| (X) | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2011 |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

| ( ) | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
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| New Jersey                                                     | 22-3282551                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
|                                                           |                                 |
| 64 Old Highway 22, Clinton, NJ                                 | 08809                                |
| (Address of Principal Executive Offices)                       | (Zip Code)                           |

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|                |                               | Page #                                                                                                                              |
|---------------------|------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|
|  PART I        | CONSOLIDATED FINANCIAL INFORMATION |                                                                                                                                |
|                |                               |                                                                                                                                |
|                | ITEM 1                             | Consolidated Financial Statements (Unaudited)                                                                                       |   |
|                |                               |                                                                                                                                |   |
|                |                               | Consolidated Balance Sheets at March 31, 2011, December 31, 2010, and March 31, 2010                                           | 1 |
|                |                               |                                                                                                                                |
|                |                               | Consolidated Statements of Operations for the three months ended March 31, 2011 and 2010                             | 2 |
|                |                               |                                                                                                                                |   |
|                |                               | Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2011 and  2010 | 3 |
|                |                               |                                                                                                                                |   |
|                |                               | Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and  2010                            | 4 |
|                |                               |                                                                                                                                |   |
|                |                               | Notes to the Consolidated Financial Statements                                                                                      | 5 |
|                |                               |                                                                                                                                |
|                | ITEM 2                             | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                         | 22 |
|                |                               |                                                                                                                                |   |
|                | ITEM 3                             | Quantitative and Qualitative Disclosures about Market Risk                                                                          | 36 |
|                |                               |                                                                                                                                |   |
|                | ITEM 4                             | Controls and Procedures                                                                                                             | 36 |
|                |                               |                                                                                                                                |   |
| PART II             | OTHER INFORMATION                  | 37                                                                                                                                  |
|                |                               |                                                                                                                                |   |
|                | ITEM 1                             | Legal Proceedings                                                                                                                   | 37 |
|                |                               |                                                                                                                                |   |
|                | ITEM 1A                            | Risk Factors                                                                                                                        | 37 |
|                |                               |                                                                                                                                |   |
|                | ITEM 2                             | Unregistered Sales of Equity Securities and Use of Proceeds                                                                         | 37 |
|                |                               |                                                                                                                                |   |
|                | ITEM 3                             | Defaults upon Senior Securities                                                                                                     | 37 |
|                |                               |                                                                                                                                |   |
|                | ITEM 4                             | Reserved                                                                                                                            | 37 |
|                |                               |                                                                                                                                |   |
|                | ITEM 5                             | Other Information                                                                                                                   | 37 |
|                |                               |                                                                                                                                |   |
|                | ITEM 6                             | Exhibits                                                                                                                            | 37 |
|                |                               |                                                                                                                                |
|  SIGNATURES    | 37                                 |
|                |                               |                                                                                                                                |
|  EXHIBIT INDEX | 38                                 |
|                |                               |
|                | Exhibit 31.1                       | 40                                                                                                                                  |
|                | Exhibit 31.2                       | 41                                                                                                                                  |
|                | Exhibit 32.1                       | 42                                                                                                                                  |
|                |                               |
|                |                               |

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| Amounts in thousands, except percentages                                                |   | March 31, 2011 |     |   | December 31, 2010 |   |     | March 31, 2010 |   |
|-----------------------------------------------------------------------------------------|--------|----------------|----------|--------|-------------------|--------|----------|----------------|--------|
|                                                                                    |   |           |     |   |              |   |     |           |   |
| ASSETS                                                                                  |   |           |     |   |              |   |     |           |   |
| Cash and due from banks                                                                 |   | $              | 15,478   |   |              | $      | 17,637   |           |   | $ | 22,654 |   |
| Federal funds sold and interest-bearing deposits                                        |   |           | 39,880   |   |              |   | 26,289   |           |   |   | 43,734 |   |
| Cash and cash equivalents                                                               |   |           | 55,358   |   |              |   | 43,926   |           |   |   | 66,388 |   |
| Securities:                                                                        |   |           |     |   |              |   |     |           |   |   |   |   |
| Securities available for sale, at fair value                                            |   |           | 103,238  |   |              |   | 107,131  |           |   |   | 113,465 |   |
| Securities held to maturity (fair value of $17,774, $21,351, and $25,310, respectively) |   |           | 17,577   |   |              |   | 21,111   |           |   |   | 24,977 |   |
| Total securities                                                                        |   |           | 120,815  |   |              |   | 128,242  |           |   |   | 138,442 |   |
| Loans:                                                                             |   |           |     |   |              |   |     |           |   |   |   |   |
| SBA loans held for sale                                                                 |   |           | 9,933    |   |              |   | 10,397   |           |   |   | 22,617 |   |
| SBA loans held to maturity                                                              |   |           | 74,657   |   |              |   | 75,741   |           |   |   | 75,191 |   |
| SBA 504 loans                                                                           |   |           | 60,092   |   |              |   | 64,276   |           |   |   | 67,000 |   |
| Commercial loans                                                                        |   |           | 283,135  |   |              |   | 281,205  |           |   |   | 292,557 |   |
| Residential mortgage loans                                                              |   |           | 132,512  |   |              |   | 128,400  |           |   |   | 135,596 |   |
| Consumer loans                                                                          |   |           | 54,193   |   |              |   | 55,917   |           |   |   | 58,239 |   |
| Total loans                                                                             |   |           | 614,522  |   |              |   | 615,936  |           |   |   | 651,200 |   |
| Allowance for loan losses                                                               |   |           | (15,275  | )      |              |   | (14,364  | )              |   |   | (14,055 | ) |
| Net loans                                                                               |   |           | 599,247  |   |              |   | 601,572  |           |   |   | 637,145 |   |
|                                                                                    |   |           |     |   |              |   |     |           |   |   |   |   |
| Premises and equipment, net                                                             |   |           | 10,782   |   |              |   | 10,967   |           |   |   | 11,525 |   |
| Bank owned life insurance (BOLI)                                                        |   |           | 8,885    |   |              |   | 8,812    |           |   |   | 8,574 |   |
| Deferred tax assets                                                                     |   |           | 7,833    |   |              |   | 7,550    |           |   |   | 7,856 |   |
| Federal Home Loan Bank stock, at cost                                                   |   |           | 4,206    |   |              |   | 4,206    |           |   |   | 4,677 |   |
| Accrued interest receivable                                                             |   |           | 3,725    |   |              |   | 3,791    |           |   |   | 4,009 |   |
| Prepaid FDIC insurance                                                                  |   |           | 2,994    |   |              |   | 3,266    |           |   |   | 4,136 |   |
| Other real estate owned (OREO)                                                          |   |           | 2,602    |   |              |   | 2,346    |           |   |   | 3,318 |   |
| Goodwill and other intangibles                                                          |   |           | 1,541    |   |              |   | 1,544    |           |   |   | 1,555 |   |
| Other assets                                                                            |   |           | 2,845    |   |              |   | 2,188    |           |   |   | 2,302 |   |
|                                                                                    |   |           |     |   |              |   |     |           |   |   |   |   |
| Total Assets                                                                            |   | $              | 820,833  |   |              | $      | 818,410  |           |   | $ | 889,927 |   |
|                                                                                    |   |           |     |   |              |   |     |           |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                    |   |           |     |   |              |   |     |           |   |
|  Liabilities:                                                                      |   |           |     |   |              |   |     |           |   |   |   |   |
|    Deposits:                                                             |   |           |     |   |              |   |     |           |   |   |   |   |
| Noninterest-bearing demand deposits                                                     |   | $              | 91,247   |   |              | $      | 91,272   |           |   | $ | 84,858 |   |
| Interest-bearing demand deposits                                                        |   |           | 101,878  |   |              |   | 105,530  |           |   |   | 102,846 |   |
| Savings deposits                                                                        |   |           | 293,750  |   |              |   | 277,394  |           |   |   | 291,870 |   |
| Time deposits, under $100,000                                                           |   |           | 110,050  |   |              |   | 119,478  |           |   |   | 149,934 |   |
| Time deposits, $100,000 and over                                                        |   |           | 59,851   |   |              |   | 61,114   |           |   |   | 85,294 |   |
| Total deposits                                                                          |   |           | 656,776  |   |              |   | 654,788  |           |   |   | 714,802 |   |
|                                                                                    |   |           |     |   |              |   |     |           |   |   |   |   |
| Borrowed funds                                                                          |   |           | 75,000   |   |              |   | 75,000   |           |   |   | 86,554 |   |
| Subordinated debentures                                                                 |   |           | 15,465   |   |              |   | 15,465   |           |   |   | 15,465 |   |
| Accrued interest payable                                                                |   |           | 569      |   |              |   | 556      |           |   |   | 706 |   |
| Accrued expenses and other liabilities                                                  |   |           | 2,642    |   |              |   | 2,516    |           |   |   | 3,688 |   |
| Total liabilities                                                                       |   |           | 750,452  |   |              |   | 748,325  |           |   |   | 821,215 |   |
| Commitments and contingencies                                                           |   |           | -   |   |              |   | -   |           |   |   | -  |   |
|                                                                                    |   |           |     |   |              |   |     |           |   |   |   |   |
|  Shareholders' equity:                                                             |   |           |     |   |              |   |     |           |   |   |   |   |
| Cumulative perpetual preferred stock                                                    |   |           | 19,146   |   |              |   | 19,019   |           |   |   | 18,650 |   |
| Common stock                                                                            |   |           | 52,842   |   |              |   | 55,884   |           |   |   | 55,536 |   |
| Accumuluated deficit                                                                    |   |           | (2,006   | )      |              |   | (772     | )              |   |   | (1,117 | ) |
| Treasury stock at cost                                                                  |   |           | -        |   |              |   | (4,169   | )              |   |   | (4,169 | ) |
| Accumulated other comprehensive income (loss)                                           |   |           | 399      |   |              |   | 123      |           |   |   | (188 | ) |
| Total Shareholders' Equity                                                              |   |           | 70,381   |   |              |   | 70,085   |           |   |   | 68,712 |   |
|                                                                                    |   |           |     |   |              |   |     |           |   |   |   |   |
| Total Liabilities and Shareholders' Equity                                              |   | $              | 820,833  |   |              | $      | 818,410  |           |   | $ | 889,927 |   |
|                                                                                    |   |           |     |   |              |   |     |           |   |   |   |   |
| Preferred shares                                                                        |   |           |  21 |   |              |   |  21 |           |   |   |  21 |   |
| Issued common shares                                                                    |   |           | 7,222    |   |              |   | 7,636    |           |   |   | 7,581 |   |
| Outstanding common shares                                                               |   |           | 7,222    |   |              |   | 7,211    |           |   |   | 7,156 |   |

