | )      |   |   | (945 | ) |
| Preferred stock dividends paid                                                    |   |   | (220    | )      |   |   | (220 | ) |
| Net cash provided (utilized) by financing activities                              |   |   | 9,392   |   |   |   | (90 | ) |
| Net increase (decrease) in cash and cash equivalents                              |   |   | 17,036  |   |   |   | (21,684 | ) |
| Cash and cash equivalents, beginning of period                                    |   |   | 26,908  |   |   |   | 43,298 |   |
| Cash and cash equivalents, end of period                                          |   | $      | 43,944  |   |   | $      | 21,614 |   |
| Cash paid during period                                                           |   |   |    |   |   |   |   |   |
| Interest                                                                          |   | $      | 3,062   |   |   | $      | 3,973 |   |
| Income taxes                                                                      |   |   | 449     |   |   |   | 79 |   |
| Non-cash transfers                                                                |   |   |    |   |   |   |   |   |
| Transfer from loans to other real estate owned                                    |   |   | 321     |   |   |   | - |   |

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| (in thousands)                         |   | Amortizedcost (1) |    |   | Gross un-realized gains |   |   | Gross un-realized losses |   |   | Fair value |   |
|----------------------------------------|--------|-------------------|---------|--------|-------------------------|--------|--------|--------------------------|--------|--------|------------|--------|
| June 30, 2011                          |   |              |    |   |                    |   |   |                     |   |   |       |   |
| Available-for-sale                     |   |              |    |   |                    |   |   |                     |   |   |       |   |
| U.S. Treasury notes                    |   | $                 | 4,999   |   |                    | $      | 373    |                     |   | $      | -          |   |   | $ | 5,372 |   |
| U.S. Government Agency notes           |   |              | 22,573  |   |                    |   | 422    |                     |   |   | -          |   |   |   | 22,995 |   |
| Municipal bonds                        |   |              | 51,388  |   |                    |   | 459    |                     |   |   | (3,062     | )      |   |   | 48,785 |   |
| Mortgage backed securities             |   |              |    |   |                    |   |   |                     |   |   |       |   |   |   |   |   |
| U.S. Government Agencies               |   |              | 30,895  |   |                    |   | 938    |                     |   |   | (1         | )      |   |   | 31,832 |   |
| Collateralized mortgage obligations    |   |              |    |   |                    |   |   |                     |   |   |       |   |   |   |   |   |
| U.S. Government Agencies               |   |              | 8,052   |   |                    |   | 41     |                     |   |   | -          |   |   |   | 8,093 |   |
| Non-agency                             |   |              | 16,624  |   |                    |   | 499    |                     |   |   | (282       | )      |   |   | 16,841 |   |
| SBA bonds                              |   |              | 4,062   |   |                    |   | 80     |                     |   |   | -          |   |   |   | 4,142 |   |
| Corporate bonds                        |   |              | 1,095   |   |                    |   | 28     |                     |   |   | -          |   |   |   | 1,123 |   |
| Preferred Stock                        |   |              | 20      |   |                    |   | 204    |                     |   |   | -          |   |   |   | 224 |   |
| Total securities available-for-sale    |   | $                 | 139,708 |   |                    | $      | 3,044  |                     |   | $      | (3,345     | )      |   | $ | 139,407 |   |
| Held-to-maturity                       |   |              |    |   |                    |   |   |                     |   |   |       |   |   |   |   |   |
| Mortgage backed security               |   | $                 | 53      |   |                    | $      | 1      |                     |   | $      | -          |   |   | $ | 54 |   |
| Non-marketable securities              |   |              |    |   |                    |   |   |                     |   |   |       |   |   |   |   |   |
| Federal Home Loan Bank of Boston stock |   | $                 | 6,032   |   |                    | $      | -      |                     |   | $      | -          |   |   | $ | 6,032 |   |
| December 31, 2010                      |   |              |    |   |                    |   |   |                     |   |   |       |   |   |   |   |   |
| Available-for-sale                     |   |              |    |   |                    |   |   |                     |   |   |       |   |   |   |   |   |
| U.S. Treasury notes                    |   | $                 | 4,999   |   |                    | $      | 197    |                     |   | $      | -          |   |   | $ | 5,196 |   |
| U.S. Government Agency notes           |   |              | 41,590  |   |                    |   | 380    |                     |   |   | (92        | )      |   |   | 41,878 |   |
| Municipal bonds                        |   |              | 51,330  |   |                    |   | 139    |                     |   |   | (5,371     | )      |   |   | 46,098 |   |
| Mortgage backed securities             |   |              |    |   |                    |   |   |                     |   |   |       |   |   |   |   |   |
| U.S. Government Agencies               |   |              | 19,190  |   |                    |   | 566    |                     |   |   | (20        | )      |   |   | 19,736 |   |
| Collateralized mortgage obligations    |   |              |    |   |                    |   |   |                     |   |   |       |   |   |   |   |   |
| U.S. Government Agencies               |   |              | 9,283   |   |                    |   | 29     |                     |   |   | (1         | )      |   |   | 9,311 |   |
| Non-agency                             |   |              | 19,002  |   |                    |   | 714    |                     |   |   | (599       | )      |   |   | 19,117 |   |
| SBA bonds                              |   |              | 4,831   |   |                    |   | 70     |                     |   |   | -          |   |   |   | 4,901 |   |
| Corporate bonds                        |   |              | 1,089   |   |                    |   | 41     |                     |   |   | -          |   |   |   | 1,130 |   |
| Preferred Stock                        |   |              | 20      |   |                    |   | 35     |                     |   |   | -          |   |   |   | 55 |   |
| Total securities available-for-sale    |   | $                 | 151,334 |   |                    | $      | 2,171  |                     |   | $      | (6,083     | )      |   | $ | 147,422 |   |
| Held-to-maturity                       |   |              |    |   |                    |   |   |                     |   |   |       |   |   |   |   |   |
| Mortgage backed security               |   | $                 | 56      |   |                    | $      | 2      |                     |   | $      | -          |   |   | $ | 58 |   |
| Non-marketable securities              |   |              |    |   |                    |   |   |                     |   |   |       |   |   |   |   |   |
| Federal Home Loan Bank of Boston stock |   | $                 | 6,032   |   |                    | $      | -      |                     |   | $      | -          |   |   | $ | 6,032 |   |

| (1) | Net of other-than-temporary impairment write-down recognized in earnings. |
|-----|---------------------------------------------------------------------------|

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|                                       |   | Less than 12 Months |   |   | 12 Months or Longer |   |   | Total     |   |
|--------------------------------------------|--------|---------------------|--------|--------|---------------------|--------|--------|-----------|--------|
| (in thousands)                             |   | Fairvalue           |   |   | Unrealizedlosses    |   |   | Fairvalue |   |   | Unrealized losses |   |   | Fairvalue |   |   | Unrealizedlosses |   |
| June 30, 2011                              |   |                |   |   |                |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale                         |   |                |   |   |                |   |   |      |   |   |   |   |   |   |   |   |   |   |
| U.S. Government Agency notes               |   | $                   | -      |   |                | $      | -      |      |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Municipal Bonds                            |   |                | 14,410 |   |                |   | 630    |      |   |   | 15,321 |   |   |   | 2,432 |   |   |   | 29,731 |   |   |   | 3,062 |   |
| Mortgage backed securities                 |   |                | 58     |   |                |   | 1      |      |   |   | - |   |   |   | - |   |   |   | 58 |   |   |   | 1 |   |
| Collateralized mortgage obligations        |   |                |   |   |                |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government Agencies                   |   |                | -      |   |                |   | -      |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Non-agency                                 |   |                | 1,004  |   |                |   | 15     |      |   |   | 2,068 |   |   |   | 151 |   |   |   | 3,072 |   |   |   | 166 |   |
| Total temporarily impaired securities      |   |                | 15,472 |   |                |   | 646    |      |   |   | 17,389 |   |   |   | 2,583 |   |   |   | 32,861 |   |   |   | 3,229 |   |
| Other-than-temporarily impaired securities |   |                |   |   |                |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Collateralized mortgage obligations        |   |                |   |   |                |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-agency                                 |   |                | 3,186  |   |                |   | 71     |      |   |   | 750 |   |   |   | 45 |   |   |   | 3,936 |   |   |   | 116 |   |
| Total temporarily impaired and other-than- |   |                |   |   |                |   |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| temporarily impaired securities            |   | $                   | 18,658 |   |                | $      | 717    |      |   | $ | 18,139 |   |   | $ | 2,628 |   |   | $ | 36,797 |   |   | $ | 3,345 |   |

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| Six months ended June 30 (in thousands)                                         |   | 2011   |   |   | 2010   |   |
|---------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Balance, beginning of period                                                    |   | $      | 1,128  |   |   | $      | 1,128 |   |
| Credit component on debt securities in which OTTI was not previously recognized |   |   | -      |   |   |   | - |   |
| Balance, end of period                                                          |   | $      | 1,128  |   |   | $      | 1,128 |   |

| (in thousands)                                |   | June 30, 2011 |    |   | December 31, 2010 |   |
|-----------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
| Residential 1-4 family                        |   | $             | 182,764 |   |              | $      | 173,931 |   |
| Residential 5+ multifamily                    |   |          | 3,068   |   |              |   | 2,889 |   |
| Construction of residential 1-4 family        |   |          | 8,046   |   |              |   | 8,949 |   |
| Home equity credit                            |   |          | 33,657  |   |              |   | 34,164 |   |
| Residential real estate                       |   |          | 227,535 |   |              |   | 219,933 |   |
| Commercial                                    |   |          | 79,976  |   |              |   | 75,495 |   |
| Construction of commercial                    |   |          | 4,502   |   |              |   | 7,312 |   |
| Commercial real estate                        |   |          | 84,478  |   |              |   | 82,807 |   |
| Farm land                                     |   |          | 5,767   |   |              |   | 5,690 |   |
| Vacant land                                   |   |          | 12,687  |   |              |   | 12,979 |   |
| Real estate secured                           |   |          | 330,467 |   |              |   | 321,409 |   |
| Commercial and industrial                     |   |          | 30,060  |   |              |   | 25,123 |   |
| Municipal                                     |   |          | 2,768   |   |              |   | 4,338 |   |
| Consumer                                      |   |          | 4,599   |   |              |   | 4,677 |   |
| Loans receivable, gross                       |   |          | 367,894 |   |              |   | 355,547 |   |
| Deferred loan origination fees and costs, net |   |          | 939     |   |              |   | 822 |   |
| Allowance for loan losses                     |   |          | (3,979  | )      |              |   | (3,920 | ) |
| Loans receivable, net                         |   | $             | 364,854 |   |              | $      | 352,449 |   |
| Loans held-for-sale                           |   |          |    |   |              |   |   |   |
| Residential 1-4 family                        |   | $             | 146     |   |              | $      | 1,184 |   |