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | For the three months ended March 31, |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
| (In thousands, except per share amounts)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 2011                                 |   |   | 2010 |   |
| INTEREST INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                 |   |   |   |   |
| Federal funds sold and interest-bearing deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                    | 11     |   |   | $ | 26 |   |
| Federal Home Loan Bank stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                 | 66     |   |   |   | 34 |   |
| Securities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                 |   |   |   |   |   |   |
| Available for sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                 | 864    |   |   |   | 1,280 |   |
| Held to maturity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                 | 287    |   |   |   | 338 |   |
| Total securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                 | 1,151  |   |   |   | 1,618 |   |
| Loans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                 |   |   |   |   |   |   |
| SBA loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                 | 1,236  |   |   |   | 1,452 |   |
| SBA 504 loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                 | 955    |   |   |   | 1,087 |   |
| Commercial loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                 | 4,306  |   |   |   | 4,604 |   |
| Residential mortgage loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 | 1,831  |   |   |   | 1,961 |   |
| Consumer loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                 | 686    |   |   |   | 731 |   |
| Total loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                 | 9,014  |   |   |   | 9,835 |   |
| Total interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                 | 10,242 |   |   |   | 11,513 |   |
| INTEREST EXPENSE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                 |   |   |   |   |   |   |
| Interest-bearing demand deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                 | 139    |   |   |   | 258 |   |
| Savings deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                 | 581    |   |   |   | 901 |   |
| Time deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                 | 1,097  |   |   |   | 1,813 |   |
| Borrowed funds and subordinated debentures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 | 950    |   |   |   | 1,077 |   |
| Total interest expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                                 | 2,767  |   |   |   | 4,049 |   |
|  Net interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                 | 7,475  |   |   |   | 7,464 |   |
| Provision for loan losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                 | 2,500  |   |   |   | 1,500 |   |
| Net interest income after provision for loan losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                 | 4,975  |   |   |   | 5,964 |   |
| NONINTEREST INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                 |   |   |   |   |   |   |
| Branch fee income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                 | 344    |   |   |   | 362 |   |
| Service and loan fee income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                 | 243    |   |   |   | 209 |   |
| Gain on sale of SBA loans held for sale, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                 | 111    |   |   |   | - |   |
| Gain on sale of mortgage loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                 | 169    |   |   |   | 145 |   |
| Bank owned life insurance (BOLI)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |                                 | 73     |   |   |   | 73 |   |
| Net security gains                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                 | 125    |   |   |   | 4 |   |
| Other income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                 | 190    |   |   |   | 117 |   |
| Total noninterest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                 | 1,255  |   |   |   | 910 |   |
| NONINTEREST EXPENSE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                 |   |   |   |   |   |   |
| Compensation and benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                 | 3,057  |   |   |   | 2,999 |   |
| Occupancy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                 | 720    |   |   |   | 677 |   |
| Processing and communications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                                 | 507    |   |   |   | 524 |   |
| Furniture and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                 | 384    |   |   |   | 423 |   |
| Professional services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                 | 202    |   |   |   | 229 |   |
| Loan collection costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                                 | 224    |   |   |   | 184 |   |
| OREO expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                 | 222    |   |   |   | 30 |   |
| Deposit insurance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                 | 319    |   |   |   | 330 |   |
| Advertising                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                 | 118    |   |   |   | 106 |   |
| Other expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                 | 405    |   |   |   | 439 |   |
| Total noninterest expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                 | 6,158  |   |   |   | 5,941 |   |
| Income before provision for income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                 | 72     |   |   |   | 933 |   |
| (Benefit) provision for income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                 | (148   | ) |   |   | 185 |   |
| Net income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                 | 220    |   |   |   | 748 |   |
| Preferred stock dividends & discount accretion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                 | 384    |   |   |   | 373 |   |
| (Loss attributable) income available to common shareholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | $                                    | (164   | ) |   | $ | 375 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |   |   |   |   |   |   |
| Net (loss) income per common share      - Basic                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $                                    | (0.02  | ) |   | $ | 0.05 |   |
|                                                                       - Diluted                                                                                                             |   | $                                    | (0.02  | ) |   | $ | 0.05 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |   |   |   |   |   |   |
| Weighted average common shares outstanding    - Basic                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                 | 7,219  |   |   |   | 7,150 |   |
|                                                                                         - Diluted |   |                                 | 7,219  |   |   |   | 7,294 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                 |   |   |   |   |   |   |

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|                                            |                                                |   | Preferred |   |   | Common Stock |      |   | Retained Earnings |   |            | Treasury |   |   | Accumulated Other Comprehensive |    |   | Total Shareholders' |   |
|-------------------------------------------------|-----------------------------------------------------|--------|-----------|--------|--------|--------------|-----------|--------|-------------------|--------|-----------------|----------|--------|--------|---------------------------------|---------|--------|---------------------|--------|
| (In thousands)                                  |                                                | Stock  |      |   | Shares |         |      | Amount |              |   |  (Deficit) |     |   | Stock  |                            |    | Loss   |                |   | Equity |   |
| Balance, December 31, 2009                      |                                                | $      | 18,533    |   |   |         | 7,144     |   |              | $      | 55,454          |     |   | $      | (1,492                          | )  |   | $                   | (4,169 | ) |   | $ | (461 | ) |   | $ | 67,865 |   |
| Comprehensive income:                           |                                                |   |      |   |   |         |      |   |              |   |            |     |   |   |                            |    |   |                |   |   |   |   |   |   |   |   |   |   |
|                                            | Net income                                          |   |      |   |   |         |      |   |              |   |            |     |   |   |                            | 748     |   |                |   |   |   |   |   |   |   |   |   | 748 |   |
|                                            | Net unrealized gains on securities                  |   |      |   |   |         |      |   |              |   |            |     |   |   |                            |    |   |                |   |   |   |   |   | 272 |   |   |   | 272 |   |
|                                            | Net unrealized gains on cash flow hedge derivatives |   |      |   |   |         |      |   |              |   |            |     |   |   |                            |    |   |                |   |   |   |   |   | 1 |   |   |   | 1 |   |
| Total comprehensive income                      |                                                |   |      |   |   |         |      |   |              |   |            |     |   |   |                            |    |   |                |   |   |   |   |   |   |   |   | 1,021 |   |
| Accretion of discount on preferred stock        |                                                |   | 117       |   |   |         |      |   |              |   |            |     |   |   | (117                            | )       |   |                |   |   |   |   |   |   |   |   | - |   |
| Dividends on preferred stock (5% annually)      |                                                |   |      |   |   |         |      |   |              |   |            |     |   |   | (256                            | )       |   |                |   |   |   |   |   |   |   |   | (256 | ) |
| Common stock issued and related tax effects (a) |                                                |   |      |   |   |         |   12 |   |              |   | 82              |     |   |   |                            |    |   |                |   |   |   |   |   |   |   |   | 82 |   |
| Balance, March 31, 2010                    |                                                | $      | 18,650    |   |   |         | 7,156     |   |              | $      | 55,536          |     |   | $      | (1,117                          | )       |   | $                   | (4,169 | ) |   | $ | (188 | ) |   | $ | 68,712 |   |

|                                                |   | Preferred |   |   | Common Stock |   |      | Retained Earnings |   |   | Treasury        |   |   | Accumulated Other Comprehensive |   |    | Total Shareholders' |   |
|-----------------------------------------------------|--------|-----------|--------|--------|--------------|--------|-----------|-------------------|--------|--------|-----------------|--------|--------|---------------------------------|--------|---------|---------------------|--------|
| (In thousands)                                      |   | Stock     |   |   | Shares       |   |      | Amount            |   |   |  (Deficit) |   |   | Stock                           |   |    | Income (Loss)       |   |   | Equity |   |
| Balance, December 31, 2010                          |   | $         | 19,019 |   |         |   | 7,211     |              |   | $      | 55,884          |   |   | $                               | (772   | )  |                | $      | (4,169 | ) |   | $ | 123 |   |   | $ | 70,085 |   |
| Comprehensive income:                               |   |      |   |   |         |   |      |              |   |   |            |   |   |                            |   |    |                |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                          |   |      |   |   |         |   |      |              |   |   |            |   |   |                            | 220    |    |                |   |   |   |   |   |   |   |   |   | 220 |   |
| Net unrealized gains on securities                  |   |      |   |   |         |   |      |              |   |   |            |   |   |                            |   |    |                |   |   |   |   |   | 192 |   |   |   | 192 |   |
| Net unrealized gains on cash flow hedge derivatives |   |      |   |   |         |   |      |              |   |   |            |   |   |                            |   |    |                |   |   |   |   |   | 84 |   |   |   | 84 |   |
| Total comprehensive income                          |   |      |   |   |         |   |      |              |   |   |            |   |   |                            |   |    |                |   |   |   |   |   |   |   |   |   | 496 |   |
| Accretion of discount on preferred stock            |   |      | 127    |   |         |   |      |              |   |   |            |   |   |                            | (127   | )       |                |   |   |   |   |   |   |   |   |   | - |   |
| Dividends on preferred stock (5% annually)          |   |      |   |   |         |   |      |              |   |   |            |   |   |                            | (259   | )       |                |   |   |   |   |   |   |   |   |   | (259 | ) |
| Retire Treasury stock                               |   |      |   |   |         |   |      |              |   |   | (3,101          | )      |   |                            | (1,068 | )       |                |   | 4,169  |   |   |   |   |   |   |   | -  |   |
| Common stock issued and related tax effects (a)     |   |      |   |   |         |   |   11 |              |   |   | 59              |   |   |                            |   |    |                |   |   |   |   |   |   |   |   |   | 59 |   |
| Balance, March 31, 2011                        |   | $         | 19,146 |   |         |   | 7,222     |              |   | $      | 52,842          |   |   | $                               | (2,006 | )  |                | $      | - |   |   | $ | 399 |   |   | $ | 70,381 |   |

----

|                                                                                   |   | For the three months ended March 31, |      |
|----------------------------------------------------------------------------------------|--------|------------------------------------------------|-----------|
| (In thousands)                                                                         |   | 2011                                           |      |   | 2010 |   |
| OPERATING ACTIVITIES                                                                   |   |                                           |      |   |   |   |
| Net income                                                                             |   | $                                              | 220       |   |   | $ | 748 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                                           |      |   |   |
| Provision for loan losses                                                              |   |                                           | 2,500     |   |   |   | 1,500 |   |
| Net amortization of purchase premiums and discounts on securities                      |   |                                           | 146       |   |   |   | 219 |   |
| Depreciation and amortization                                                          |   |                                           | 302       |   |   |   | 316 |   |
| Deferred income tax benefit                                                            |   |                                           | (467      | ) |   |   | (740 | )  |
| Net security gains                                                                     |   |                                           | (125      | ) |   |   | (4 | )  |
| Stock compensation expense                                                             |   |                                           | 35        |   |   |   | 87 |   |
| Gain on sale of SBA loans held for sale, net                                           |   |                                           | (111      | ) |   |   | - |   |
| Gain on sale of mortgage loans                                                         |   |                                           | (169      | ) |   |   | (145 | ) |
| Origination of mortgage loans held for sale                                            |   |                                           | (9,671    | ) |   |   | (7,837 | )  |
| Origination of SBA loans held for sale                                                 |   |                                           | (601      | ) |   |   | (1,211 | ) |
| Proceeds from the sale of mortgage loans held for sale, net                            |   |                                           | 9,840     |   |   |   | 7,982 |   |
| Proceeds from the sale of SBA loans held for sale, net                                 |   |                                           | 1,177     |   |   |   | - |   |
| Loss on the sale of premises and equipment                                             |   |                                           | -         |   |   |   | 3 |   |
| Net change in other assets and liabilities                                             |   |                                           | 257       |   |   |   | 1,730 |   |
|      Net cash provided by operating activities                     |   |                                           | 3,333     |   |   |   | 2,648 |   |
| INVESTING ACTIVITIES:                                                                  |   |                                           |      |   |   |   |   |   |
| Purchases of securities available for sale                                             |   |                                           | (10,953   | ) |   |   | - |   |
| Maturities and principal payments on securities held to maturity                       |   |                                           | 3,584     |   |   |   | 1,279 |   |
| Maturities and principal payments on securities available for sale                     |   |                                           | 9,922     |   |   |   | 18,820 |   |
| Proceeds from sale of securities held to maturity                                      |   |                                           | -         |   |   |   | 1,893 |   |
| Proceeds from sale of securities available for sale                                    |   |                                           | 5,172     |   |   |   | 8,838 |   |
| Proceeds from the sale of other real estate owned                                      |   |                                           | -         |   |   |   | 1,698 |   |
| Net (decrease) increase in loans                                                  |   |                                           | (1,246    | )  |   |   | 2,235 |   |
| Purchase of bank owned life insurance                                                  |   |                                           | -         |   |   |   | (2,499 | )  |
| Proceeds from the sale of premises and equipment                                       |   |                                           | -         |   |   |   | 26 |   |
| Purchases of premises and equipment                                                    |   |                                           | (112      | ) |   |   | (76 | )  |
|      Net cash provided by investing activities                     |   |                                           | 6,367     |   |   |   | 32,214 |   |
| FINANCING ACTIVITIES:                                                                  |   |                                           |      |   |   |   |   |   |
| Net increase (decrease) in deposits                                               |   |                                           | 1,988     |   |   |   | (43,437 | ) |
| Proceeds from new borrowings                                                           |   |                                           | -         |   |   |   | 1,554 |   |
| Proceeds from the exercise of stock options                                            |   |                                           | 2         |   |   |   | 32 |   |
| Cash dividends paid on preferred stock                                                 |   |                                           | (258      | ) |   |   | (258 | )  |
|      Net cash provided by (used in) financing activities      |   |                                           | 1,732     |   |   |   | (42,109 | )  |
| Increase (decrease) in cash and cash equivalents                                  |   |                                           | 11,432    |   |   |   | (7,247 | )  |
| Cash and cash equivalents, beginning of period                                         |   |                                           | 43,926    |   |   |   | 73,635 |   |
| Cash and cash equivalents, end of period                                               |   | $                                              | 55,358    |   |   | $ | 66,388 |   |
| SUPPLEMENTAL DISCLOSURES:                                                              |   |                                           |      |   |   |   |   |   |
| Cash:                                                                                  |   |                                           |      |   |   |   |   |   |
| Interest paid                                                                          |   | $                                              | 2,755     |   |   | $ | 4,053 |   |
| Income taxes paid                                                                      |   |                                           | 334       |   |   |   | 303 |   |
| Noncash investing activities:                                                          |   |                                           |      |   |   |   |   |   |
|  Transfer of loans to other real estate owned                                     |   |                                           |  605 |   |   |   |  3,486 |   |
|                                                                                   |   |                                           |      |   |   |   |   |   |

----

|                                            |   | Shares |    |   | Weighted AverageExercise Price |   |   | Weighted AverageRemaining ContractualLife (in years) |   |   | Aggregate IntrinsicValue |   |
|-------------------------------------------------|--------|--------|---------|--------|--------------------------------|--------|--------|------------------------------------------------------|--------|--------|--------------------------|--------|
| Outstanding at December 31, 2010                |   |   | 775,468 |   |                           | $      | 5.90   |                                                 |   |   | 3.9                      |   |   | $ | 1,049,184 |   |
|      Options granted   |   |   | -       |   |                           |   | -      |                                                 |   |   |                     |   |   |   |   |   |
|      Options exercised |   |   | (40,472 | )      |                           |   | 4.39   |                                                 |   |   |                     |   |   |   |   |   |
|      Options forfeited |   |   | (3,782  | )      |                           |   | 6.43   |                                                 |   |   |                     |   |   |   |   |   |
|      Options expired   |   |   | (1,302  | )      |                           |   | 7.29   |                                                 |   |   |                     |   |   |   |   |   |
| Outstanding at March 31, 2011                   |   |   | 729,912 |   |                           | $      | 5.98   |                                                 |   |   | 3.6                      |   |   | $ | 1,394,230 |   |
| Exercisable at March 31, 2011                   |   |   | 658,364 |   |                           | $      | 6.19   |                                                 |   |   | 3.1                      |   |   | $ | 1,187,432 |   |

----

|                    |             |   | Options Outstanding      |    |    | Options Exercisable                                    |   |
|-------------------------|------------------|--------|--------------------------|---------|---------|--------------------------------------------------------|--------|
| Range ofExercise Prices |             |   | Options Outstanding |    |    | Weighted Average Remaining Contractual Life (in years) |   |   | Weighted AverageExercise Price |   |   | OptionsExercisable |   |   | Weighted AverageExercise Price |   |
| $                       | 0.00 - 4.00 |   |                     |    | 317,718 |                                                   |   |   | 3.4 |   |   | $ | 3.45 |   |   |   | 257,222 |   |   | $ | 3.35 |   |
|                    | 4.01 - 8.00 |   |                     |    | 218,476 |                                                   |   |   | 4.0 |   |   |   | 5.79 |   |   |   | 207,424 |   |   |   | 5.84 |   |
|                    | 8.01 - 12.00     |   |                     |    | 128,256 |                                                   |   |   | 2.8 |   |   |   | 9.20 |   |   |   | 128,256 |   |   |   | 9.20 |   |
|                    | 12.01 - 16.00    |   |                     |    | 65,462  |                                                   |   |   | 4.9 |   |   |   | 12.55 |   |   |   | 65,462 |   |   |   | 12.55 |   |
| Total                   |             |   |                     | 729,912 |    |                                                   |   | 3.6 |   |   | $ | 5.98 |   |   |   | 658,364 |   |   | $ | 6.19 |   |

|                                          |   |  Three months ended March 31,    |   |
|-----------------------------------------------|--------|------------------------------------------------------|--------|
|                                          |   |  2011                                           |   |   |  2010 |   |
| Number of options exercised                   |   |                                                 | 40,472 |   |   |   | 11,739 |   |
| Total intrinsic value of options exercised    |   | $                                               | 81,347 |   |   | $ | 16,855 |   |
| Cash received from options exercised          |   |                                                 | 2,364  |   |   |   | 31,731 |   |
| Tax deduction realized from options exercised |   |                                                 | 32,490 |   |   |   | 6,732 |   |

|                                            |   | Shares |   |   | Average Grant Date Fair Value |   |
|-------------------------------------------------|--------|--------|--------|--------|-------------------------------|--------|
| Nonvested restricted stock at December 31, 2010 |   |   | 43,367 |   |                          | $      | 5.83 |   |
| Granted                                         |   |   | -      |   |                          |   | - |   |
| Vested                                          |   |   | (6,245 | )      |                          |   | 11.05 |   |
| Forfeited                                       |   |   | (1,326 | )      |                          |   | 8.72 |   |
| Nonvested restricted stock at March 31, 2011    |   |   | 35,796 |   |                          | $      | 4.81 |   |

----

----

----

|                                                                                                                        |   |    | Three months ended March 31, |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|---------|------------------------------|--------|
| (In thousands, except per share amounts)                                                                                    |   |    | 2011                         |   |   |   | 2010 |   |
| Net income (loss)                                                                                                           |   | $  | 220                          |   |   | $  | 748 |   |
| Less: Preferred stock dividends and discount accretion                                                                      |   |    | 384                          |   |   |   | 373 |   |
| (Loss attributable ) income available to common shareholders                                                           |   | $       | (164                         | )      |   | $ | 375 |   |
| Weighted average common shares outstanding - Basic                                                                          |   |    | 7,219                        |   |   |   | 7,150 |   |
| Plus:  Potential dilutive common stock equivalents                                                                |   |    | -                            |   |   |   | 144 |   |
| Weighted average common shares outstanding - Diluted                                                                        |   |    | 7,219                        |   |   |   | 7,294 |   |
| Net (loss) income per common share -                                                                                   |   |    |                         |   |   |   |   |   |
| Basic                                                                                                                       |   | $  | (0.02                        | )      |   | $ | 0.05 |   |
| Diluted                                                                                                                     |   |    | (0.02                        | )      |   |   | 0.05 |   |
| Stock options and common stock excluded from the income per share computation as their effect would have been anti-dilutive |   |    | 361                          |   |   |   | 697 |   |

----

| (In thousands)                                                                                          |   |    | Pre-tax |   |   |    | Tax    |   |   |    | After-tax |    |
|---------------------------------------------------------------------------------------------------------|--------|---------|---------|--------|--------|---------|--------|--------|--------|---------|-----------|---------|
| Net unrealized gains (losses) on securities:                                                            |   |    |    |   |   |    |   |   |   |    |      |    |
| Balance at December 31, 2009                                                                            |   |    |    |   |   |    |   |   |   |  $ | 5         |    |
| Unrealized holding gain on securities arising during the period                                         |   |  $ | 468     |   |   |  $ | 193    |   |   |    | 275       |    |
| Less: Reclassification adjustment for gains included in net income                                      |   |    | 4       |   |   |    | 1      |   |   |    | 3         |    |
| Net unrealized gain on securities arising during the period                                             |   |    | 464     |   |   |    | 192    |   |   |    | 272       |    |
| Balance at March 31, 2010                                                                               |   |    |    |   |   |    |   |   |   |  $ | 277       |    |
|                                                                                                    |   |    |    |   |   |    |   |   |   |    |      |    |
| Balance at December 31, 2010                                                                            |   |    |    |   |   |    |   |   |   |  $ | 423       |    |
| Unrealized holding gain on securities arising during the period                                         |   |  $ | 446     |   |   |  $ | 171    |   |   |    | 275       |    |
|        Less: Reclassification adjustment for gains included in net income |   |    | 125     |   |   |    | 42     |   |   |    | 83        |    |
| Net unrealized gain on securities arising during the period                                             |   |    | 321     |   |   |    | 129    |   |   |    | 192       |    |
| Balance at March 31, 2011                                                                               |   |    |    |   |   |    |   |   |   |  $ | 615       |    |
|                                                                                                    |   |    |    |   |   |    |   |   |   |    |      |    |
|                                                                                                    |   |    |    |   |   |    |   |   |   |    |      |    |
| Net unrealized gains (losses) on cash flow hedges:                                                      |   |    |    |   |   |    |   |   |   |    |      |    |
| Balance at December 31, 2009                                                                            |   |    |    |   |   |    |   |   |   |  $ | (466      | )       |
| Unrealized holding gain on cash flow hedges arising during the period                                   |   |  $ | 1       |   |   |  $ | -      |   |   |    | 1         |    |
| Balance at March 31, 2010                                                                               |   |    |    |   |   |    |   |   |   |  $ | (465      | )       |
|                                                                                                    |   |    |    |   |   |    |   |   |   |    |      |    |
| Balance at December 31, 2010                                                                            |   |    |    |   |   |    |   |   |   |  $ | (300      | )  |
| Unrealized holding gain on cash flow hedges arising during the period                                   |   |  $ | 139     |   |   |  $ | 55     |   |   |    | 84        |    |
| Balance at March 31, 2011                                                                               |   |    |    |   |   |    |   |   |   |  $ | (216      | )       |
|                                                                                                    |   |    |    |   |   |    |   |   |   |    |      |    |
|                                                                                                    |   |    |    |   |   |    |   |   |   |    |      |    |
| Total Accumulated Other Comprehensive Income at March 31, 2011                                          |   |    |    |   |   |    |   |   |   |  $ | 399       |    |