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| June 30, 2011 (in thousands)           |   | Pass   |    |   | Special mention |   |   | Substandard |   |   | Doubtful |   |   | Loss   |   |   | Total  |   |
|----------------------------------------|--------|--------|---------|--------|-----------------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|--------|--------|--------|
| Residential 1-4 family                 |   | $      | 163,345 |   |            | $      | 13,210 |        |   | $      | 6,209    |   |   | $      | -      |   |   | $      | - |   |   | $ | 182,764 |   |
| Residential 5+ multifamily             |   |   | 2,538   |   |            |   | 530    |        |   |   | -        |   |   |   | -      |   |   |   | - |   |   |   | 3,068 |   |
| Construction of residential 1-4 family |   |   | 3,971   |   |            |   | 416    |        |   |   | 3,659    |   |   |   | -      |   |   |   | - |   |   |   | 8,046 |   |
| Home equity credit                     |   |   | 30,960  |   |            |   | 1,465  |        |   |   | 1,232    |   |   |   | -      |   |   |   | - |   |   |   | 33,657 |   |
| Residential real estate                |   |   | 200,814 |   |            |   | 15,621 |        |   |   | 11,100   |   |   |   | -      |   |   |   | - |   |   |   | 227,535 |   |
| Commercial                             |   |   | 60,896  |   |            |   | 6,101  |        |   |   | 12,979   |   |   |   | -      |   |   |   | - |   |   |   | 79,976 |   |
| Construction of commercial             |   |   | 3,840   |   |            |   | 191    |        |   |   | 471      |   |   |   | -      |   |   |   | - |   |   |   | 4,502 |   |
| Commercial real estate                 |   |   | 64,736  |   |            |   | 6,292  |        |   |   | 13,450   |   |   |   | -      |   |   |   | - |   |   |   | 84,478 |   |
| Farm land                              |   |   | 3,139   |   |            |   | 1,779  |        |   |   | 849      |   |   |   | -      |   |   |   | - |   |   |   | 5,767 |   |
| Vacant land                            |   |   | 7,603   |   |            |   | 894    |        |   |   | 4,190    |   |   |   | -      |   |   |   | - |   |   |   | 12,687 |   |
| Real estate secured                    |   |   | 276,292 |   |            |   | 24,586 |        |   |   | 29,589   |   |   |   | -      |   |   |   | - |   |   |   | 330,467 |   |
| Commercial and industrial              |   |   | 20,030  |   |            |   | 8,315  |        |   |   | 1,715    |   |   |   | -      |   |   |   | - |   |   |   | 30,060 |   |
| Municipal                              |   |   | 2,768   |   |            |   | -      |        |   |   | -        |   |   |   | -      |   |   |   | - |   |   |   | 2,768 |   |
| Consumer                               |   |   | 4,330   |   |            |   | 196    |        |   |   | 73       |   |   |   | -      |   |   |   | - |   |   |   | 4,599 |   |
| Loans receivable, gross                |   | $      | 303,420 |   |            | $      | 33,097 |        |   | $      | 31,377   |   |   | $      | -      |   |   | $      | - |   |   | $ | 367,894 |   |

| June 30, 2011 (in thousands)                  |   | Pass   |    |   | Special mention |   |   | Substandard |   |   | Doubtful |   |   | Loss   |   |   | Total  |   |
|-----------------------------------------------|--------|--------|---------|--------|-----------------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|--------|--------|--------|
| Performing loans                              |   | $      | 303,151 |   |            | $      | 33,097 |        |   | $      | -        |   |   | $      | -      |   |   | $      | - |   |   | $ | 336,248 |   |
| Potential problem loans                       |   |   | -       |   |            |   | -      |        |   |   | 15,154   |   |   |   | -      |   |   |   | - |   |   |   | 15,154 |   |
| Troubled debt restructurings – accruing |   |   | 269     |   |            |   | -      |        |   |   | 1,661    |   |   |   | -      |   |   |   | - |   |   |   | 1,930 |   |
| Troubled debt restructuring - non-accrual     |   |   | -       |   |            |   | -      |        |   |   | 7,691    |   |   |   | -      |   |   |   | - |   |   |   | 7,691 |   |
| All other non-accrual loans                   |   |   | -       |   |            |   | -      |        |   |   | 6,871    |   |   |   | -      |   |   |   | - |   |   |   | 6,871 |   |
| Impaired loans                                |   |   | 269     |   |            |   | -      |        |   |   | 16,223   |   |   |   | -      |   |   |   | - |   |   |   | 16,492 |   |
| Loans receivable, gross                       |   | $      | 303,420 |   |            | $      | 33,097 |        |   | $      | 31,377   |   |   | $      | -      |   |   | $      | - |   |   | $ | 367,894 |   |

| (in thousands)                                               |   | June 30, 2011 |   |   | December 31, 2010 |   |
|--------------------------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Troubled debt restructurings – accruing                |   | $             | 1,930  |   |              | $      | 5,330 |   |
| Troubled debt restructuring - non-accrual                    |   |          | 7,691  |   |              |   | 4,254 |   |
| All other non-accrual loans                                  |   |          | 6,871  |   |              |   | 5,791 |   |
| Impaired loans                                               |   | $             | 16,492 |   |              | $      | 15,375 |   |
| Commitments to lend additional amounts to impaired borrowers |   | $             | -      |   |              | $      | - |   |

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Table of Contents

| June 30, 2011 (in thousands) |   | Pass   |    |   | Special mention |   |   | Substandard |   |   | Doubtful |   |   | Loss   |   |   | Total  |   |
|------------------------------|--------|--------|---------|--------|-----------------|--------|--------|-------------|--------|--------|----------|--------|--------|--------|--------|--------|--------|--------|
| Current                      |   | $      | 301,609 |   |            | $      | 30,228 |        |   | $      | 20,121   |   |   | $      | -      |   |   | $      | - |   |   | $ | 351,958 |   |
| Past due 001-029             |   |   | 1,726   |   |            |   | 1,950  |        |   |   | 3,571    |   |   |   | -      |   |   |   | - |   |   |   | 7,247 |   |
| Past due 030-059             |   |   | 69      |   |            |   | 731    |        |   |   | 376      |   |   |   | -      |   |   |   | - |   |   |   | 1,176 |   |
| Past due 060-089             |   |   | 16      |   |            |   | 188    |        |   |   | 925      |   |   |   | -      |   |   |   | - |   |   |   | 1,129 |   |
| Past due 090-179             |   |   | -       |   |            |   | -      |        |   |   | 1,038    |   |   |   | -      |   |   |   | - |   |   |   | 1,038 |   |
| Past due 180+                |   |   | -       |   |            |   | -      |        |   |   | 5,346    |   |   |   | -      |   |   |   | - |   |   |   | 5,346 |   |
| Loans receivable, gross      |   | $      | 303,420 |   |            | $      | 33,097 |        |   | $      | 31,377   |   |   | $      | -      |   |   | $      | - |   |   | $ | 367,894 |   |

|                                |   |    |    |   | Past due  |   |   |       |   |
|-------------------------------------|--------|---------|---------|--------|-----------|--------|--------|------------|--------|
| June 30, 2011(in thousands)         |   | Current |    |   | 1-29 days |   |   | 30-59 days |   |   | 60-89 days |   |   | 90-179 days |   |   | 180 days and over |   |   | 30 days and over |   |   | Accruing 90 days and over |   |   | Non- accrual |   |
| Residential 1-4 family              |   | $       | 176,930 |   |      | $      | 3,748  |       |   | $ | 445 |   |   | $ | 303 |   |   | $ | 504 |   |   | $ | 834 |   |   | $ | 2,086 |   |   | $ | - |   |   | $ | 6,288 |   |
| Residential 5+ multifamily          |   |    | 2,794   |   |      |   | -      |       |   |   | 274 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 274 |   |   |   | - |   |   |   | - |   |
| Residential 1-4 family construction |   |    | 8,046   |   |      |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Home equity credit                  |   |    | 32,850  |   |      |   | 645    |       |   |   | 37 |   |   |   | 86 |   |   |   | 14 |   |   |   | 24 |   |   |   | 161 |   |   |   | - |   |   |   | 200 |   |
| Residential real estate             |   |    | 220,620 |   |      |   | 4,393  |       |   |   | 756 |   |   |   | 389 |   |   |   | 518 |   |   |   | 858 |   |   |   | 2,521 |   |   |   | - |   |   |   | 6,488 |   |
| Commercial                          |   |    | 76,815  |   |      |   | 1,717  |       |   |   | 283 |   |   |   | 125 |   |   |   | 495 |   |   |   | 541 |   |   |   | 1,444 |   |   |   | - |   |   |   | 3,134 |   |
| Construction of commercial          |   |    | 4,482   |   |      |   | 21     |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Commercial real estate              |   |    | 81,297  |   |      |   | 1,738  |       |   |   | 283 |   |   |   | 125 |   |   |   | 495 |   |   |   | 541 |   |   |   | 1,444 |   |   |   | - |   |   |   | 3,134 |   |
| Farm land                           |   |    | 5,334   |   |      |   | 433    |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Vacant land                         |   |    | 8,645   |   |      |   | 16     |       |   |   | 64 |   |   |   | 565 |   |   |   | - |   |   |   | 3,397 |   |   |   | 4,026 |   |   |   | - |   |   |   | 3,933 |   |
| Real estate secured                 |   |    | 315,896 |   |      |   | 6,580  |       |   |   | 1,103 |   |   |   | 1,079 |   |   |   | 1,013 |   |   |   | 4,796 |   |   |   | 7,991 |   |   |   | - |   |   |   | 13,555 |   |
| Commercial and industrial           |   |    | 28,842  |   |      |   | 590    |       |   |   | 20 |   |   |   | 34 |   |   |   | 25 |   |   |   | 550 |   |   |   | 629 |   |   |   | - |   |   |   | 1,008 |   |
| Municipal                           |   |    | 2,768   |   |      |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                            |   |    | 4,452   |   |      |   | 77     |       |   |   | 53 |   |   |   | 16 |   |   |   | - |   |   |   | - |   |   |   | 69 |   |   |   | - |   |   |   | - |   |
| Loans receivable, gross             |   | $       | 351,958 |   |      | $      | 7,247  |       |   | $ | 1,176 |   |   | $ | 1,129 |   |   | $ | 1,038 |   |   | $ | 5,346 |   |   | $ | 8,689 |   |   | $ | - |   |   | $ | 14,563 |   |

|                        |   | Three months ended June 30 |   |   | Six months ended June 30 |   |
|-----------------------------|--------|----------------------------|--------|--------|--------------------------|--------|
| (in thousands)              |   | Beginning balance          |   |   | Provision                |   |   | Charge-offs |   |   | Reco-veries |   |   | Ending balance |   |   | Beginning balance |   |   | Provision |   |   | Charge-offs |   |   | Reco-veries |   |   | Ending balance |   |
| 2011 Periods                |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential                 |   | $                          | 1,462  |   |                     | $      | 139 |   |   | $ | (20 | ) |   | $ | 2 |   |   | $ | 1,583 |   |   | $ | 1,504 |   |   | $ | 197 |   |   | $ | (121 | ) |   | $ | 3 |   |   | $ | 1,583 |   |
| Commercial                  |   |                       | 1,343  |   |                     |   | (9 | ) |   |   | (96 | ) |   |   | - |   |   |   | 1,238 |   |   |   | 1,132 |   |   |   | 282 |   |   |   | (175 | ) |   |   | - |   |   |   | 1,239 |   |
| Land                        |   |                       | 296    |   |                     |   | (25 | ) |   |   | - |   |   |   | - |   |   |   | 271 |   |   |   | 392 |   |   |   | (42 | ) |   |   | (79 | ) |   |   | - |   |   |   | 271 |   |
| Real estate                 |   |                       | 3,101  |   |                     |   | 105 |   |   |   | (116 | ) |   |   | 2 |   |   |   | 3,092 |   |   |   | 3,028 |   |   |   | 437 |   |   |   | (375 | ) |   |   | 3 |   |   |   | 3,093 |   |
| Commercial & industrial |   |                       | 531    |   |                     |   | 79 |   |   |   | (89 | ) |   |   | - |   |   |   | 521 |   |   |   | 541 |   |   |   | 69 |   |   |   | (89 | ) |   |   | - |   |   |   | 521 |   |
| Municipal                   |   |                       | 55     |   |                     |   | (27 | ) |   |   | - |   |   |   | - |   |   |   | 28 |   |   |   | 51 |   |   |   | (23 | ) |   |   | - |   |   |   | - |   |   |   | 28 |   |
| Consumer                    |   |                       | 167    |   |                     |   | 70 |   |   |   | (159 | ) |   |   | 13 |   |   |   | 91 |   |   |   | 164 |   |   |   | 86 |   |   |   | (179 | ) |   |   | 19 |   |   |   | 92 |   |
| Unallocated                 |   |                       | 124    |   |                     |   | 123 |   |   |   | - |   |   |   | - |   |   |   | 247 |   |   |   | 136 |   |   |   | 111 |   |   |   | - |   |   |   | - |   |   |   | 245 |   |
| Totals                      |   | $                          | 3,978  |   |                     | $      | 350 |   |   | $ | (364 | ) |   | $ | 15 |   |   | $ | 3,979 |   |   | $ | 3,920 |   |   | $ | 680 |   |   | $ | (643 | ) |   | $ | 22 |   |   | $ | 3,979 |   |
| 2010 Periods                |   |                       |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Totals                      |   | $                          | 3,649  |   |                     | $      | 260 |   |   | $ | (149 | ) |   | $ | 8 |   |   | $ | 3,768 |   |   | $ | 3,473 |   |   | $ | 440 |   |   | $ | (159 | ) |   | $ | 14 |   |   | $ | 3,768 |   |