| ·   | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Generally, this includes debt and equity securities and derivative contracts that are traded in an active exchange market (i.e. New York Stock Exchange), as well as certain U.S. Treasury, U.S. Government and sponsored entity agency mortgage-backed securities that are highly liquid and are actively traded in over-the-counter markets. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Quoted prices for similar assets or liabilities in active markets. |
|--------------------|--------------------------------------------------------------------|

| ·   | Quoted prices for identical or similar assets or liabilities in inactive markets. |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (i.e., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.” |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Generally, this includes U.S. Government and sponsored entity mortgage-backed securities, corporate debt securities and  derivative contracts. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Prices or valuation techniques that require inputs that are both unobservable (i.e. supported by little or no market activity) and that are significant to the fair value of the assets or liabilities. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                   |   | As of March 31, 2011 |   |
|----------------------------------------|--------|----------------------|--------|
| (In thousands)                         |   | Level 1              |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Financial Assets:                      |   |                 |   |   |   |   |   |   |   |   |   |   |
| Securities available for sale:         |   |                 |   |   |   |   |   |   |   |   |   |   |
| U.S. government sponsored entities     |   | $                    | -      |   |   | $ | 8,866 |   |   | $ | - |   |   | $ | 8,866 |   |
| State and political subdivisions       |   |                 | -      |   |   |   | 11,397 |   |   |   | - |   |   |   | 11,397 |   |
| Residential mortgage-backed securities |   |                 | -      |   |   |   | 79,186 |   |   |   | - |   |   |   | 79,186 |   |
| Commercial mortgage-backed securities  |   |                 | -      |   |   |   | 1,656 |   |   |   | - |   |   |   | 1,656 |   |
| Trust preferred securities             |   |                 | -      |   |   |   | 561 |   |   |   | - |   |   |   | 561 |   |
| Other equities                         |   |                 | -      |   |   |   | 1,572 |   |   |   | - |   |   |   | 1,572 |   |
| Total securities available for sale    |   |                 | -      |   |   |   | 103,238 |   |   |   | - |   |   |   | 103,238 |   |
| Financial Liabilities:                 |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap agreements          |   |                 | -      |   |   |   | 360 |   |   |   | - |   |   |   | 360 |   |

|                                   |   | As of December 31, 2010 |   |
|----------------------------------------|--------|-------------------------|--------|
| (In thousands)                         |   | Level 1                 |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Financial Assets:                      |   |                    |   |   |   |   |   |   |   |   |   |   |
| Securities available for sale:         |   |                    |   |   |   |   |   |   |   |   |   |   |
| U.S. government sponsored entities     |   | $                       | -      |   |   | $ | 6,462 |   |   | $ | - |   |   | $ | 6,462 |   |
| State and political subdivisions       |   |                    | -      |   |   |   | 10,963 |   |   |   | - |   |   |   | 10,963 |   |
| Residential mortgage-backed securities |   |                    | -      |   |   |   | 85,741 |   |   |   | - |   |   |   | 85,741 |   |
| Commercial mortgage-backed securities  |   |                    | -      |   |   |   | 1,826 |   |   |   | - |   |   |   | 1,826 |   |
| Trust preferred securities             |   |                    | -      |   |   |   | 565 |   |   |   | - |   |   |   | 565 |   |
| Other equities                         |   |                    | -      |   |   |   | 1,574 |   |   |   | - |   |   |   | 1,574 |   |
| Total securities available for sale    |   |                    | -      |   |   |   | 107,131 |   |   |   | - |   |   |   | 107,131 |   |
| Financial Liabilities:                 |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate swap agreements          |   |                    | -      |   |   |   | 499 |   |   |   | - |   |   |   | 499 |   |

----

|                                             |   | As of March 31, 2011          |    |
|--------------------------------------------------|--------|-------------------------------|---------|
| (In thousands)                                   |   | Securities Available for Sale |    |   | Interest Rate Swap Agreements |   |
| Beginning balance December 31, 2010              |   | $                             | 107,131 |   |   | $ | 499 |   |
| Total net gains (losses) included in:            |   |                          |    |   |   |   |   |   |
| Net income                                       |   |                          | 125     |   |   |   | - |   |
| Other comprehensive income                       |   |                          | 321     |   |   |   | (139 | ) |
| Purchases, sales, issuances and settlements, net |   |                          | 4,339   |   |   |   | - |   |
| Transfers in and/or out of Level 2               |   |                          | -       |   |   |   | - |   |
| Ending balance March 31, 2011                    |   | $                             | 103,238 |   |   | $ | 360 |   |

|                                |   | As of March 31, 2011 |   |
|-------------------------------------|--------|----------------------|--------|
| (In thousands)                      |   | Level 1              |   |   | Level 2 |   |   | Level 3 |   |   | Total |   | Total fair value gain (loss) during three months ended March 31, 2011 |   |
| Financial Assets:                   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Other real estate owned ("OREO")    |   | $                    | -      |   |   | $ | - |   |   |  $ | 605 |   |   | $ | 605 |   |   | $ |  (404 | ) |
| Impaired collateral-dependent loans |   |                 | -      |   |   |  - |   |   |   | 11,498 |   |   |   | 11,498 |   |   |   | (320 | ) |

----

|                                       |   | March 31, 2011       |          |   | December 31, 2010         |   |
|--------------------------------------------|--------|----------------------|---------------|--------|---------------------------|--------|
| (In thousands)                             |   | Carrying Amount |          |   | Estimated Fair Value |   |   | Carrying Amount |   |   | EstimatedFair Value |   |
| Financial assets:                          |   |                 |          |   |                      |   |   |   |   |   |   |   |
| Cash and cash equivalents                  |   | $                    | 55,358        |   |                      | $      | 55,358 |   |   | $ | 43,926 |   |   | $ | 43,926 |   |
| Securities available for sale              |   |                 | 103,238       |   |                      |   | 103,238 |   |   |   | 107,131 |   |   |   | 107,131 |   |
| Securities held to maturity                |   |                 | 17,577        |   |                      |   | 17,774 |   |   |   | 21,111 |   |   |   | 21,351 |   |
| SBA loans held for sale                    |   |                 | 9,933         |   |                      |   | 10,568 |   |   |   | 10,397 |   |   |   | 11,048 |   |
| Loans, net of allowance for loan losses    |   |                 |  589,314 |   |                      |   |  583,408 |   |   |   |  591,175 |   |   |   |  588,519 |   |
| Federal Home Loan Bank stock               |   |                 | 4,206         |   |                      |   | 4,206 |   |   |   | 4,206 |   |   |   | 4,206 |   |
| SBA servicing assets                       |   |                 | 440           |   |                      |   | 440 |   |   |   | 512 |   |   |   | 512 |   |
| Accrued interest receivable                |   |                 | 3,725         |   |                      |   | 3,725 |   |   |   | 3,791 |   |   |   | 3,791 |   |
| Financial liabilities:                     |   |                 |          |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                   |   |                 | 656,776       |   |                      |   | 635,198 |   |   |   | 654,788 |   |   |   | 634,713 |   |
| Borrowed funds and subordinated debentures |   |                 | 90,465        |   |                      |   | 103,595 |   |   |   | 90,465 |   |   |   | 103,704 |   |
| Accrued interest payable                   |   |                 | 569           |   |                      |   | 569 |   |   |   | 556 |   |   |   | 556 |   |
| Interest rate swap agreements              |   |                 | 360           |   |                      |   | 360 |   |   |   | 499 |   |   |   | 499 |   |

----

|                                   |   | March 31, 2011 |    |   | December 31, 2010      |    |
|----------------------------------------|--------|----------------|---------|--------|------------------------|---------|
| (In thousands)                         |   | Amortized Cost |    |   | Gross Unrealized Gains |    |   | Gross Unrealized Losses |   |   | Estimated Fair Value |   |   | Amortized Cost |   |   | Gross Unrealized Gains |   |   | Gross Unrealized Losses |   |   | Estimated Fair Value |   |
| Available for sale:                    |   |           |    |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US Government sponsored entities       |   | $              | 8,839   |   |                   | $       | 59 |   |   | $ | (32 | ) |   | $ | 8,866 |   |   | $ | 6,415 |   |   | $ | 47 |   |   | $ | - |   |   | $ | 6,462 |   |
| State and political subdivisions       |   |           | 11,243  |   |                   |    | 199 |   |   |   | (45 | ) |   |   | 11,397 |   |   |   | 11,246 |   |   |   | 23 |   |   |   | (306 | ) |   |   | 10,963 |   |
| Residential mortgage-backed securities |   |           | 77,902  |   |                   |    | 1,808 |   |   |   | (524 | ) |   |   | 79,186 |   |   |   | 84,359 |   |   |   | 2,022 |   |   |   | (640 | ) |   |   | 85,741 |   |
| Commercial mortgage-backed securities  |   |           | 1,649   |   |                   |    | 12 |   |   |   | (5 | ) |   |   | 1,656 |   |   |   | 1,827 |   |   |   | 3 |   |   |   | (4 | ) |   |   | 1,826 |   |
| Trust preferred securities             |   |           | 978     |   |                   |    | - |   |   |   | (417 | ) |   |   | 561 |   |   |   | 977 |   |   |   | - |   |   |   | (412 | ) |   |   | 565 |   |
| Other securities                       |   |           | 1,610   |   |                   |    | 3 |   |   |   | (41 | ) |   |   | 1,572 |   |   |   | 1,610 |   |   |   | - |   |   |   | (36 | ) |   |   | 1,574 |   |
| Total securities available for sale    |   | $              | 102,221 |   |                   | $       | 2,081 |   |   | $ | (1,064 | ) |   | $ | 103,238 |   |   | $ | 106,434 |   |   | $ | 2,095 |   |   | $ | (1,398 | ) |   | $ | 107,131 |   |
| Held to maturity:                      |   |           |    |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State and political subdivisions       |   | $         | 2,297   |   |                   | $  | 2 |   |   | $  | (9 | ) |   | $ | 2,290 |   |   | $  | 2,297 |   |   | $  | - |   |   | $  | (66 | ) |   | $  | 2,231 |   |
| Residential mortgage-backed securities |   |           | 11,965  |   |                   |    | 374 |   |   |   | (292 | ) |   |   | 12,047 |   |   |   | 14,722 |   |   |   | 444 |   |   |   | (318 | ) |   |   | 14,848 |   |
| Commercial mortgage-backed securities  |   |           | 3,265   |   |                   |    | 160 |   |   |   | - |   |   |   | 3,425 |   |   |   | 4,042 |   |   |   | 217 |   |   |   | - |   |   |   | 4,259 |   |
| Trust preferred securities             |   |           | 50      |   |                   |    | - |   |   |   | (38 | ) |   |   | 12 |   |   |   | 50 |   |   |   | - |   |   |   | (37 | ) |   |   | 13 |   |
| Total securities held to maturity      |   | $              | 17,577  |   |                   | $       | 536 |   |   | $ | (339 | ) |   | $ | 17,774 |   |   | $ | 21,111 |   |   | $ | 661 |   |   | $ | (421 | ) |   | $ | 21,351 |   |