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Table of Contents

|                                   |   | Collectively evaluated |    |   | Individually evaluated |   |   | Total portfolio |   |
|----------------------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|-----------------|--------|
| June 30, 2011(in thousands)            |   | Loanbalance            |    |   | Allowance              |   |   | Loanbalance     |   |   | Allowance |   |   | LoanBalance |   |   | Allowance |   |
| Residential 1-4 family                 |   | $                      | 177,466 |   |                   | $      | 749    |            |   | $ | 5,299 |   |   | $ | 427 |   |   | $ | 182,764 |   |   | $ | 1,176 |   |
| Residential 5+ multifamily             |   |                   | 3,068   |   |                   |   | 20     |            |   |   | - |   |   |   | - |   |   |   | 3,068 |   |   |   | 20 |   |
| Construction of residential 1-4 family |   |                   | 4,387   |   |                   |   | 16     |            |   |   | 3,659 |   |   |   | - |   |   |   | 8,046 |   |   |   | 16 |   |
| Home equity credit                     |   |                   | 33,418  |   |                   |   | 371    |            |   |   | 239 |   |   |   | - |   |   |   | 33,657 |   |   |   | 371 |   |
| Residential real estate                |   |                   | 218,339 |   |                   |   | 1,156  |            |   |   | 9,197 |   |   |   | 427 |   |   |   | 227,535 |   |   |   | 1,583 |   |
| Commercial                             |   |                   | 71,895  |   |                   |   | 908    |            |   |   | 8,081 |   |   |   | 280 |   |   |   | 79,976 |   |   |   | 1,188 |   |
| Construction of commercial             |   |                   | 4,502   |   |                   |   | 51     |            |   |   | - |   |   |   | - |   |   |   | 4,502 |   |   |   | 51 |   |
| Commercial real estate                 |   |                   | 76,397  |   |                   |   | 959    |            |   |   | 8,081 |   |   |   | 280 |   |   |   | 84,478 |   |   |   | 1,239 |   |
| Farm land                              |   |                   | 5,767   |   |                   |   | 56     |            |   |   | - |   |   |   | - |   |   |   | 5,767 |   |   |   | 56 |   |
| Vacant land                            |   |                   | 8,599   |   |                   |   | 101    |            |   |   | 4,088 |   |   |   | 114 |   |   |   | 12,687 |   |   |   | 215 |   |
| Real estate secured                    |   |                   | 309,102 |   |                   |   | 2,272  |            |   |   | 21,366 |   |   |   | 821 |   |   |   | 330,467 |   |   |   | 3,093 |   |
| Commercial and industrial              |   |                   | 28,623  |   |                   |   | 390    |            |   |   | 1,437 |   |   |   | 131 |   |   |   | 30,060 |   |   |   | 521 |   |
| Municipal                              |   |                   | 2,768   |   |                   |   | 28     |            |   |   | - |   |   |   | - |   |   |   | 2,768 |   |   |   | 28 |   |
| Consumer                               |   |                   | 4,476   |   |                   |   | 46     |            |   |   | 122 |   |   |   | 46 |   |   |   | 4,599 |   |   |   | 92 |   |
| Unallocated allowance                  |   |                   | -       |   |                   |   | -      |            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 245 |   |
| Totals                                 |   | $                      | 344,969 |   |                   | $      | 2,736  |            |   | $ | 22,925 |   |   | $ | 998 |   |   | $ | 367,894 |   |   | $ | 3,979 |   |

|                        |   | Collectively evaluated |    |   | Individually evaluated |   |   | Total portfolio |   |
|-----------------------------|--------|------------------------|---------|--------|------------------------|--------|--------|-----------------|--------|
| June 30, 2011(in thousands) |   | Loanbalance            |    |   | Allowance              |   |   | Loanbalance     |   |   | Allowance |   |   | LoanBalance |   |   | Allowance |   |
| Performing loans            |   | $                      | 335,708 |   |                   | $      | 2,386  |            |   | $ | 540 |   |   | $ | 46 |   |   | $ | 336,247 |   |   | $ | 2,432 |   |
| Potential problem loans     |   |                   | 9,261   |   |                   |   | 350    |            |   |   | 5,893 |   |   |   | 462 |   |   |   | 15,155 |   |   |   | 812 |   |
| Impaired loans              |   |                   | -       |   |                   |   | -      |            |   |   | 16,492 |   |   |   | 490 |   |   |   | 16,492 |   |   |   | 490 |   |
| Unallocated allowance       |   |                   | -       |   |                   |   | -      |            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 245 |   |
| Totals                      |   | $                      | 344,969 |   |                   | $      | 2,736  |            |   | $ | 22,925 |   |   | $ | 998 |   |   | $ | 367,894 |   |   | $ | 3,979 |   |

|                      |   | Impaired loans with specific allowance |   |   | Impaired loans with no specific allowance |   |
|---------------------------|--------|----------------------------------------|--------|--------|-------------------------------------------|--------|
| June 30, 2011             |   | Loan balance                           |   |   | Specific                                  |   |   | Income |   |   | Loan balance |   |   | Income |   |
| (in thousands)            |   | Book                                   |   |   | Note                                      |   |   | Average |   |   | Allowance |   |   | recognized |   |   | Book |   |   | Note |   |   | Average |   |   | recognized |   |
| Residential 1-4 family    |   | $                                      | 889    |   |                                      | $      | 922 |   |   | $ | 1,473 |   |   | $ | 142 |   |   | $ | 9 |   |   | $ | 5,400 |   |   | $ | 5,459 |   |   | $ | 4,453 |   |   | $ | 42 |   |
| Home equity credit        |   |                                   | -      |   |                                      |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 200 |   |   |   | 203 |   |   |   | 265 |   |   |   | 1 |   |
| Residential real estate   |   |                                   | 889    |   |                                      |   | 922 |   |   |   | 1,473 |   |   |   | 142 |   |   |   | 9 |   |   |   | 5,600 |   |   |   | 5,662 |   |   |   | 4,718 |   |   |   | 43 |   |
| Commercial                |   |                                   | 2,671  |   |                                      |   | 2,790 |   |   |   | 2,657 |   |   |   | 154 |   |   |   | 61 |   |   |   | 2,123 |   |   |   | 2,581 |   |   |   | 2,137 |   |   |   | 14 |   |
| Vacant land               |   |                                   | 669    |   |                                      |   | 774 |   |   |   | 735 |   |   |   | 64 |   |   |   | - |   |   |   | 3,263 |   |   |   | 3,627 |   |   |   | 3,215 |   |   |   | - |   |
| Real estate secured       |   |                                   | 4,229  |   |                                      |   | 4,486 |   |   |   | 4,865 |   |   |   | 360 |   |   |   | 70 |   |   |   | 10,986 |   |   |   | 11,870 |   |   |   | 10,070 |   |   |   | 57 |   |
| Commercial and industrial |   |                                   | 154    |   |                                      |   | 155 |   |   |   | 333 |   |   |   | 130 |   |   |   | 2 |   |   |   | 1,123 |   |   |   | 1,744 |   |   |   | 778 |   |   |   | 1 |   |
| Consumer                  |   |                                   | -      |   |                                      |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 143 |   |   |   | 29 |   |   |   | - |   |
| Totals                    |   | $                                      | 4,383  |   |                                      | $      | 4,641 |   |   | $ | 5,198 |   |   | $ | 490 |   |   | $ | 72 |   |   | $ | 12,109 |   |   | $ | 13,757 |   |   | $ | 10,877 |   |   | $ | 58 |   |

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| June 30, (in thousands)                        |   | 2011   |    |   | 2010   |   |
|------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Residential mortgage loans serviced for others |   | $      | 101,584 |   |   | $      | 78,119 |   |
| Fair value of mortgage servicing rights        |   |   | 760     |   |   |   | 517 |   |

|                                          |   | Three months |   |   | Six months |   |
|-----------------------------------------------|--------|--------------|--------|--------|------------|--------|
| Periods ended June 30, (in thousands)         |   | 2011         |   |   | 2010       |   |   | 2011 |   |   | 2010 |   |
| Loan Servicing Rights                         |   |         |   |   |       |   |   |   |   |   |   |   |
| Balance, beginning of period                  |   | $            | 701    |   |       | $      | 424 |   |   | $ | 683 |   |   | $ | 427 |   |
| Originated                                    |   |         | 29     |   |       |   | 84 |   |   |   | 105 |   |   |   | 112 |   |
| Amortization (1)                              |   |         | (56    | )      |       |   | (43 | ) |   |   | (114 | ) |   |   | (74 | ) |
| Balance, end of period                        |   |         | 674    |   |       |   | 465 |   |   |   | 674 |   |   |   | 465 |   |
| Valuation Allowance                           |   |         |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Balance, beginning of period                  |   |         | (8     | )      |       |   | (28 | ) |   |   | (10 | ) |   |   | (30 | ) |
| (Increase) decrease in impairment reserve (1) |   |         | (17    | )      |       |   | 4 |   |   |   | (15 | ) |   |   | 6 |   |
| Balance, end of period                        |   |         | (25    | )      |       |   | (24 | ) |   |   | (25 | ) |   |   | (24 | ) |
| Loan servicing rights, net                    |   | $            | 649    |   |       | $      | 441 |   |   | $ | 649 |   |   | $ | 441 |   |

| (1) | Amortization expense and changes in the impairment reserve are recorded in loan servicing fee income. |
|-----|-------------------------------------------------------------------------------------------------------|

|  in thousands)                           |   | June 30, 2011 |    |   | December 31, 2010 |   |
|-----------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
| Securities available-for-sale (at fair value) |   | $             | 61,388  |   |              | $      | 62,764 |   |
| Loans receivable                              |   |          | 118,290 |   |              |   | 114,424 |   |
| Total pledged assets                          |   | $             | 179,678 |   |              | $      | 177,188 |   |

|                                                                     |   | Three months |   |   | Six months |   |
|--------------------------------------------------------------------------|--------|--------------|--------|--------|------------|--------|
| Periods ended June 30, (in thousands, except per share amounts)          |   | 2011         |   |   | 2010       |   |   | 2011 |   |   | 2010 |   |
| Net income                                                               |   | $            | 882    |   |       | $      | 878 |   |   | $ | 1,825 |   |   | $ | 1,473 |   |
| Preferred stock net accretion                                            |   |         | 6      |   |       |   | 5 |   |   |   | 11 |   |   |   | 10 |   |
| Preferred stock dividends paid                                           |   |         | 110    |   |       |   | 110 |   |   |   | 220 |   |   |   | 220 |   |
| Net income available to common shareholders                              |   | $            | 766    |   |       | $      | 763 |   |   | $ | 1,594 |   |   | $ | 1,243 |   |
| Weighted average common stock outstanding – basic                  |   |         | 1,689  |   |       |   | 1,687 |   |   |   | 1,688 |   |   |   | 1,687 |   |
| Weighted average common and common equivalent stock outstanding- diluted |   |         | 1,689  |   |       |   | 1,687 |   |   |   | 1,689 |   |   |   | 1,687 |   |
| Earnings per common and common equivalent share                          |   |         |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                    |   | $            | 0.45   |   |       | $      | 0.45 |   |   | $ | 0.94 |   |   | $ | 0.74 |   |
| Diluted                                                                  |   |         | 0.45   |   |       |   | 0.45 |   |   |   | 0.94 |   |   |   | 0.74 |   |