|                                   |   | Within one year |   |   | After one yearthrough five years |   |   | After five yearsthrough ten years |   |   | After ten years |   |   | Total carrying value |   |
|----------------------------------------|--------|-----------------|--------|--------|----------------------------------|--------|--------|-----------------------------------|--------|--------|-----------------|--------|--------|----------------------|--------|
| (In thousands)                         |   | Amount          |   |   | Yield                            |   |   | Amount                            |   |   | Yield           |   |   | Amount               |   |   | Yield |   |   | Amount |   |   | Yield |   |   | Amount |   |   | Yield |   |
| Available for sale at fair value:      |   |            |   |   |                             |   |   |                              |   |   |            |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| US Government sponsored entities       |   | $               | -      |   |                             |   | -      | %                                 |   | $      | 865             |   |   |                 | 2.32   | % |   | $ | 5,093 |   |   |   | 2.62 | % |   | $ | 2,908 |   |   |   | 4.30 | % |   | $ | 8,866 |   |   |   | 3.15 | % |
| State and political subdivisions       |   |            | -      |   |                             |   | -      |                              |   |   | 170             |   |   |                 | 6.50   |   |   |   | 3,677 |   |   |   | 3.11 |   |   |   | 7,550 |   |   |   | 3.84 |   |   |   | 11,397 |   |   |   | 3.64 |   |
| Residential mortgage-backed securities |   |            | -      |   |                             |   | -      |                              |   |   | 787             |   |   |                 | 3.10   |   |   |   | 6,327 |   |   |   | 0.78 |   |   |   | 72,072 |   |   |   | 3.48 |   |   |   | 79,186 |   |   |   | 3.55 |   |
| Commercial mortgage-backed securities  |   |            | -      |   |                             |   | -      |                              |   |   | -               |   |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | 1,656 |   |   |   | 6.09 |   |   |   | 1,656 |   |   |   | 6.09 |   |
| Trust preferred securities             |   |            | -      |   |                             |   | -      |                              |   |   | -               |   |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | 561 |   |   |   | 1.08 |   |   |   | 561 |   |   |   | 1.08 |   |
| Other securities                       |   |            | -      |   |                             |   | -      |                              |   |   | -               |   |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | 1,572 |   |   |   | 3.44 |   |   |   | 1,572 |   |   |   | 3.44 |   |
| Total securities available for sale    |   | $               | -      |   |                             |   | -      | %                                 |   | $      | 1,822           |   |   |                 | 3.05   | % |   | $ | 15,097 |   |   |   | 1.97 | % |   | $ | 86,319 |   |   |   | 3.58 | % |   | $ | 103,238 |   |   |   |  3.55 | % |
|  Held to maturity at cost:        |   |            |   |   |                             |   |   |                              |   |   |            |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State and political subdivisions       |   | $               | -      |   |                             |   | -      | %                                 |   | $      | -               |   |   |                 | -      | % |   | $ | - |   |   |   | - | % |   | $ | 2,297 |   |   |   | 5.15 | % |   | $ | 2,297 |   |   |   | 5.15 | % |
| Residential mortgage-backed securities |   |            | -      |   |                             |   | -      |                              |   |   | 423             |   |   |                 | 4.25   |   |   |   | 3,367 |   |   |   | 4.75 |   |   |   | 8,175 |   |   |   | 4.75 |   |   |   | 11,965 |   |   |   | 4.73 |   |
| Commercial mortgage-backed securities  |   |            | -      |   |                             |   | -      |                              |   |   | -               |   |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | 3,265 |   |   |   | 10.14 |   |   |   | 3,265 |   |   |   | 10.14 |   |
| Trust preferred securities             |   |            | -      |   |                             |   | -      |                              |   |   | -               |   |   |                 | -      |   |   |   | - |   |   |   | - |   |   |   | 50 |   |   |   | - |   |   |   | 50 |   |   |   | - |   |
| Total securities held to maturity      |   | $               | -      |   |                             |   | -      | %                                 |   | $      | 423             |   |   |                 | 4.25   | % |   | $ | 3,367 |   |   |   | 4.75 | % |   | $ | 13,787 |   |   |   | 6.08 | % |   | $ | 17,577 |   |   |   | 5.78 | % |

----

|   |   | March 31, 2011 |   |
|--------|--------|----------------|--------|

|                                   |   |                           |   |   | Less than 12 months  |   |   | 12 months and greater |   |   | Total                |   |
|----------------------------------------|--------|--------------------------------|--------|--------|----------------------|--------|--------|-----------------------|--------|--------|----------------------|--------|
| (In thousands)                         |   | TotalNumber in a Loss Position |   |   | Estimated Fair Value |   |   | Unrealized Loss       |   |   | Estimated Fair Value |   |   | Unrealized Loss |   |   | Estimated Fair Value |   |   | Unrealized Loss |   |
| Available for sale:                    |   |                           |   |   |                 |   |   |                  |   |   |                 |   |   |   |   |   |   |   |   |   |   |
| U.S. Government sponsored entities     |   |                           | 2      |   |                 | $      | 1,469  |                  |   | $      | (32                  | )      |   | $ | - |   |   | $ | - |   |   | $ | 1,469 |   |   | $ | (32 | ) |
| State and political subdivisions       |   |                           | 8      |   |                 |   | 2,586  |                  |   |   | (45                  | )      |   |   | - |   |   |   | - |   |   |   | 2,586 |   |   |   | (45 | ) |
| Residential mortgage-backed securities |   |                           | 17     |   |                 |   | 15,417 |                  |   |   | (325                 | )      |   |   | 2,916 |   |   |   | (199 | ) |   |   | 18,333 |   |   |   | (524 | ) |
| Commercial mortgage-backed securities  |   |                           | 1      |   |                 |   | -      |                  |   |   | -                    |   |   |   | 1,344 |   |   |   | (5 | )  |   |   | 1,344 |   |   |   | (5 | ) |
| Trust preferred securities             |   |                           | 1      |   |                 |   | -      |                  |   |   | -                    |   |   |   | 561 |   |   |   | (417 | ) |   |   | 561 |   |   |   | (417 | ) |
| Other equities                         |   |                           | 3      |   |                 |   | -      |                  |   |   | -                    |   |   |   | 1,019 |   |   |   | (41 | ) |   |   | 1,019 |   |   |   | (41 | ) |
| Total temporarily impaired investments |   |                           | 32     |   |                 | $      | 19,472 |                  |   | $      | (402                 | )      |   | $ | 5,840 |   |   | $ | (662 | ) |   | $ | 25,312 |   |   | $ | (1,064 | ) |
| Held to maturity:                      |   |                           |   |   |                 |   |   |                  |   |   |                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State and political subdivisions       |   |                           | 3      |   |                 | $      | 1,803  |                  |   | $      | (9                   | )      |   | $ | - |   |   | $ | - |   |   | $ | 1,803 |   |   | $ | (9 | ) |
| Residential mortgage-backed securities |   |                           | 6      |   |                 |   | 2,783  |                  |   |   | (75                  | )      |   |   | 2,449 |   |   |   | (217 | ) |   |   | 5,232 |   |   |   | (292 | ) |
| Trust preferred securities             |   |                           | 2      |   |                 |   | -      |                  |   |   | -                    |   |   |   | 13 |   |   |   | (38 | ) |   |   | 12 |   |   |   | (38 | ) |
| Total temporarily impaired investments |   |                           | 11     |   |                 | $      | 4,586  |                  |   | $      | (84                  | )      |   | $ | 2,462 |   |   | $ | (255 | ) |   | $ | 7,047 |   |   | $ | (339 | ) |

|                                   |   | December 31, 2010              |   |
|----------------------------------------|--------|--------------------------------|--------|
|                                   |   |                           |   |   | Less than 12 months |   |   | 12 months and greater |   |   | Total |   |
| (In thousands)                         |   | TotalNumber in a Loss Position |   |   | Estimated Fair Value |   |   | Unrealized Loss |   |   | Estimated Fair Value |   |   | Unrealized Loss |   |   | Estimated Fair Value |   |   | Unrealized Loss |   |
| Available for sale:                    |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State and political subdivisions       |   |                           | 31     |   |   | $ | 9,051 |   |   | $ | (306 | ) |   | $ | - |   |   | $ | - |   |   | $ | 9,051 |   |   | $ | (306 | ) |
| Residential mortgage-backed securities |   |                           | 17     |   |   |   | 14,651 |   |   |   | (422 | ) |   |   | 3,547 |   |   |   | (218 | ) |   |   | 18,198 |   |   |   | (640 | ) |
| Commercial mortgage-backed securities  |   |                           | 1      |   |   |   | - |   |   |   | - |   |   |   | 1,516 |   |   |   | (4 | ) |   |   | 1,516 |   |   |   | (4 | ) |
| Trust preferred securities             |   |                           | 1      |   |   |   | - |   |   |   | - |   |   |   | 565 |   |   |   | (412 | ) |   |   | 565 |   |   |   | (412 | ) |
| Other equities                         |   |                           | 4      |   |   |   | - |   |   |   | - |   |   |   | 1,074 |   |   |   | (36 | ) |   |   | 1,074 |   |   |   | (36 | ) |
| Total temporarily impaired investments |   |                           | 54     |   |   | $ | 23,702 |   |   | $ | (728 | ) |   | $ | 6,702 |   |   | $ | (670 | ) |   | $ | 30,404 |   |   | $ | (1,398 | ) |
| Held to maturity:                      |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| State and political subdivisions       |   |                           | 4      |   |   | $ | 2,231 |   |   | $ | (66 | ) |   | $ | - |   |   | $ | - |   |   | $ | 2,231 |   |   | $ | (66 | ) |
| Residential mortgage-backed securities |   |                           | 5      |   |   |   | 2,243 |   |   |   | (75 | ) |   |   | 2,651 |   |   |   | (243 | ) |   |   | 4,894 |   |   |   | (318 | ) |
| Trust preferred securities             |   |                           | 2      |   |   |   | - |   |   |   | - |   |   |   | 13 |   |   |   | (37 | ) |   |   | 13 |   |   |   | (37 | ) |
| Total temporarily impaired investments |   |                           | 11     |   |   | $ | 4,474 |   |   | $ | (141 | ) |   | $ | 2,664 |   |   | $ | (280 | ) |   | $ | 7,138 |   |   | $ | (421 | ) |

----

|                                                                              |   | For the three months ended March 31, |    |
|-----------------------------------------------------------------------------------|--------|--------------------------------------|---------|
| (In thousands)                                                                    |   | 2011                                 |    |   | 2010 |   |
| Available for sale:                                                               |   |                                 |    |   |   |   |
| Realized gains                                                                    |   | $                                    | 126     |   |   | $ | 244 |   |
| Realized losses                                                                   |   |                                 | (1      | ) |   |   | (150 | )  |
| Other-than-temporary impairment charges                                           |   |                                 | -       |   |   |   | - |   |
| Total securities available for sale                                               |   | $                                    | 125     |   |   | $ | 94 |   |
|                                                                              |   |                                 |    |   |   |   |   |   |
| Held to maturity:                                                                 |   |                                 |    |   |   |   |   |   |
| Realized gains                                                                    |   | $                                    |  - |   |   | $ | - |   |
| Realized losses                                                                   |   |                                 |  - |   |   |   | (90 | )  |
| Other-than-temporary impairment charges                                           |   |                                 | -       |   |   |   | - |   |
| Total securities held to maturity                                                 |   | $                                    | -       |   |   | $ | (90 | ) |
|                                                                              |   |                                 |    |   |   |   |   |   |
| Net gains on sales of securities and other-than-temporary impairment charges |   | $                                    | 125     |   |   | $ | 4 |   |