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Table of Contents

|                                     |   | Actual |   |   | For Capital Adequacy Purposes |   |   | To be Well Capitalized Under Prompt Corrective Action Provisions |   |
|------------------------------------------|--------|--------|--------|--------|-------------------------------|--------|--------|------------------------------------------------------------------|--------|
| (dollars in thousands)                   |   | Amount |   |   | Ratio                         |   |   | Amount                                                           |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| June 30, 2011                       |   |   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |
| Total Capital (to risk-weighted assets)  |   |   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |
| Salisbury                                |   | $      | 52,605 |   |                          |   | 13.93  | %                                                                |   | $ | 30,207 |   |   |   | 8.0 | % |   |   | n/a |   |   |   | - |   |
| Bank                                     |   |   | 43,002 |   |                          |   | 11.19  |                                                             |   |   | 30,754 |   |   |   | 8.0 |   |   | $ | 38,443 |   |   |   | 10.0 | % |
| Tier 1 Capital (to risk-weighted assets) |   |   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salisbury                                |   |   | 48,513 |   |                          |   | 12.85  |                                                             |   |   | 15,104 |   |   |   | 4.0 |   |   |   | n/a |   |   |   | - |   |
| Bank                                     |   |   | 38,910 |   |                          |   | 10.12  |                                                             |   |   | 15,377 |   |   |   | 4.0 |   |   |   | 23,066 |   |   |   | 6.0 |   |
| Tier 1 Capital (to average assets)       |   |   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salisbury                                |   |   | 48,513 |   |                          |   | 8.45   |                                                             |   |   | 23,407 |   |   |   | 4.0 |   |   |   | n/a |   |   |   | - |   |
| Bank                                     |   |   | 38,910 |   |                          |   | 6.79   |                                                             |   |   | 23,361 |   |   |   | 4.0 |   |   |   | 29,201 |   |   |   | 5.0 |   |
| June 30, 2010                            |   |   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Capital (to risk-weighted assets)  |   |   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salisbury                                |   | $      | 50,393 |   |                          |   | 13.39  | %                                                                |   | $ | 30,108 |   |   |   | 8.0 | % |   |   | n/a |   |   |   | - |   |
| Bank                                     |   |   | 40,817 |   |                          |   | 10.88  |                                                             |   |   | 30,042 |   |   |   | 8.0 |   |   | $ | 37,553 |   |   |   | 10.0 | % |
| Tier 1 Capital (to risk-weighted assets) |   |   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salisbury                                |   |   | 46,582 |   |                          |   | 12.38  |                                                             |   |   | 15,054 |   |   |   | 4.0 |   |   |   | n/a |   |   |   | - |   |
| Bank                                     |   |   | 37,006 |   |                          |   | 9.86   |                                                             |   |   | 15,613 |   |   |   | 4.0 |   |   |   | 23,420 |   |   |   | 6.0 |   |
| Tier 1 Capital (to average assets)       |   |   |   |   |                          |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salisbury                                |   |   | 46,582 |   |                          |   | 8.35   |                                                             |   |   | 22,318 |   |   |   | 4.0 |   |   |   | n/a |   |   |   | - |   |
| Bank                                     |   |   | 37,006 |   |                          |   | 6.63   |                                                             |   |   | 22,318 |   |   |   | 4.0 |   |   |   | 27,898 |   |   |   | 5.0 |   |

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|                                  |   | Three months |   |   | Six months |   |
|---------------------------------------|--------|--------------|--------|--------|------------|--------|
| Periods ended June 30, (in thousands) |   | 2011         |   |   | 2010       |   |   | 2011 |   |   | 2010 |   |
| Service cost                          |   | $            | 95     |   |       | $      | 74 |   |   | $ | 191 |   |   | $ | 174 |   |
| Interest cost on benefit obligation   |   |         | 93     |   |       |   | 89 |   |   |   | 187 |   |   |   | 180 |   |
| Expected return on plan assets        |   |         | (106   | )      |       |   | (98 | ) |   |   | (212 | ) |   |   | (198 | ) |
| Amortization of prior service cost    |   |         | -      |   |       |   | - |   |   |   | - |   |   |   | - |   |
| Amortization of net loss              |   |         | 17     |   |       |   | 16 |   |   |   | 33 |   |   |   | 34 |   |
| Net periodic benefit cost             |   | $            | 99     |   |       | $      | 81 |   |   | $ | 199 |   |   | $ | 190 |   |

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Table of Contents

|                                                          |   | Three months |   |   | Six months |   |
|---------------------------------------------------------------|--------|--------------|--------|--------|------------|--------|
| Periods ended June 30, (in thousands)                         |   | 2011         |   |   | 2010       |   |   | 2011 |   |   | 2010 |   |
| Net income                                                    |   | $            | 882    |   |       | $      | 878 |   |   | $ | 1,825 |   |   | $ | 1,473 |   |
| Other comprehensive income                                    |   |         |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Net unrealized gains on securities available-for-sale         |   |         | 2,762  |   |       |   | 1,570 |   |   |   | 3,600 |   |   |   | 2,545 |   |
| Reclassification of net realized gains in net income          |   |         | -      |   |       |   | 1 |   |   |   | 11 |   |   |   | 1 |   |
| Unrealized gains on securities available-for-sale             |   |         | 2,762  |   |       |   | 1,571 |   |   |   | 3,611 |   |   |   | 2,546 |   |
| Income tax expense                                            |   |         | (939   | )      |       |   | (534 | ) |   |   | (1,228 | ) |   |   | (866 | ) |
| Unrealized gains on securities available-for-sale, net of tax |   |         | 1,823  |   |       |   | 1,037 |   |   |   | 2,383 |   |   |   | 1,680 |   |
| Pension plan income                                           |   |         | 17     |   |       |   | 17 |   |   |   | 33 |   |   |   | 35 |   |
| Income tax expense                                            |   |         | (6     | )      |       |   | (6 | ) |   |   | (11 | ) |   |   | (12 | ) |
| Pension plan income, net of tax                               |   |         | 11     |   |       |   | 11 |   |   |   | 22 |   |   |   | 23 |   |
| Other comprehensive income, net of tax                        |   |         | 1,834  |   |       |   | 1,048 |   |   |   | 2,405 |   |   |   | 1,703 |   |
| Comprehensive income                                          |   | $            | 2,716  |   |       | $      | 1,926 |   |   | $ | 4,230 |   |   | $ | 3,176 |   |

| June 30, (in thousands)                                        |   | 2011   |   |   | 2010   |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Unrealized losses on securities available-for-sale, net of tax |   | $      | (199   | )      |   | $      | (2,151 | ) |
| Unrecognized pension plan expense, net of tax                  |   |   | (1,165 | )      |   |   | (1,224 | ) |
| Accumulated other comprehensive loss, net                      |   | $      | (1,364 | )      |   | $      | (3,375 | ) |

|   | · | Level 1. Quoted prices in active markets for identical assets. Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange.  Level 1 also includes U.S. Treasury, other U.S. Government and agency mortgage-backed securities that are traded by dealers or brokers in active markets.  Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 2. Significant other observable inputs. Valuations for assets and liabilities traded in less active dealer or broker markets.  Valuations are obtained from third party pricing services for identical or comparable assets or liabilities. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 3. Significant unobservable inputs. Valuations for assets and liabilities that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, and are not based on market exchange, dealer, or broker traded transactions.  Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | Securities available-for-sale. Securities available-for-sale are recorded at fair value on a recurring basis. Level 1 securities include exchange-traded equity securities. Level 2 securities include debt securities with quoted prices, which are traded less frequently than exchange-traded instruments, whose value is determined using matrix pricing with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes obligations of the U.S. Treasury and U.S. government-sponsored enterprises, mortgage-backed securities, collateralized mortgage obligations, municipal bonds, SBA bonds, corporate bonds and certain preferred equities. Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence.  In the absence of such evidence, management’s best estimate is used. Subsequent to inception, management only changes level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalization and other transactions across the capital structure, offerings in the equity or debt markets, and changes in financial ratios or cash flows. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Collateral dependent loans that are deemed to be impaired are valued based upon the fair value of the underlying collateral less costs to sell. Such collateral primarily consists of real estate and, to a lesser extent, other business assets. Management may adjust appraised values to reflect estimated market value declines or apply other discounts to appraised values resulting from its knowledge of the property. Internal valuations are utilized to determine the fair value of other business assets. Collateral dependent impaired loans are categorized as Level 3. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other real estate owned acquired through foreclosure or repossession is adjusted to fair value less costs to sell upon transfer out of loans. Subsequently, it is carried at the lower of carrying value or fair value less costs to sell. Fair value is generally based upon independent market prices or appraised values of the collateral. Management adjusts appraised values to reflect estimated market value declines or apply other discounts to appraised values for unobservable factors resulting from its knowledge of the property, and such property is categorized as Level 3. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                          |   | Fair value measurements using |   |   | Assets at |   |
|-----------------------------------------------|--------|-------------------------------|--------|--------|-----------|--------|
| (in thousands)                                |   | Level 1                       |   |   | Level 2   |   |   | Level 3 |   |   | fair value |   |
| June 30, 2011                                 |   |                          |   |   |      |   |   |   |   |   |   |   |
| Assets at fair value on a recurring basis     |   |                          |   |   |      |   |   |   |   |   |   |   |
| Securities available-for-sale                 |   | $                             | 224    |   |      | $      | 139,183 |   |   | $ | - |   |   | $ | 139,407 |   |
| Assets at fair value on a non-recurring basis |   |                          |   |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Collateral dependent impaired loans           |   |                          | -      |   |      |   | - |   |   |   | 3,894 |   |   |   | 3,894 |   |
| Other real estate owned                       |   |                          | -      |   |      |   | - |   |   |   | 400 |   |   |   | 400 |   |