----

| For the three months ended March 31, 2011   |
|---------------------------------------------|
| (In thousands)                              |   | SBA |   |   | SBA 504 |   |   | Commercial |   |   | Residential |   |   | Consumer |   |   | Unallocated |   |   | Total |   |
| Allowance for credit losses:                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning balance                           |   | $ | 4,198 |   |   | $ | 1,551 |   |   | $ | 6,011 |   |   | $ | 1,679 |   |   | $ | 586 |   |   | $ | 339 |   |   | $ | 14,364 |   |
| Charge-offs                                 |   |   | (711 | ) |   |   | - |   |   |   | (848 | ) |   |   | (142 | ) |   |   | - |   |   |   | - |   |   |   | (1,701 | ) |
| Recoveries                                  |   |   | 8  |   |   |   | - |   |   |   | 98 |   |   |   | 4 |   |   |   | 2 |   |   |   | - |   |   |   | 112 |   |
| Net charge-offs                             |   |   | (703  | ) |   |   | - |   |   |   | (750 | ) |   |   | (138 | ) |   |   | 2 |   |   |   | - |   |   |   | (1,589 | ) |
| Provision for loan lossescharged to expense |   |   |  759 |   |   |   |  71 |   |   |   |  1,524 |   |   |   |  258 |   |   |   |  (61 | )  |   |   | (51 | ) |   |   | 2,500 |   |
| Ending balance                              |   | $ |  4,254 |   |   | $ |  1,622 |   |   | $ |  6,785 |   |   | $ |  1,799 |   |   | $ |  527 |   |   | $ |  288 |   |   | $ | 15,275 |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance:                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment       |   | $ |  1,421 |   |   | $ |  85 |   |   | $ |  1,271 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ |  2,777 |   |
| Collectively evaluated for impairment       |   |   |  2,833 |   |   |   |  1,537 |   |   |   |  5,514 |   |   |   |  1,799 |   |   |   |  527 |   |   |   |  288 |   |   |   |  12,498 |   |
| Totals                                      |   | $ |  4,254 |   |   | $ |  1,622 |   |   | $ |  6,785 |   |   | $ |  1,799 |   |   | $ | 527 |   |   | $ |  288 |   |   | $ | 15,275 |   |
|                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan ending balances:                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Individually evaluated for impairment       |   | $ | 6,474 |   |   | $ |  9,521 |   |   | $ |  16,491 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 32,486 |   |
| Collectively evaluated for impairment       |   |   | 78,116 |   |   |   |  50,571 |   |   |   |  266,644 |   |   |   |  132,512 |   |   |   |  54,193 |   |   |   | - |   |   |   | 582,036 |   |
| Total ending balance                        |   | $ |  84,590 |   |   | $ |  60,092 |   |   | $ |  283,135 |   |   | $ |  132,512 |   |   | $ |  54,193 |   |   | $ | - |   |   | $ | 614,522 |   |

| For the three months ended March 31, 2010    |
|----------------------------------------------|
| Allowance for credit losses:                 |   |   |   |
| Beginning balance                            |   | $ | 13,842 |   |
| Charge-offs                                  |   |   | (1,335 | ) |
| Recoveries                                   |   |   | 48 |   |
| Net charge-offs                              |   |   | (1,287 | ) |
| Provision for loan losses charged to expense |   |   | 1,500 |   |
| Ending balance                               |   | $ | 14,055 |   |

| ·   | Risk ratings of 1 through 6 are used for loans that are performing, as they meet, and are expected to continue to meet, all of the terms and conditions set forth in the original loan documentation, and are generally current on principal and interest payments.  These performing loans are termed “Pass”. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Criticized loans are assigned a risk rating of 7 and termed “Special Mention”, as the borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention.  If not checked or corrected, these trends will weaken the Bank’s collateral and position.  While potentially weak, these borrowers are currently marginally acceptable and no loss of interest or principal is anticipated.  As a result, special mention assets do not expose an institution to sufficient risk to warrant adverse classification.  Included in “Special Mention” could be turnaround situations, such as borrowers with deteriorating trends beyond one year, borrowers in start up or deteriorating industries, or borrowers with a poor market share in an average industry.  "Special Mention" loans may include an element of asset quality, financial flexibility, or management below average.  Management and ownership may have limited depth or experience.  Regulatory agencies have agreed on a consistent definition of “Special Mention” as an asset with potential weaknesses which, if left uncorrected, may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date.  This definition is intended to ensure that the “Special Mention” category is not used to identify assets that have as their sole weakness credit data exceptions or collateral documentation exceptions that are not material to the repayment of the asset. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Classified loans are assigned a risk rating of an 8 or 9, depending upon the prospect for collection, and deemed “Substandard”.  A risk rating of 8 is used for borrowers with well-defined weaknesses that jeopardize the orderly liquidation of debt.  The loan is inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any.  Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned.  There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected.  Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified “Substandard”.  A risk rating of 9 is used for borrowers that have all the weaknesses inherent in a loan with a risk rating of 8, with the added characteristic that the weaknesses make collection of debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.  Serious problems exist to the point where partial loss of principal is likely.  The possibility of loss is extremely high, but because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined.   Pending factors include proposed merger, acquisition, or liquidation procedures; capital injection; perfecting liens on additional collateral; and refinancing plans.  Partial charge-offs are likely. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Once a borrower is deemed incapable of repayment of unsecured debt, the risk rating becomes a 10, the loan is termed a “Loss”, and charged-off immediately.  Loans to such borrowers are considered uncollectible and of such little value that continuance as active assets of the Bank is not warranted.  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 these basically worthless assets even though partial recovery may be affected in the future. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                    |   | March 31, 2011                                              |    |
|-----------------------------------------|--------|-------------------------------------------------------------|---------|
|                                    |   | SBA, SBA 504 & Commercial Loans - Internal Risk Ratings |    |
| (In thousands)                          |   | Pass                                                        |    |   | Special Mention |   |   | Substandard |   |   | Total |   |
| SBA loans                               |   | $                                                           | 48,383  |   |   | $ | 21,863 |   |   | $ | 14,344 |   |   | $ | 84,590 |   |
| SBA 504 loans                           |   |                                                        | 31,663  |   |   |   | 13,821 |   |   |   | 14,608 |   |   |   | 60,092 |   |
| Commercial loans                        |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial other                        |   |                                                        | 17,971  |   |   |   | 4,586 |   |   |   | 1,983 |   |   |   | 24,540 |   |
| Commercial real estate                  |   |                                                        | 178,783 |   |   |   | 60,942 |   |   |   | 9,061 |   |   |   | 248,786 |   |
| Commercial real estate construction     |   |                                                        | 6,735   |   |   |   | 2,190 |   |   |   | 884 |   |   |   | 9,809 |   |
| Total commercial loans                  |   |                                                        | 203,489 |   |   |   | 67,718 |   |   |   | 11,928 |   |   |   | 283,135 |   |
| Total SBA, SBA 504 and Commercial loans |   | $                                                           | 283,535 |   |   | $ | 103,402 |   |   | $ | 40,880 |   |   | $ | 427,817 |   |

|                             |   | March 31, 2011                                                       |    |
|----------------------------------|--------|----------------------------------------------------------------------|---------|
|                             |   | Residential Mortgage & Consumer Loans - Performing/Nonperforming |    |
| (In thousands)                   |   | Performing                                                           |    |   | Nonperforming |   |   | Total |   |
| Residential mortgage loans       |   |                                                                 |    |   |   |   |   |   |   |
| Residential mortgages            |   | $                                                                    | 119,588 |   |   | $ | 2,292 |   |   | $ | 121,880 |   |
| Residential construction         |   |                                                                 | 2,247   |   |   |   | - |   |   |   | 2,247 |   |
| Purchased residential mortgages  |   |                                                                 | 6,268   |   |   |   | 2,117 |   |   |   | 8,385 |   |
| Total residential mortgage loans |   | $                                                                    | 128,103 |   |   |   | 4,409 |   |   | $ | 132,512 |   |
| Consumer loans                   |   |                                                                 |    |   |   |   |   |   |   |   |   |   |
| Home equity                      |   | $                                                                    | 52,502  |   |   | $ | 405 |   |   | $ | 52,907 |   |
| Consumer other                   |   |                                                                 | 1,285   |   |   |   | 1 |   |   |   | 1,286 |   |
| Total consumer loans             |   | $                                                                    | 53,787  |   |   | $ | 406 |   |   | $ | 54,193 |   |
| Total loans                      |   |                                                                 |    |   |   |   |   |   |   | $ | 614,522 |   |

|                                    |   | December 31, 2010                                           |    |
|-----------------------------------------|--------|-------------------------------------------------------------|---------|
|                                    |   | SBA, SBA 504 & Commercial Loans - Internal Risk Ratings |    |
| (In thousands)                          |   | Pass                                                        |    |   | Special Mention |   |   | Substandard |   |   | Total |   |
| SBA loans                               |   | $                                                           | 48,500  |   |   | $ | 25,668 |   |   | $ | 11,970 |   |   | $ | 86,138 |   |
| SBA 504 loans                           |   |                                                        | 30,235  |   |   |   | 15,366 |   |   |   | 18,675 |   |   |   | 64,276 |   |
| Commercial loans                        |   |                                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial other                        |   |                                                        | 17,402  |   |   |   | 4,764 |   |   |   | 2,102 |   |   |   | 24,268 |   |
| Commercial real estate                  |   |                                                        | 169,093 |   |   |   | 67,305 |   |   |   | 10,493 |   |   |   | 246,891 |   |
| Commercial real estate construction     |   |                                                        | 6,197   |   |   |   | 2,715 |   |   |   | 1,134 |   |   |   | 10,046 |   |
| Total commercial loans                  |   |                                                        | 192,692 |   |   |   | 74,784 |   |   |   | 13,729 |   |   |   | 281,205 |   |
| Total SBA, SBA 504 and Commercial loans |   | $                                                           | 271,427 |   |   | $ | 115,818 |   |   | $ | 44,374 |   |   | $ | 431,619 |   |

|                             |   | December 31, 2010                                                    |    |
|----------------------------------|--------|----------------------------------------------------------------------|---------|
|                             |   | Residential Mortgage & Consumer Loans - Performing/Nonperforming |    |
| (In thousands)                   |   | Performing                                                           |    |   | Nonperforming |   |   | Total |   |
| Residential mortgage loans       |   |                                                                 |    |   |   |   |   |   |   |
| Residential mortgages            |   | $                                                                    | 114,716 |   |   | $ | 2,453 |   |   | $ | 117,169 |   |
| Residential construction         |   |                                                                 | 2,711   |   |   |   | - |   |   |   | 2,711 |   |
| Purchased residential mortgages  |   |                                                                 | 5,888   |   |   |   | 2,632 |   |   |   | 8,520 |   |
| Total residential mortgage loans |   | $                                                                    | 123,315 |   |   | $ | 5,085 |   |   | $ | 128,400 |   |
| Consumer loans                   |   |                                                                 |    |   |   |   |   |   |   |   |   |   |
| Home equity                      |   | $                                                                    | 54,024  |   |   | $ | 249 |   |   | $ | 54,273 |   |
| Consumer other                   |   |                                                                 | 1,644   |   |   |   | - |   |   |   | 1,644 |   |
| Total consumer loans             |   | $                                                                    | 55,668  |   |   | $ | 249 |   |   | $ | 55,917 |   |
| Total loans                      |   |                                                                 |    |   |   |   |   |   |   | $ | 615,936 |   |