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|  (in thousands)                                     |   | Securities available-for-sale |   |   | Collateral dependent impaired Loans |   |   | Other real estate owned |   |   | Level 3assets atfair value |   |
|----------------------------------------------------------|--------|------------------------------------|--------|--------|------------------------------------------|--------|--------|-------------------------|--------|--------|----------------------------|--------|
| Balance, December 31, 2010                               |   | $                                  | -      |   |                                     | $      | 4,768  |                    |   | $      | 557                        |   |   | $ | 5,325 |   |
| Gains and losses (realized/unrealized)                   |   |                               |   |   |                                     |   |   |                    |   |   |                       |   |   |   |   |   |
| Included in earnings                                     |   |                               | -      |   |                                     |   | -      |                    |   |   | -                          |   |   |   | - |   |
| Included in other comprehensive income                   |   |                               | -      |   |                                     |   | -      |                    |   |   | -                          |   |   |   | - |   |
| Principal pay-downs of securities, net of accretion      |   |                               | -      |   |                                     |   | -      |                    |   |   | -                          |   |   |   | - |   |
| Write-down of other real estate owned                    |   |                               |   |   |                                     |   |   |                    |   |   | (157                       | )      |   |   | (157 | ) |
| Transfers in and/or out of Level 3                       |   |                               | -      |   |                                     |   | (874   | )                       |   |   | -                          |   |   |   | (874 | ) |
| Balance, June 30, 2011                                   |   | $                                  | -      |   |                                     | $      | 3,894  |                    |   | $      | 400                        |   |   | $ | 4,294 |   |
| Amount of total gains or losses for the period           |   |                               |   |   |                                     |   |   |                    |   |   |                       |   |   |   |   |   |
| attributable to the change in unrealized gains or losses |   |                               |   |   |                                     |   |   |                    |   |   |                       |   |   |   |   |   |
| Relating to assets still held at the reporting date      |   | $                                  | -      |   |                                     | $      | -      |                    |   | $      | -                          |   |   | $ | - |   |

|                                            |   | June 30, 2011 |    |   | December 31, 2010   |   |
|-------------------------------------------------|--------|---------------|---------|--------|---------------------|--------|
| (in thousands)                                  |   | CarryingValue |    |   | Estimatedfair value |   |   | CarryingValue |   |   | Estimatedfair value |   |
| Financial Assets                                |   |          |    |   |                |   |   |   |   |   |   |   |
| Cash and due from banks                         |   | $             | 43,944  |   |                | $      | 43,944 |   |   | $ | 26,908 |   |   | $ | 26,908 |   |
| Interest bearing time deposits with other banks |   |          | -       |   |                |   | - |   |   |   | 5,000 |   |   |   | 5,000 |   |
| Securities available-for-sale                   |   |          | 139,407 |   |                |   | 139,407 |   |   |   | 147,422 |   |   |   | 147,422 |   |
| Security held-to-maturity                       |   |          | 53      |   |                |   | 54 |   |   |   | 56 |   |   |   | 58 |   |
| Federal Home Loan Bank stock                    |   |          | 6,032   |   |                |   | 6,032 |   |   |   | 6,032 |   |   |   | 6,032 |   |
| Loans held-for-sale                             |   |          | 146     |   |                |   | 147 |   |   |   | 1,184 |   |   |   | 1,193 |   |
| Loans receivable net                            |   |          | 364,854 |   |                |   | 364,992 |   |   |   | 352,449 |   |   |   | 351,628 |   |
| Accrued interest receivable                     |   |          | 2,086   |   |                |   | 2,086 |   |   |   | 2,132 |   |   |   | 2,132 |   |
| Financial Liabilities                           |   |          |    |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Demand (non-interest-bearing)                   |   |          | 78,985  |   |                |   | 78,985 |   |   |   | 71,565 |   |   |   | 71,565 |   |
| Demand (interest-bearing)                       |   |          | 63,651  |   |                |   | 63,651 |   |   |   | 63,258 |   |   |   | 63,258 |   |
| Money market                                    |   |          | 113,316 |   |                |   | 113,316 |   |   |   | 77,089 |   |   |   | 77,089 |   |
| Savings and other                               |   |          | 93,341  |   |                |   | 93,341 |   |   |   | 93,324 |   |   |   | 93,324 |   |
| Certificates of deposit                         |   |          | 109,736 |   |                |   | 109,750 |   |   |   | 125,053 |   |   |   | 125,172 |   |
| Deposits                                        |   |          | 459,029 |   |                |   | 459,043 |   |   |   | 430,289 |   |   |   | 430,408 |   |
| FHLBB advances                                  |   |          | 55,460  |   |                |   | 60,341 |   |   |   | 72,812 |   |   |   | 78,317 |   |
| Repurchase agreements                           |   |          | 12,359  |   |                |   | 12,359 |   |   |   | 13,190 |   |   |   | 13,190 |   |
| Accrued interest payable                        |   |          | 307     |   |                |   | 307 |   |   |   | 435 |   |   |   | 435 |   |

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| Item 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|---------------------------------------------------------------------------------------|

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|   | · | Earnings per common share decreased $0.04, or 8.2%, to $0.45 versus first quarter 2011, and were unchanged versus second quarter 2010. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Tax equivalent net interest income increased $110,000, or 2.3%, versus first quarter 2011, and increased $290,000, or 6.3%, versus second quarter 2010. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Provision for loan losses was $350,000, versus $330,000 for first quarter 2011 and $260,000 for second quarter 2010. Net loan charge-offs were $349,000, versus $272,000 for first quarter 2011 and $141,000 for second quarter 2010. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Non-interest income decreased $171,000, or 12.2%, versus first quarter 2011 and was relatively unchanged versus second quarter 2010. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Non-interest expense increased $8,000, or 0.2%, versus first quarter 2011 and $187,000, or 4.4%, versus second quarter 2010. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|

|   | · | Non-performing assets increased $3.3 million to $15.0 million, or 2.55% of total assets, versus first quarter 2011 and $3.5 million versus second quarter 2010. Loans receivable 30 days or more past due decreased $3.4 million to $8.7 million, or 2.4% of gross loans, versus first quarter 2011 and increased $613,000 versus second quarter 2010. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Three months ended June 30,                        |   | Average Balance |    |   | Income / Expense |   |    | Average Yield / Rate |   |
|----------------------------------------------------|--------|-----------------|---------|--------|------------------|--------|---------|----------------------|--------|
| (dollars in thousands)                             |   | 2011            |    |   | 2010             |   |    | 2011                 |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
| Loans (a)                                          |   | $               | 368,420 |   |             | $      | 338,175 |                 |   | $ | 4,695 |   |   | $ | 4,601 |   |   |   | 5.10 | % |   |   | 5.44 | % |
| Securities (c)(d)                                  |   |            | 138,950 |   |             |   | 166,413 |                 |   |   | 1,544 |   |   |   | 1,852 |   |   |   | 4.44 |   |   |   | 4.45 |   |
| FHLBB stock                                        |   |            | 6,032   |   |             |   | 6,032   |                 |   |   | 6 |   |   |   | - |   |   |   | 0.42 |   |   |   | - |   |
| Short term funds (b)                               |   |            | 35,111  |   |             |   | 27,339  |                 |   |   | 33 |   |   |   | 38 |   |   |   | 0.38 |   |   |   | 0.56 |   |
| Total earning assets                               |   |            | 548,513 |   |             |   | 537,959 |                 |   |   | 6,278 |   |   |   | 6,491 |   |   |   | 4.58 |   |   |   | 4.83 |   |
| Other assets                                       |   |            | 34,074  |   |             |   | 32,319  |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                       |   | $               | 582,587 |   |             | $      | 570,278 |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits                   |   | $               | 62,468  |   |             | $      | 54,397  |                 |   |   | 107 |   |   |   | 153 |   |   |   | 0.68 |   |   |   | 1.13 |   |
| Money market accounts                              |   |            | 108,975 |   |             |   | 75,002  |                 |   |   | 159 |   |   |   | 105 |   |   |   | 0.58 |   |   |   | 0.56 |   |
| Savings and other                                  |   |            | 96,739  |   |             |   | 89,168  |                 |   |   | 97 |   |   |   | 142 |   |   |   | 0.40 |   |   |   | 0.64 |   |
| Certificates of deposit                            |   |            | 112,932 |   |             |   | 140,311 |                 |   |   | 466 |   |   |   | 726 |   |   |   | 1.66 |   |   |   | 2.07 |   |
| Total interest-bearing deposits                    |   |            | 381,114 |   |             |   | 358,878 |                 |   |   | 829 |   |   |   | 1,126 |   |   |   | 0.87 |   |   |   | 1.26 |   |
| Repurchase agreements                              |   |            | 9,466   |   |             |   | 9,730   |                 |   |   | 12 |   |   |   | 19 |   |   |   | 0.50 |   |   |   | 0.78 |   |
| FHLBB advances                                     |   |            | 55,605  |   |             |   | 75,087  |                 |   |   | 562 |   |   |   | 761 |   |   |   | 4.00 |   |   |   | 4.01 |   |
| Total interest-bearing liabilities                 |   |            | 446,185 |   |             |   | 443,695 |                 |   |   | 1,403 |   |   |   | 1,906 |   |   |   | 1.26 |   |   |   | 1.72 |   |
| Demand deposits                                    |   |            | 75,703  |   |             |   | 68,907  |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other liabilities                                  |   |            | 3,734   |   |             |   | 3,662   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                         |   |            | 56,965  |   |             |   | 54,014  |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities & shareholders’ equity |   | $               | 582,587 |   |             | $      | 570,278 |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                |   |            |    |   |             |   |    |                 |   | $ | 4,875 |   |   | $ | 4,585 |   |   |   |   |   |   |   |   |   |
| Spread on interest-bearing funds                   |   |            |    |   |             |   |    |                 |   |   |   |   |   |   |   |   |   |   | 3.32 |   |   |   | 3.11 |   |
| Net interest margin (e)                            |   |            |    |   |             |   |    |                 |   |   |   |   |   |   |   |   |   |   | 3.56 |   |   |   | 3.41 |   |

| (a) | Includes non-accrual loans. |
|-----|-----------------------------|

| (b) | Includes interest-bearing deposits in other banks and federal funds sold. |
|-----|---------------------------------------------------------------------------|

| (c) | Average balances of securities are based on historical cost. |
|-----|--------------------------------------------------------------|

| (d) | Includes tax exempt income of $259,000 and $260,000, respectively for 2011 and 2010 on tax-exempt securities whose income and yields are calculated on a tax-equivalent basis. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | Net interest income divided by average interest-earning assets. |
|-----|-----------------------------------------------------------------|

| Three months ended June 30, (in thousands) |   | 2011 versus 2010 |   |
|--------------------------------------------|--------|------------------|--------|
| Change in interest due to                  |   | Volume           |   |   | Rate |   |   | Net |   |
| Interest-earning assets                    |   |             |   |   |   |   |   |   |   |
| Loans                                      |   | $                | 398    |   |   | $ | (304 | ) |   | $ | 94 |   |
| Securities                                 |   |             | (305   | ) |   |   | (3 | ) |   |   | (308 | ) |
| FHLBB stock                                |   |             | -      |   |   |   | 6 |   |   |   | 6 |   |
| Short term funds                           |   |             | 9      |   |   |   | (14 | ) |   |   | (5 | ) |
| Total                                      |   |             | 102    |   |   |   | (315 | ) |   |   | (213 | ) |
| Interest-bearing liabilities               |   |             |   |   |   |   |   |   |   |   |   |   |
| Deposits                                   |   |             | (50    | ) |   |   | (247 | ) |   |   | (297 | ) |
| Repurchase agreements                      |   |             | -      |   |   |   | (7 | ) |   |   | (7 | ) |
| FHLBB advances                             |   |             | (197   | ) |   |   | (2 | ) |   |   | (199 | ) |
| Total                                      |   |             | (247   | ) |   |   | (256 | ) |   |   | (503 | ) |
| Net change in net interest income          |   | $                | 349    |   |   | $ | (59 | ) |   | $ | 290 |   |

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|                                                                   |   | Three months |   |   | Six months |   |
|------------------------------------------------------------------------|--------|--------------|--------|--------|------------|--------|
| Periods ended June 30, (dollars in thousands)                          |   | 2011         |   |   | 2010       |   |   | 2011 |   |   | 2010 |   |
| Balance, beginning of period                                           |   | $            | 3,978  |   |       | $      | 3,649 |   |   | $ | 3,920 |   |   | $ | 3,473 |   |
| Provision (benefit) or loan losses                                     |   |         | 350    |   |       |   | 260 |   |   |   | 680 |   |   |   | 440 |   |
| Charge-offs                                                            |   |         |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Real estate mortgages                                                  |   |         | (116   | )      |       |   | (135 | ) |   |   | (375 | ) |   |   | (135 | ) |
| Commercial & industrial                                            |   |         | (89    | )      |       |   | - |   |   |   | (89 | ) |   |   | - |   |
| Consumer                                                               |   |         | (159   | )      |       |   | (14 | ) |   |   | (179 | ) |   |   | (24 | ) |
| Total charge-offs                                                      |   |         | (364   | )      |       |   | (149 | ) |   |   | (643 | ) |   |   | (159 | ) |
| Recoveries                                                             |   |         |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| Real estate mortgages                                                  |   |         | 2      |   |       |   | - |   |   |   | 3 |   |   |   | - |   |
| Commercial & industrial                                            |   |         | -      |   |       |   | - |   |   |   | - |   |   |   | - |   |
| Consumer                                                               |   |         | 13     |   |       |   | 8 |   |   |   | 19 |   |   |   | 14 |   |
| Total recoveries                                                       |   |         | 15     |   |       |   | 8 |   |   |   | 22 |   |   |   | 14 |   |
| Net (charge-offs) recoveries                                           |   |         | (349   | )      |       |   | (141 | ) |   |   | (621 | ) |   |   | (145 | ) |
| Balance, end of period                                                 |   | $            | 3,979  |   |       | $      | 3,768 |   |   | $ | 3,979 |   |   | $ | 3,768 |   |
| Loans receivable, gross                                                |   |         |   |   |       |   |   |   |   | $ | 367,894 |   |   | $ | 345,205 |   |
| Non-performing loans                                                   |   |         |   |   |       |   |   |   |   |   | 14,563 |   |   |   | 11,520 |   |
| Accruing loans past due 30-89 days                                     |   |         |   |   |       |   |   |   |   |   | 1,482 |   |   |   | 830 |   |
| Ratio of allowance for loan losses:                                    |   |         |   |   |       |   |   |   |   |   |   |   |   |   |   |   |
| to loans receivable, gross                                             |   |         |   |   |       |   |   |   |   |   | 1.08 | % |   |   | 1.09 | % |
| to non-performing loans                                                |   |         |   |   |       |   |   |   |   |   | 27.31 |   |   |   | 32.71 |   |
| Ratio of non-performing loans to loans receivable, gross               |   |         |   |   |       |   |   |   |   |   | 3.96 |   |   |   | 3.33 |   |
| Ratio of accruing loans past due 30-89 days to loans receivable, gross |   |         |   |   |       |   |   |   |   |   | 0.40 |   |   |   | 0.24 |   |

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|                    |   | June 30, 2011 |    |   | December 31, 2010 |   |
|-------------------------|--------|---------------|---------|--------|-------------------|--------|
| (in thousands)          |   | LoanBalance   |    |   | Allowance         |   |   | LoanBalance |   |   | Allowance |   |
| Performing loans        |   | $             | 335,708 |   |              | $      | 2,386 |   |   | $ | 332,240 |   |   | $ | 2,500 |   |
| Potential problem loans |   |          | 9,261   |   |              |   | 350 |   |   |   | 5,744 |   |   |   | 169 |   |
| Collectively evaluated  |   |          | 344,969 |   |              |   | 2,736 |   |   |   | 337,984 |   |   |   | 2,669 |   |
| Performing loans        |   |          | 540     |   |              |   | 46 |   |   |   | - |   |   |   | - |   |
| Potential problem loans |   |          | 5,893   |   |              |   | 462 |   |   |   | 2,188 |   |   |   | 330 |   |
| Impaired loans          |   |          | 16,492  |   |              |   | 490 |   |   |   | 15,375 |   |   |   | 785 |   |
| Individually evaluated  |   |          | 22,925  |   |              |   | 998 |   |   |   | 17,563 |   |   |   | 1,115 |   |
| Unallocated allowance   |   |          | -       |   |              |   | 245 |   |   |   | - |   |   |   | 136 |   |
| Totals                  |   | $             | 367,894 |   |              | $      | 3,979 |   |   | $ | 355,547 |   |   | $ | 3,920 |   |

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| Three months ended June 30, (dollars in thousands) |   | 2011   |   |   | 2010   |   |   | 2011 vs. 2010 |   |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------------|--------|
| Trust and wealth advisory fees                     |   | $      | 596    |   |   | $      | 491    |          |   | $ | 105 |   |   |   | 21.38 | % |
| Service charges and fees                           |   |   | 522    |   |   |   | 499    |          |   |   | 23 |   |   |   | 4.61 |   |
| Gains on sales of mortgage loans, net              |   |   | 59     |   |   |   | 122    |          |   |   | (63 | ) |   |   | (51.64 | ) |
| Mortgage servicing, net                            |   |   | (5     | )      |   |   | 27     |          |   |   | (32 | ) |   |   | (118.52 | ) |
| Gains on securities, net                           |   |   | -      |   |   |   | 1      |          |   |   | (1 | ) |   |   | (100.00 | ) |
| Other                                              |   |   | 58     |   |   |   | 89     |          |   |   | (31 | ) |   |   | (34.83 | ) |
| Total non-interest income                          |   | $      | 1,230  |   |   | $      | 1,229  |          |   | $ | 1 |   |   |   | (0.08 | )% |

| Three months ended June 30, (dollars in thousands) |   | 2011   |   |   | 2010   |   |   | 2011 vs. 2010 |   |
|----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------------|--------|
| Salaries                                           |   | $      | 1,657  |   |   | $      | 1,668  |          |   | $ | (11 | ) |   |   | (0.66 | )% |
| Employee benefits                                  |   |   | 650    |   |   |   | 586    |          |   |   | 64 |   |   |   | 10.92 |   |
| Premises and equipment                             |   |   | 568    |   |   |   | 495    |          |   |   | 73 |   |   |   | 14.75 |   |
| Data processing                                    |   |   | 285    |   |   |   | 363    |          |   |   | (78 | ) |   |   | (21.49 | ) |
| Professional fees                                  |   |   | 300    |   |   |   | 455    |          |   |   | (155 | ) |   |   | (34.07 | ) |
| Collections and OREO                               |   |   | 243    |   |   |   | 21     |          |   |   | 222 |   |   |   | 1057.14 |   |
| FDIC insurance                                     |   |   | 182    |   |   |   | 182    |          |   |   | - |   |   |   | - |   |
| Marketing and community contributions              |   |   | 92     |   |   |   | 59     |          |   |   | 33 |   |   |   | 55.93 |   |
| Amortization of intangible assets                  |   |   | 56     |   |   |   | 56     |          |   |   | - |   |   |   | - |   |
| Other                                              |   |   | 399    |   |   |   | 360    |          |   |   | 39 |   |   |   | 10.83 |   |
| Non-interest expense                               |   | $      | 4,432  |   |   | $      | 4,245  |          |   | $ | 187 |   |   |   | 4.41 | % |

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| Six months ended June 30,                          |   | Average Balance |    |   | Income / Expense |   |    | Average Yield / Rate |   |
|----------------------------------------------------|--------|-----------------|---------|--------|------------------|--------|---------|----------------------|--------|
| (dollars in thousands)                             |   | 2011            |    |   | 2010             |   |    | 2011                 |   |   | 2010 |   |   | 2011 |   |   | 2010 |   |
| Loans (a)                                          |   | $               | 365,445 |   |             | $      | 335,774 |                 |   | $ | 9,360 |   |   | $ | 9,088 |   |   |   | 5.13 | % |   |   | 5.41 | % |
| Securities (c)(d)                                  |   |            | 142,066 |   |             |   | 158,444 |                 |   |   | 3,137 |   |   |   | 3,597 |   |   |   | 4.42 |   |   |   | 4.54 |   |
| FHLBB stock                                        |   |            | 6,032   |   |             |   | 6,032   |                 |   |   | 12 |   |   |   | - |   |   |   | 0.42 |   |   |   | - |   |
| Short term funds (b)                               |   |            | 29,463  |   |             |   | 34,006  |                 |   |   | 64 |   |   |   | 84 |   |   |   | 0.45 |   |   |   | 0.49 |   |
| Total earning assets                               |   |            | 543,006 |   |             |   | 534,256 |                 |   |   | 12,573 |   |   |   | 12,769 |   |   |   | 4.64 |   |   |   | 4.78 |   |
| Other assets                                       |   |            | 33,756  |   |             |   | 32,590  |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                       |   | $               | 576,762 |   |             | $      | 566,846 |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits                   |   | $               | 62,779  |   |             | $      | 51,792  |                 |   |   | 223 |   |   |   | 301 |   |   |   | 0.71 |   |   |   | 1.16 |   |
| Money market accounts                              |   |            | 96,709  |   |             |   | 70,731  |                 |   |   | 269 |   |   |   | 201 |   |   |   | 0.56 |   |   |   | 0.57 |   |
| Savings and other                                  |   |            | 96,100  |   |             |   | 88,410  |                 |   |   | 194 |   |   |   | 285 |   |   |   | 0.41 |   |   |   | 0.64 |   |
| Certificates of deposit                            |   |            | 116,788 |   |             |   | 144,602 |                 |   |   | 1,014 |   |   |   | 1,538 |   |   |   | 1.75 |   |   |   | 2.13 |   |
| Total interest-bearing deposits                    |   |            | 372,376 |   |             |   | 355,535 |                 |   |   | 1,700 |   |   |   | 2,325 |   |   |   | 0.92 |   |   |   | 1.31 |   |
| Repurchase agreements                              |   |            | 10,764  |   |             |   | 11,158  |                 |   |   | 27 |   |   |   | 46 |   |   |   | 0.50 |   |   |   | 0.82 |   |
| FHLBB advances                                     |   |            | 59,322  |   |             |   | 75,418  |                 |   |   | 1,207 |   |   |   | 1,518 |   |   |   | 4.05 |   |   |   | 4.00 |   |
| Total interest-bearing liabilities                 |   |            | 442,462 |   |             |   | 442,111 |                 |   |   | 2,934 |   |   |   | 3,889 |   |   |   | 1.33 |   |   |   | 1.76 |   |
| Demand deposits                                    |   |            | 74,354  |   |             |   | 67,522  |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other liabilities                                  |   |            | 3,864   |   |             |   | 3,726   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                         |   |            | 56,082  |   |             |   | 53,487  |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities & shareholders’ equity |   | $               | 576,762 |   |             | $      | 566,846 |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                |   |            |    |   |             |   |    |                 |   | $ | 9,639 |   |   | $ | 8,880 |   |   |   |   |   |   |   |   |   |
| Spread on interest-bearing funds                   |   |            |    |   |             |   |    |                 |   |   |   |   |   |   |   |   |   |   | 3.31 |   |   |   | 3.02 |   |
| Net interest margin (e)                            |   |            |    |   |             |   |    |                 |   |   |   |   |   |   |   |   |   |   | 3.56 |   |   |   | 3.33 |   |

| (a) | Includes non-accrual loans. |
|-----|-----------------------------|

| (b) | Includes interest-bearing deposits in other banks and federal funds sold. |
|-----|---------------------------------------------------------------------------|

| (c) | Average balances of securities are based on historical cost. |
|-----|--------------------------------------------------------------|

| (d) | Includes tax exempt income of $517,000 and $519,000, respectively for the 2011 and 2010 periods on tax-exempt securities whose income and yields are calculated on a tax-equivalent basis. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | Net interest income divided by average interest-earning assets. |
|-----|-----------------------------------------------------------------|

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| Six months ended June 30, (in thousands) |   | 2011 versus 2010 |   |
|------------------------------------------|--------|------------------|--------|
| Change in interest due to                |   | Volume           |   |   | Rate |   |   | Net |   |
| Interest-earning assets                  |   |             |   |   |   |   |   |   |   |
| Loans                                    |   | $                | 782    |   |   | $ | (510 | ) |   | $ | 272 |   |
| Securities                               |   |             | (367   | ) |   |   | (93 | ) |   |   | (460 | ) |
| FHLBB stock                              |   |             | -      |   |   |   | 12 |   |   |   | 12 |   |
| Short term funds                         |   |             | (13    | ) |   |   | (7 | ) |   |   | (20 | ) |
| Total                                    |   |             | 404    |   |   |   | (598 | ) |   |   | (194 | ) |
| Interest-bearing liabilities             |   |             |   |   |   |   |   |   |   |   |   |   |
| Deposits                                 |   |             | (125   | ) |   |   | (500 | ) |   |   | (625 | ) |
| Repurchase agreements                    |   |             | (1     | ) |   |   | (18 | ) |   |   | (19 | ) |
| FHLBB advances                           |   |             | (326   | ) |   |   | 15 |   |   |   | (311 | ) |
| Total                                    |   |             | (452   | ) |   |   | (503 | ) |   |   | (955 | ) |
| Net change in net interest income        |   | $                | 854    |   |   | $ | (95 | ) |   | $ | 759 |   |