----

|                                |   | March 31, 2011      |   |
|-------------------------------------|--------|---------------------|--------|
| (In thousands)                      |   | 30-59 Days Past Due |   |   | 60-89 Days Past Due |   |   | 90+ Days and Still Accruing |   |   | Nonaccrual |   |   | Total Past Due |   |   | Current |   |   | Total Loans |   |
| SBA loans                           |   | $                   | 5,187  |   |   | $ | - |   |   | $ | 299 |   |   | $ | 9,057 |   |   | $ | 14,543 |   |   | $ | 70,047 |   |   | $ | 84,590 |   |
| SBA 504 loans                       |   |                | 5,264  |   |   |   | - |   |   |   | 1,339 |   |   |   | 4,300 |   |   |   | 10,903 |   |   |   | 49,189 |   |   |   | 60,092 |   |
| Commercial loans                    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial other                    |   |                | -      |   |   |   | 151 |   |   |   | 591 |   |   |   | 185 |   |   |   | 927 |   |   |   | 23,613 |   |   |   | 24,540 |   |
| Commercial real estate              |   |                | 6,744  |   |   |   | 85 |   |   |   | 533 |   |   |   | 4,682 |   |   |   | 12,044 |   |   |   | 236,742 |   |   |   | 248,786 |   |
| Commercial real estate construction |   |                | -      |   |   |   | - |   |   |   | - |   |   |   | 884 |   |   |   | 884 |   |   |   | 8,925 |   |   |   | 9,809 |   |
| Residential mortgage loans          |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgages               |   |                | 953    |   |   |   | 1,879 |   |   |   | 1,059 |   |   |   | 2,292 |   |   |   | 6,183 |   |   |   | 115,697 |   |   |   | 121,880 |   |
| Residential construction            |   |                | 47     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 47 |   |   |   | 2,200 |   |   |   | 2,247 |   |
| Purchased residential mortgages     |   |                | 31     |   |   |   | - |   |   |   | 427 |   |   |   | 2,117 |   |   |   | 2,575 |   |   |   | 5,810 |   |   |   | 8,385 |   |
| Consumer loans                      |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Home equity                         |   |                | 511    |   |   |   | 48 |   |   |   | - |   |   |   | 405 |   |   |   | 964 |   |   |   | 51,943 |   |   |   | 52,907 |   |
| Consumer other                      |   |                | -      |   |   |   | - |   |   |   | - |   |   |   | 1 |   |   |   | 1 |   |   |   | 1,285 |   |   |   | 1,286 |   |
| Total loans                         |   | $                   | 18,737 |   |   | $ | 2,163 |   |   | $ | 4,248 |   |   | $ | 23,923 |   |   | $ | 49,071 |   |   | $ | 565,451 |   |   | $ | 614,522 |   |

|                               |   | December 31, 2010   |   |
|------------------------------------|--------|---------------------|--------|
| (In thousands)                     |   | 30-59 Days Past Due |   |   | 60-89 Days Past Due |   |   | 90+ Days and Still Accruing |   |   | Nonaccrual |   |   | Total Past Due |   |   | Current |   |   | Total Loans |   |
| SBA loans                          |   | $                   | 1,297  |   |   | $ | 1,181 |   |   | $ | 374 |   |   | $ | 8,162 |   |   | $ | 11,014 |   |   | $ | 75,124 |   |   | $ | 86,138 |   |
| SBA 504 loans                      |   |                | -      |   |   |   | 1,339 |   |   |   | - |   |   |   | 2,714 |   |   |   | 4,053 |   |   |   | 60,223 |   |   |   | 64,276 |   |
| Commercial loans                   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial other                   |   |                | 693    |   |   |   | 86 |   |   |   | - |   |   |   | 179 |   |   |   | 958 |   |   |   | 23,310 |   |   |   | 24,268 |   |
| Commercial real estate             |   |                | 3,051  |   |   |   | 176 |   |   |   | - |   |   |   | 4,139 |   |   |   | 7,366 |   |   |   | 239,525 |   |   |   | 246,891 |   |
| Commercial real estate contruction |   |                | -      |   |   |   | - |   |   |   | - |   |   |   | 1,134 |   |   |   | 1,134 |   |   |   | 8,912 |   |   |   | 10,046 |   |
| Residential mortgage loans         |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgages              |   |                | 2,123  |   |   |   | 144 |   |   |   | - |   |   |   | 2,453 |   |   |   | 4,720 |   |   |   | 112,449 |   |   |   | 117,169 |   |
| Residential construction           |   |                | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,711 |   |   |   | 2,711 |   |
| Purchased residential mortgages    |   |                | 117    |   |   |   | - |   |   |   | - |   |   |   | 2,632 |   |   |   | 2,749 |   |   |   | 5,771 |   |   |   | 8,520 |   |
| Cosumer loans                      |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Home equity                        |   |                | 175    |   |   |   | 325 |   |   |   | - |   |   |   | 249 |   |   |   | 749 |   |   |   | 53,524 |   |   |   | 54,273 |   |
| Consumer other                     |   |                | 5      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5 |   |   |   | 1,639 |   |   |   | 1,644 |   |
| Total loans                        |   | $                   | 7,461  |   |   | $ | 3,251 |   |   | $ | 374 |   |   | $ | 21,662 |   |   | $ | 32,748 |   |   | $ | 583,188 |   |   | $ | 615,936 |   |

----

|                                                                               | March 31, 2011                                       |   |
|------------------------------------------------------------------------------------|------------------------------------------------------|--------|
| (In thousands)                                                                     | Recorded Investment (Balance less specific reserves) |   |   | Outstanding Principal Balance |   |   | Related Allowance |   |   | Average Recorded Investment |   |   | Year to Date Lost Interest on Impaired Loans |   |   | Year to Date Interest Income Collected on Impaired Loans |   |
| With no related allowance:                                                         |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SBA loans(1)                                                                       |                                                 | $      | 2,226 |   |   | $ | 2,226 |   |   | $ | - |   |   |   |   |   |   |   |   |   |   |
| SBA 504 loans                                                                      |                                                 |   | 7,046 |   |   |   | 7,046 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |
| Commercial loans                                                                   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial other                                                                   |                                                 |   | 177 |   |   |   | 177 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate                                                             |                                                 |   | 13,374 |   |   |   | 13,374 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |
| Total commercial loans                                                             |                                                 |   | 13,551 |   |   |   | 13,551 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans with no related allowance                                     |                                                 | $      | 22,823 |   |   | $ | 22,823 |   |   | $ | - |   |   |   |   |   |   |   |   |   |   |
|                                                                               |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With an allowance:                                                                 |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SBA loans(1)                                                                       |                                                 | $      | 2,827 |   |   | $ | 4,248 |   |   | $ | 1,421 |   |   |   |   |   |   |   |   |   |   |
| SBA 504 loans                                                                      |                                                 |   | 2,390 |   |   |   | 2,475 |   |   |   | 85 |   |   |   |   |   |   |   |   |   |   |
| Commercial loans                                                                   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial other                                                                   |                                                 |   |  61 |   |   |   |  993 |   |   |   |  932 |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate                                                             |                                                 |   | 857 |   |   |   | 1,063 |   |   |   | 206 |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate construction                                                |                                                 |   | 751 |   |   |   | 884 |   |   |   | 133 |   |   |   |   |   |   |   |   |   |   |
| Total commercial loans                                                             |                                                 |   | 1,669 |   |   |   | 2,940 |   |   |   | 1,271 |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans with a related allowance                                      |                                                 | $      | 6,886 |   |   | $ | 9,663 |   |   | $ | 2,777 |   |   |   |   |   |   |   |   |   |   |
|                                                                               |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total individually evaluated impaired loans:                                       |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SBA loans(1)                                                                       |                                                 | $      | 5,053 |   |   | $ | 6,474 |   |   | $ | 1,421 |   |   | $ | 6,872 |   |   | $ | 119 |   |   | $ | 23 |   |
| SBA 504 loans                                                                      |                                                 |   | 9,436 |   |   |   | 9,521 |   |   |   | 85 |   |   |   | 8,487 |   |   |   | 78 |   |   |   | - |   |
| Commercial loans                                                                   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial other                                                                   |                                                 |   | 238 |   |   |   | 1,170 |   |   |   | 932 |   |   |   | 509 |   |   |   | 4 |   |   |   | - |   |
| Commercial real estate                                                             |                                                 |   | 14,231 |   |   |   | 14,437 |   |   |   | 206 |   |   |   | 10,731 |   |   |   | 101 |   |   |   | 20 |   |
| Commercial real estate construction                                                |                                                 |   | 751 |   |   |   | 884 |   |   |   | 133 |   |   |   | 1,051 |   |   |   | 32 |   |   |   | - |   |
| Total commercial loans                                                             |                                                 |   | 15,220 |   |   |   | 16,491 |   |   |   | 1,271 |   |   |   | 12,291 |   |   |   | 137 |   |   |   | 20 |   |
| Total individually evaluated impaired loans                                        |                                                 | $      | 29,709 |   |   | $ | 32,486 |   |   | $ | 2,777 |   |   | $ | 27,650 |   |   | $ | 334 |   |   | $ | 43 |   |
|                                                                               |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Homogeneous loans collectively evaluated for impairment:                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage loans                                                         |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgages                                                              |                                                 | $      | 2,292 |   |   | $ | 2,292 |   |   | $ | - |   |   | $ | 2,217 |   |   | $ | 38 |   |   | $ | - |   |
| Purchased mortgages                                                                |                                                 |   | 2,117 |   |   |   | 2,117 |   |   |   | - |   |   |   | 2,143 |   |   |   | 32 |   |   |   | - |   |
| Total residential mortgage loans                                                   |                                                 |   | 4,409 |   |   |   | 4,409 |   |   |   | - |   |   |   | 4,360 |   |   |   | 70 |   |   |   | - |   |
| Consumer loans                                                                     |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Home equity                                                                        |                                                 |   | 405 |   |   |   | 405 |   |   |   | - |   |   |   | 228 |   |   |   | - |   |   |   | 4 |   |
| Consumer Other                                                                     |                                                 |   |  1 |   |   |   |  1 |   |   |   | - |   |   |   |  - |   |   |   |  - |   |   |   |  - |   |
| Total consumer loans                                                               |                                                 |   |  406 |   |   |   |  406 |   |   |   |   |   |   |   |  228 |   |   |   |  - |   |   |   |  4 |   |
| Total other homogeneous loans evaluated for impairment                             |                                                 |   | 4,815 |   |   |   | 4,815 |   |   |   | - |   |   |   | 4,588 |   |   |   | 70 |   |   |   | 4 |   |
| Total impaired loans                                                               |                                                 | $      | 34,524 |   |   | $ | 37,301 |   |   | $ | 2,777 |   |   | $ | 32,238 |   |   | $ | 404 |   |   | $ | 47 |   |
| (1) Balances are reduced by amount guaranteed by the Small Business Administration |