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| Six months ended June 30, (dollars in thousands) |   | 2011   |   |   | 2010   |   |   | 2011 vs. 2010 |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------------|--------|
| Trust and wealth advisory fees                   |   | $      | 1,263  |   |   | $      | 1,036  |          |   | $ | 227 |   |   |   | 21.91 | % |
| Service charges and fees                         |   |   | 1,022  |   |   |   | 952    |          |   |   | 70 |   |   |   | 7.35 |   |
| Gains on sales of mortgage loans, net            |   |   | 192    |   |   |   | 164    |          |   |   | 28 |   |   |   | 17.07 |   |
| Mortgage servicing, net                          |   |   | 26     |   |   |   | 60     |          |   |   | (34 | ) |   |   | (56.67 | ) |
| Gains on securities, net                         |   |   | 11     |   |   |   | 1      |          |   |   | 10 |   |   |   | 1000.00 |   |
| Other                                            |   |   | 117    |   |   |   | 146    |          |   |   | (29 | ) |   |   | (19.86 | ) |
| Total non-interest income                        |   | $      | 2,631  |   |   | $      | 2,359  |          |   | $ | 272 |   |   |   | 11.53 |   |

| Six months ended June 30, (dollars in thousands) |   | 2011   |   |   | 2010   |   |   | 2011 vs. 2010 |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---------------|--------|
| Salaries                                         |   | $      | 3,386  |   |   | $      | 3,239  |          |   | $ | 147 |   |   |   | 4.54 | % |
| Employee benefits                                |   |   | 1,283  |   |   |   | 1,216  |          |   |   | 67 |   |   |   | 5.51 |   |
| Premises and equipment                           |   |   | 1,151  |   |   |   | 1,011  |          |   |   | 140 |   |   |   | 13.85 |   |
| Data processing                                  |   |   | 662    |   |   |   | 772    |          |   |   | (110 | ) |   |   | (14.25 | ) |
| Professional fees                                |   |   | 577    |   |   |   | 857    |          |   |   | (280 | ) |   |   | (32.67 | ) |
| FDIC insurance                                   |   |   | 405    |   |   |   | 354    |          |   |   | 51 |   |   |   | 14.41 |   |
| Collections and OREO                             |   |   | 367    |   |   |   | 43     |          |   |   | 324 |   |   |   | 753.49 |   |
| Marketing and community contributions            |   |   | 160    |   |   |   | 121    |          |   |   | 39 |   |   |   | 32.23 |   |
| Amortization of intangible assets                |   |   | 111    |   |   |   | 111    |          |   |   | - |   |   |   | - |   |
| Other                                            |   |   | 754    |   |   |   | 833    |          |   |   | (79 | ) |   |   | (9.48 | ) |
| Non-interest expense                             |   | $      | 8,856  |   |   | $      | 8,557  |          |   | $ | 299 |   |   |   | 3.49 | % |

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| (in thousands)                                |   | June 30, 2011 |    |   | December 31, 2010 |   |
|-----------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
| Residential 1-4 family                        |   | $             | 182,764 |   |              | $      | 173,931 |   |
| Residential 5+ multifamily                    |   |          | 3,068   |   |              |   | 2,889 |   |
| Construction of residential 1-4 family        |   |          | 8,046   |   |              |   | 8,949 |   |
| Home equity credit                            |   |          | 33,657  |   |              |   | 34,164 |   |
| Residential real estate                       |   |          | 227,535 |   |              |   | 219,933 |   |
| Commercial                                    |   |          | 79,976  |   |              |   | 75,495 |   |
| Construction of commercial                    |   |          | 4,502   |   |              |   | 7,312 |   |
| Commercial real estate                        |   |          | 84,478  |   |              |   | 82,807 |   |
| Farm land                                     |   |          | 5,767   |   |              |   | 5,690 |   |
| Vacant land                                   |   |          | 12,687  |   |              |   | 12,979 |   |
| Real estate secured                           |   |          | 330,467 |   |              |   | 321,409 |   |
| Commercial and industrial                     |   |          | 30,060  |   |              |   | 25,123 |   |
| Municipal                                     |   |          | 2,768   |   |              |   | 4,338 |   |
| Consumer                                      |   |          | 4,599   |   |              |   | 4,677 |   |
| Loans receivable, gross                       |   |          | 367,894 |   |              |   | 355,547 |   |
| Deferred loan origination fees and costs, net |   |          | 939     |   |              |   | 822 |   |
| Allowance for loan losses                     |   |          | (3,979  | )      |              |   | (3,920 | ) |
| Loans receivable, net                         |   | $             | 364,854 |   |              | $      | 352,449 |   |
| Loans held-for-sale                           |   |          |    |   |              |   |   |   |
| Residential 1-4 family                        |   | $             | 146     |   |              | $      | 1,184 |   |

| (in thousands)                                |   | June 30, 2011 |    |   | December 31, 2010 |   |
|-----------------------------------------------|--------|---------------|---------|--------|-------------------|--------|
| Pass                                          |   | $             | 303,151 |   |              | $      | 292,815 |   |
| Special mention                               |   |          | 33,097  |   |              |   | 39,415 |   |
| Performing loans                              |   |          | 336,248 |   |              |   | 332,230 |   |
| Substandard                                   |   |          | 15,154  |   |              |   | 7,932 |   |
| Doubtful                                      |   |          | -       |   |              |   | 10 |   |
| Potential problem loans                       |   |          | 15,154  |   |              |   | 7,942 |   |
| Pass                                          |   |          |    |   |              |   |   |   |
| Troubled debt restructured loans, accruing    |   |          | 269     |   |              |   | - |   |
| Substandard                                   |   |          |    |   |              |   |   |   |
| Troubled debt restructured loans, accruing    |   |          | 1,661   |   |              |   | 5,330 |   |
| Troubled debt restructured loans, non-accrual |   |          | 7,691   |   |              |   | 4,254 |   |
| All other non-accrual loans                   |   |          | 6,871   |   |              |   | 5,791 |   |
| Impaired loans                                |   |          | 16,492  |   |              |   | 15,375 |   |
| Loans receivable, gross                       |   | $             | 367,894 |   |              | $      | 355,547 |   |

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|                                                       |   | Three months ended June 30, 2011 |   |   | Six months ended June 30, 2011 |   |
|------------------------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                                                       |   | Impaired loans                   |   |   | Potential                      |   |   |   |   |   | Impaired loans |   |   | Potential |   |   |   |   |
| (in thousands)                                             |   | Non-accrual                      |   |   | Accruing                       |   |   | problemloans |   |   | Total |   |   | Non-accrual |   |   | Accruing |   |   | problem loans |   |   | Total |   |
| Loans placed on non-accrual status                         |   | $                                | 4,539  |   |                           | $      | (2,960 | ) |   | $ | (1,035 | ) |   | $ | 544 |   |   | $ | 5,892 |   |   | $ | (2,960 | ) |   | $ | (2,268 | ) |   | $ | 664 |   |
| Loan risk rating downgrades to substandard                 |   |                             | -      |   |                           |   | - |   |   |   | 3,632 |   |   |   | 3,632 |   |   |   | - |   |   |   | - |   |   |   | 10,763 |   |   |   | 10,763 |   |
| Loan risk rating upgrades from substandard                 |   |                             | -      |   |                           |   | - |   |   |   | (923 | ) |   |   | (923 | ) |   |   | - |   |   |   | - |   |   |   | (1,008 | ) |   |   | (1,008 | ) |
| Loan repayments                                            |   |                             | (355   | )      |                           |   | (15 | ) |   |   | (140 | ) |   |   | (510 | ) |   |   | (456 | ) |   |   | (22 | ) |   |   | (266 | ) |   |   | (744 | ) |
| Loan charge-offs                                           |   |                             | (346   | )      |                           |   | - |   |   |   | - |   |   |   | (346 | ) |   |   | (606 | ) |   |   | - |   |   |   | - |   |   |   | (606 | ) |
| Loans no longer classified as troubled debt restructurings |   |                             | -      |   |                           |   | (417 | ) |   |   | - |   |   |   | (417 | ) |   |   | - |   |   |   | (417 | ) |   |   | - |   |   |   | (417 | ) |
| Real estate acquired in settlement of loans                |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | - |   |   |   | (314 | ) |   |   | - |   |   |   | - |   |   |   | (314 | ) |
| Increase (decrease) in loans                               |   | $                                | 3,837  |   |                           | $      | (3,392 | ) |   | $ | 1,534 |   |   | $ | 1,979 |   |   | $ | 4,516 |   |   | $ | (3,399 | ) |   | $ | 7,221 |   |   | $ | 8,338 |   |

|   | · | Impaired loans consist of all non-accrual loans and troubled debt restructured loans, and represent loans for which it is probable that Salisbury will not be able to collect all principal and interest amounts due according to the contractual terms of the loan agreements. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Non-accrual loans, a sub-set of impaired loans, are loans for which the accrual of interest has been discontinued because, in the opinion of management, full collection of principal or interest is unlikely. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Non-performing loans consist of non-accrual loans, and accruing loans past due 90 days and over that are well collateralized, in the process of collection and where full collection of principal and interest is assured. Non-performing assets consist of non-performing loans plus real estate acquired in settlement of loans. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Troubled debt restructured loans are loans for which concessions such as reduction of interest rates, other than normal market rate adjustments, or deferral of principal or interest payments, extension of maturity dates, or reduction of principal balance or accrued interest, have been granted due to a borrower’s financial condition. Loan restructuring is employed when management believes the granting of a concession will increase the probability of the full or partial collection of principal and interest. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Potential problem loans consist of performing loans that have been assigned a substandard credit risk rating and that are not classified as impaired. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | Loans risk rated as "special mention" possess credit deficiencies or potential weaknesses deserving management’s close attention that if left uncorrected may result in deterioration of the repayment prospects for the loans at some future date. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Loans risk rated as "substandard" are loans where the Bank’s position is clearly not protected adequately by borrower current net worth or payment capacity.  These loans have well defined weaknesses based on objective evidence and include loans where future losses to the Bank may result if deficiencies are not corrected, and loans where the primary source of repayment such as income is diminished and the Bank must rely on sale of collateral or other secondary sources of collection. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Loans risk rated as "doubtful" have the same weaknesses as substandard loans with the added characteristic that the weakness makes collection or liquidation in full, given current facts, conditions, and values, to be highly improbable. The possibility of loss is high, but due to certain important and reasonably specific pending factors, which may work to strengthen the loan, its reclassification as an estimated loss is deferred until its exact status can be determined. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Loans risk rated as "loss" are considered uncollectible and of such little value, that continuance as Bank assets is unwarranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather, it is not practical or desirable to defer writing off this basically worthless loan even though partial recovery may be made in the future. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (in thousands)                           |   | June 30, 2011 |   |   | December 31, 2010 |   |
|------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Troubled debt restructurings, accruing   |   | $             | 1,930  |   |              | $      | 5,330 |   |
| Troubled debt restructuring, non-accrual |   |          | 7,691  |   |              |   | 4,254 |   |
| All other non-accrual loans              |   |          | 6,871  |   |              |   | 5,791 |   |
| Impaired loans                           |   | $             | 16,492 |   |              | $      | 15,375 |   |

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| (in thousands)                              |   | June 30, 2011 |   |   | December 31, 2010 |   |
|---------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Residential 1-4 family                      |   | $             | 3,328  |   |              | $      | 2,534 |   |
| Construction of residential 1-4 family      |   |          | 2,960  |   |              |   | - |   |
| Home equity credit                          |   |          | 200    |   |              |   | 362 |   |
| Commercial                                  |   |          | 3,134  |   |              |   | 2,923 |   |
| Vacant land                                 |   |          | 3,933  |   |              |   | 4,018 |   |
| Real estate secured                         |   |          | 13,555 |   |              |   | 9,837 |   |
| Commercial and industrial                   |   |          | 1,008  |   |              |   | 208 |   |
| Consumer                                    |   |          | -      |   |              |   | - |   |
| Total non-accruing loans                    |   |          | 14,563 |   |              |   | 10,045 |   |
| Accruing loans past due 90 days and over    |   |          | -      |   |              |   | 96 |   |
| Total non-performing loans                  |   |          | 14,563 |   |              |   | 10,141 |   |
| Real estate acquired in settlement of loans |   |          | 452    |   |              |   | 610 |   |
| Total non-performing assets                 |   | $             | 15,015 |   |              | $      | 10,751 |   |

| (in thousands)             |   | June 30, 2011 |   |   | December 31, 2010 |   |
|----------------------------|--------|---------------|--------|--------|-------------------|--------|
| Current                    |   | $             | 6,410  |   |              | $      | 2,931 |   |
| Past due 001-029 days      |   |          | 667    |   |              |   | 219 |   |
| Past due 030-059 days      |   |          | 177    |   |              |   | 541 |   |
| Past due 060-089 days      |   |          | 925    |   |              |   | 1,050 |   |
| Past due 090-179 days      |   |          | 1,038  |   |              |   | 683 |   |
| Past due 180 days and over |   |          | 5,346  |   |              |   | 4,717 |   |
| Total non-performing loans |   | $             | 14,563 |   |              | $      | 10,141 |   |

| (in thousands)                               |   | June 30, 2011 |   |   | December 31, 2010 |   |
|----------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Residential 1-4 family                       |   | $             | -      |   |              | $      | 3,377 |   |
| Commercial                                   |   |          | 1,660  |   |              |   | 1,677 |   |
| Real estate secured                          |   |          | 1,660  |   |              |   | 5,054 |   |
| Commercial and industrial                    |   |          | 270    |   |              |   | 276 |   |
| Accruing troubled debt restructured loans    |   |          | 1,930  |   |              |   | 5,330 |   |
| Residential 1-4 family                       |   |          | 4,383  |   |              |   | 552 |   |
| Commercial                                   |   |          | 2,444  |   |              |   | 2,923 |   |
| Vacant land                                  |   |          | 536    |   |              |   | 621 |   |
| Real estate secured                          |   |          | 7,363  |   |              |   | 4,096 |   |
| Commercial and industrial                    |   |          | 328    |   |              |   | 158 |   |
| Non-accrual troubled debt restructured loans |   |          | 7,691  |   |              |   | 4,254 |   |
| Troubled debt restructured loans             |   | $             | 9,621  |   |              | $      | 9,584 |   |

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| (in thousands)                               |   | June 30, 2011 |   |   | December 31, 2010 |   |
|----------------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Current                                      |   | $             | 1,531  |   |              | $      | 4,798 |   |
| Past due 001-029 days                        |   |          | 399    |   |              |   | 375 |   |
| Past due 030-059 days                        |   |          | -      |   |              |   | 157 |   |
| Accruing troubled debt restructured loans    |   |          | 1,930  |   |              |   | 5,330 |   |
| Current                                      |   |          | 5,966  |   |              |   | 2,585 |   |
| Past due 001-029 days                        |   |          | 667    |   |              |   | 169 |   |
| Past due 030-059 days                        |   |          | 177    |   |              |   | 378 |   |
| Past due 060-089 days                        |   |          | 536    |   |              |   | - |   |
| Past due 090-179 days                        |   |          | 345    |   |              |   | 346 |   |
| Past due 180 days and over                   |   |          | -      |   |              |   | 776 |   |
| Non-accrual troubled debt restructured loans |   |          | 7,691  |   |              |   | 4,254 |   |
| Total troubled debt restructured loans       |   | $             | 9,621  |   |              | $      | 9,584 |   |

| (in thousands)                          |   | June 30, 2011 |   |   | December 31, 2010 |   |
|-----------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Past due 030-059 days                   |   | $             | 999    |   |              | $      | 1,188 |   |
| Past due 060-089 days                   |   |          | 204    |   |              |   | 730 |   |
| Past due 090-179 days                   |   |          | -      |   |              |   | 96 |   |
| Accruing loans                          |   |          | 1,203  |   |              |   | 2,014 |   |
| Past due 030-059 days                   |   |          | 177    |   |              |   | 541 |   |
| Past due 060-089 days                   |   |          | 925    |   |              |   | 1,050 |   |
| Past due 090-179 days                   |   |          | 1,038  |   |              |   | 587 |   |
| Past due 180 days and over              |   |          | 5,346  |   |              |   | 4,716 |   |
| Non-accrual loans                       |   |          | 7,486  |   |              |   | 6,894 |   |
| Total loans past due 30 days or greater |   | $             | 8,689  |   |              | $      | 8,908 |   |

----

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| (in thousands)                         |   | June 30, 2011 |   |   | December 31, 2010 |   |
|----------------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Residential 1-4 family                 |   | $             | 3,580  |   |              | $      | 2,483 |   |
| Residential 5+ multifamily             |   |          | -      |   |              |   | 89 |   |
| Construction of residential 1-4 family |   |          | -      |   |              |   | 75 |   |
| Home equity credit                     |   |          | 1,033  |   |              |   | 817 |   |
| Residential real estate                |   |          | 4,613  |   |              |   | 3,464 |   |
| Commercial                             |   |          | 8,184  |   |              |   | 2,327 |   |
| Construction of commercial             |   |          | 471    |   |              |   | 47 |   |
| Commercial real estate                 |   |          | 8,654  |   |              |   | 2,374 |   |
| Farm land                              |   |          | 849    |   |              |   | 881 |   |
| Vacant land                            |   |          | 257    |   |              |   | 249 |   |
| Real estate secured                    |   |          | 14,373 |   |              |   | 6,968 |   |
| Commercial and industrial              |   |          | 708    |   |              |   | 897 |   |
| Consumer                               |   |          | 73     |   |              |   | 67 |   |
| Potential problem loans                |   | $             | 15,154 |   |              | $      | 7,932 |   |

| (in thousands)                |   | June 30, 2011 |   |   | December 31, 2010 |   |
|-------------------------------|--------|---------------|--------|--------|-------------------|--------|
| Current                       |   | $             | 12,450 |   |              | $      | 5,757 |   |
| Past due 001-029 days         |   |          | 2,505  |   |              |   | 1,233 |   |
| Past due 030-059 days    |   |          | 199    |   |              |   | 357 |   |
| Past due 060-089 days    |   |          | -      |   |              |   | 534 |   |
| Past due 090-179 days         |   |          | -      |   |              |   | 51 |   |
| Total potential problem loans |   | $             | 15,154 |   |              | $      | 7,932 |   |

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|                                     |   | Well        |   |   | June 30, 2011 |   |   | December 31, 2010 |   |
|------------------------------------------|--------|-------------|--------|--------|---------------|--------|--------|-------------------|--------|
|                                     |   | capitalized |   |   | Salisbury     |   |   | Bank              |   |   | Salisbury |   |   | Bank |   |
| Total Capital (to risk-weighted assets)  |   |        | 10.00  | %      |          |   | 13.93  | %                 |   |   | 11.19 | % |   |   | 13.91 | % |   |   | 11.11 | % |
| Tier 1 Capital (to risk-weighted assets) |   |        | 6.00   |   |          |   | 12.85  |              |   |   | 10.12 |   |   |   | 12.84 |   |   |   | 10.06 |   |
| Tier 1 Capital (to average assets)       |   |        | 5.00   |   |          |   | 8.45   |              |   |   | 6.79 |   |   |   | 8.39 |   |   |   | 6.72 |   |

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| (a) | assumptions concerning future economic and business conditions and their effect on the economy in general and on the markets in which Salisbury and the Bank do business; and |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | expectations for revenues and earnings for Salisbury and the Bank. |
|-----|--------------------------------------------------------------------|

| (a) | the risk of adverse changes in business conditions in the banking industry generally and in the specific markets in which the Bank operates; |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | changes in the legislative and regulatory environment that negatively impacts Salisbury and Bank through increased operating expenses; |
|-----|----------------------------------------------------------------------------------------------------------------------------------------|

| (c) | increased competition from other financial and non-financial institutions; |
|-----|----------------------------------------------------------------------------|

| (d) | the impact of technological advances; and |
|-----|-------------------------------------------|

| (e) | other risks detailed from time to time in Salisbury’s filings with the Securities and Exchange Commission. |
|-----|------------------------------------------------------------------------------------------------------------------|

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m

| As of June 30, 2011                                                           |   | Months 1-12 |   |   | Months 13-24 |   |
|-------------------------------------------------------------------------------|--------|-------------|--------|--------|--------------|--------|
| Immediately rising interest rates (management’s growth assumptions)     |   |        | (12.62 | )%     |         |   | (11.00 | )% |
| Immediately falling interest rates (management’s growth assumptions)    |   |        | 0.40   |   |         |   | (1.57 | ) |
| Gradually rising interest rates (management’s growth assumptions)  |   |        | (0.25  | )      |         |   | (2.91 | ) |

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| As of June 30, 2011 (in thousands)       |   | Rates up 100bp |   |   | Rates up 200bp |   |
|------------------------------------------|--------|----------------|--------|--------|----------------|--------|
| U.S. Treasury notes                      |   | $              | (257   | )      |           | $      | (500 | ) |
| U.S. Government agency notes             |   |           | (560   | )      |           |   | (1,301 | ) |
| Municipal bonds                          |   |           | (3,781 | )      |           |   | (7,522 | ) |
| Mortgage backed securities               |   |           | (1,019 | )      |           |   | (2,232 | ) |
| Collateralized mortgage obligations      |   |           | (370   | )      |           |   | (837 | ) |
| SBA pools                                |   |           | (14    | )      |           |   | (26 | ) |
| Total available-for-sale debt securities |   | $              | (6,001 | )      |           | $      | (12,418 | ) |

| Item 4. | CONTROLS AND PROCEDURES |
|---------|-------------------------|

| PART II. | OTHER INFORMATION |
|----------|-------------------|

| Item 1. | LEGAL PROCEEDINGS |
|---------|-------------------|

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Table of Contents

| Item 1A. | RISK FACTORS |
|----------|--------------|

| Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
|---------|-------------------------------------------------------------|

| Item 3. | DEFAULTS UPON SENIOR SECURITIES |
|---------|---------------------------------|

| Item 4.  | [REMOVED AND RESERVED] |
|---------------|------------------------|

| Item 5. | OTHER INFORMATION |
|---------|-------------------|

| Item 6. | EXHIBITS |
|---------|----------|

| 31.1 | Rule 13a-14(a)/15d-14(a) Certification. |
|------|-----------------------------------------|

| 31.2 | Rule 13a-14(a)/15d-14(a) Certification. |
|------|-----------------------------------------|

| 32 | Section 1350 Certifications |
|----|-----------------------------|

| July 29, 2011 | by    /s/ Richard J. Cantele, Jr.       |
|---------------|-------------------------------------------------------------------------------------------|
|          | Richard J. Cantele, Jr.,                                                                  |
|          | Chief Executive Officer                                                                   |
|          |                                                                                      |
| July 29, 2011 | by    /s/ B. Ian McMahon           |
|          | B. Ian McMahon,                                                                           |
|          | Chief Financial Officer                                                                   |