----

|                                                                |                                                 |   |
|------------------------------------------------------------------------------------|------------------------------------------------------|--------|
|                                                                               | December 31, 2010                                    |   |
| (In thousands)                                                                     | Recorded Investment (Balance less specific reserves) |   |   | Outstanding Principal Balance |   |   | Related Allowance |   |   | Average Recorded Investment |   |   | Year to Date Lost Interest on Impaired Loans |   |   | Year to Date Interest Income Collected on Impaired Loans |   |
| With no related allowance:                                                         |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SBA loans(1)                                                                       |                                                 | $      | 2,362 |   |   | $ | 2,362 |   |   | $ | - |   |   |   |   |   |   |   |   |   |   |
| SBA 504 loans                                                                      |                                                 |   | 8,145 |   |   |   | 8,145 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |
| Commercial loans                                                                   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial other                                                                   |                                                 |   | 179 |   |   |   | 179 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate                                                             |                                                 |   | 7,891 |   |   |   | 7,891 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |
| Total commercial loans                                                             |                                                 |   | 8,070 |   |   |   | 8,070 |   |   |   | - |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans with no related allowance                                     |                                                 | $      | 18,577 |   |   | $ | 18,577 |   |   | $ | - |   |   |   |   |   |   |   |   |   |   |
|                                                                               |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| With an allowance:                                                                 |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SBA loans(1)                                                                       |                                                 | $      | 2,765 |   |   | $ | 4,526 |   |   | $ | 1,761 |   |   |   |   |   |   |   |   |   |   |
| SBA 504 loans                                                                      |                                                 |   | 2,390 |   |   |   | 2,477 |   |   |   | 87 |   |   |   |   |   |   |   |   |   |   |
| Commercial loans                                                                   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate                                                             |                                                 |   | 764 |   |   |   | 990 |   |   |   | 226 |   |   |   |   |   |   |   |   |   |   |
| Commercial real estate construction                                                |                                                 |   | 751 |   |   |   | 1,134 |   |   |   | 383 |   |   |   |   |   |   |   |   |   |   |
| Total commercial loans                                                             |                                                 |   | 1,515 |   |   |   | 2,124 |   |   |   | 609 |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans with a related allowance                                      |                                                 | $      | 6,670 |   |   | $ | 9,127 |   |   | $ | 2,457 |   |   |   |   |   |   |   |   |   |   |
|                                                                               |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total individually evaluated impaired loans:                                       |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SBA loans(1)                                                                       |                                                 | $      | 5,127 |   |   | $ | 6,888 |   |   | $ | 1,761 |   |   | $ | 6,792 |   |   | $ | 317 |   |   | $ | 234 |   |
| SBA 504 loans                                                                      |                                                 |   | 10,535 |   |   |   | 10,622 |   |   |   | 87 |   |   |   | 6,454 |   |   |   | 133 |   |   |   | 69 |   |
| Commercial loans                                                                   |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial other                                                                   |                                                 |   | 179 |   |   |   | 179 |   |   |   | - |   |   |   | 425 |   |   |   | 16 |   |   |   | 1 |   |
| Commercial real estate                                                             |                                                 |   | 8,655 |   |   |   | 8,881 |   |   |   | 226 |   |   |   | 10,964 |   |   |   | 367 |   |   |   | 143 |   |
| Commercial real estate construction                                                |                                                 |   | 751 |   |   |   | 1,134 |   |   |   | 383 |   |   |   | 813 |   |   |   | 84 |   |   |   | 47 |   |
| Total commercial loans                                                             |                                                 |   | 9,585 |   |   |   | 10,194 |   |   |   | 609 |   |   |   | 12,202 |   |   |   | 467 |   |   |   | 191 |   |
| Total individually evaluated impaired loans                                        |                                                 | $      | 25,247 |   |   | $ | 27,704 |   |   | $ | 2,457 |   |   | $ | 25,448 |   |   | $ | 917 |   |   | $ | 494 |   |
|                                                                               |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Homogeneous loans collectively evaluated for impairment:                           |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgage loans                                                         |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Residential mortgages                                                              |                                                 | $      | 2,453 |   |   | $ | 2,453 |   |   | $ | - |   |   | $ | 4,632 |   |   | $ | 147 |   |   | $ | - |   |
| Purchased mortgages                                                                |                                                 |   | 2,632 |   |   |   | 2,632 |   |   |   | - |   |   |   | 1,897 |   |   |   | 136 |   |   |   | - |   |
| Total residential mortgage loans                                                   |                                                 |   | 5,085 |   |   |   | 5,085 |   |   |   | - |   |   |   | 6,529 |   |   |   | 283 |   |   |   | - |   |
| Consumer loans                                                                     |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Home equity                                                                        |                                                 |   | 249 |   |   |   | 249 |   |   |   | - |   |   |   | 341 |   |   |   | 2 |   |   |   | 9 |   |
| Total other homogeneous loans evaluated for impairment                             |                                                 |   | 5,334 |   |   |   | 5,334 |   |   |   | - |   |   |   | 6,870 |   |   |   | 285 |   |   |   | 9 |   |
| Total impaired loans                                                               |                                                 | $      | 30,581 |   |   | $ | 33,038 |   |   | $ | 2,457 |   |   | $ | 32,318 |   |   | $ | 1,202 |   |   | $ | 503 |   |
| (1) Balances are reduced by amount guaranteed by the Small Business Administration |                                                 |

----

|                                                |   |    | For the three months ended March 31, |   |
|-----------------------------------------------------|--------|---------|--------------------------------------|--------|
|                                                |   |    | 2011                            |   |   |   | 2010 |   |
| Net income (loss) per common share - Basic (1) |   | $  | (0.02                                | )      |   | $ | 0.05 |   |
| Net income (loss) per common share - Diluted (1)    |   | $  | (0.02                                | )      |   | $ | 0.05 |   |
| Return on average assets                       |   |    | 0.11                                 | %      |   |   | 0.34 | % |
| Return (loss) on average common equity (2)          |   |    | (1.31                                | )%     |   |   | 3.09 | % |
| Efficiency ratio                                    |   |    | 71.56                                | %      |   |   |  70.98 | % |

----

| ·   | Of the $1.2 million decrease in interest income on a tax-equivalent basis, $323 thousand was attributed to reduced yields on average interest-earning assets and $925 thousand was attributable to the decrease in volume of average interest-earning assets.                                                                                                                                                                                |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The average volume of interest-earning assets decreased $72.8 million to $778.1 million for the first quarter of 2011 compared to $850.8 million for the same period in 2010. This was due primarily to a $39.0 million decrease in average loans and a $34.1 million decrease in average investment securities.                                                                                                                        |
| ·   | The yield on interest-earning assets decreased 13 basis points to 5.34 percent for the first quarter of 2011 when compared to the first quarter of 2010, due to continued re-pricing in an overall lower interest rate environment.  Yields on most earning assets, particularly those with variable rates, fell due to these lower market rates.  There was a slight increase in the yield on consumer loans. |

| ·   | Of the $1.3 million decrease in interest expense, $675 thousand was attributed to a decrease in the rates paid on interest-bearing liabilities and $607 thousand was due to the decrease in the volume of average interest-bearing liabilities.                                                                                                                                                                           |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Interest-bearing liabilities averaged $658.4 million for the first quarter of 2011, a decrease of $85.7 million or 11.5 percent, compared to the first quarter of 2010.  The decrease in interest-bearing liabilities was a result of a decrease in average time deposits and borrowed funds, partially offset by increases in all other deposit categories.                                          |
| ·   | The average cost of interest-bearing liabilities decreased 50 basis points to 1.70 percent, primarily due to the repricing of deposits in a lower interest rate environment.  The cost of interest-bearing deposits decreased 57 basis points to 1.30 percent for the first quarter of 2011 and the cost of borrowed funds and subordinated debentures decreased 9 basis points to 4.20 percent. |
| ·   | The lower cost of funding was also attributed to a shift in the mix of deposits from higher cost time deposits to lower cost savings deposits and interest-bearing demand deposits.                                                                                                                                                                                                                                            |

----

| For the three months ended March 31,             |   | 2011    |    |    | 2010     |   |
|--------------------------------------------------|--------|---------|---------|---------|----------|--------|
|                                             |   | Average |    |    |     |   |   | Rate/ |   |   | Average |   |   |   |   |   | Rate/ |   |
|                                             |   | Balance |    |    | Interest |   |   | Yield |   |   | Balance |   |   | Interest |   |   | Yield |   |
| ASSETS                                           |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-earning assets:                         |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold and interest-bearing deposits |   | $       | 33,252  |    |     | $      | 11 |   |   |   | 0.13 | % |   | $ | 32,493 |   |   | $ | 26 |   |   |   | 0.32 | % |
| Federal Home Loan Bank stock                     |   |    | 4,206   |    |     |   | 66 |   |   |   | 6.36 |   |   |   | 4,677 |   |   |   | 34 |   |   |   | 2.95 |   |
| Securities:                                      |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Available for sale                               |   |    | 105,027 |    |     |   | 912 |   |   |   | 3.47 |   |   |   | 131,295 |   |   |   | 1,294 |   |   |   | 3.94 |   |
| Held to maturity                                 |   |    | 19,516  |    |     |   | 292 |   |   |   | 5.98 |   |   |   | 27,323 |   |   |   | 354 |   |   |   | 5.18 |   |
| Total securities (A)                             |   |    | 124,543 |    |     |   | 1,204 |   |   |   | 3.87 |   |   |   | 158,618 |   |   |   | 1,648 |   |   |   | 4.16 |   |
| Loans, net of unearned discount:                 |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| SBA                                              |   |    | 85,861  |    |     |   | 1,236 |   |   |   | 5.76 |   |   |   | 98,140 |   |   |   | 1,452 |   |   |   | 5.92 |   |
| SBA 504                                          |   |    | 61,998  |    |     |   | 955 |   |   |   | 6.25 |   |   |   | 70,444 |   |   |   | 1,087 |   |   |   | 6.26 |   |
| Commercial                                       |   |    | 282,605 |    |     |   | 4,306 |   |   |   | 6.18 |   |   |   | 292,055 |   |   |   | 4,604 |   |   |   | 6.39 |   |
| Residential mortgage                             |   |    | 130,745 |    |     |   | 1,831 |   |   |   | 5.60 |   |   |   | 134,611 |   |   |   | 1,961 |   |   |   | 5.83 |   |
| Consumer                                         |   |    | 54,849  |    |     |   | 686 |   |   |   | 5.07 |   |   |   | 59,779 |   |   |   | 731 |   |   |   | 4.96 |   |
| Total loans (A),(B)                              |   |    | 616,058 |    |     |   | 9,014 |   |   |   | 5.91 |   |   |   | 655,029 |   |   |   | 9,835 |   |   |   | 6.06 |   |
| Total interest-earning assets                    |   | $       | 778,059 |    |     | $      | 10,295 |   |   |   | 5.34 | % |   | $ | 850,817 |   |   | $ | 11,543 |   |   |   | 5.47 | % |
| Noninterest-earning assets:                      |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and due from banks                          |   |    | 17,764  |    |     |   |   |   |   |   |   |   |   |   | 21,962 |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                        |   |    | (15,054 | )  |     |   |   |   |   |   |   |   |   |   | (14,581 | )  |   |   |   |   |   |   |   |   |
| Other assets                                     |   |    | 39,767  |    |     |   |   |   |   |   |   |   |   |   | 40,896 |   |   |   |   |   |   |   |   |   |
| Total noninterest-earning assets                 |   |    | 42,477  |    |     |   |   |   |   |   |   |   |   |   | 48,277 |   |   |   |   |   |   |   |   |   |
| Total Assets                                     |   | $       | 820,536 |    |     |   |   |   |   |   |   |   |   | $ | 899,094 |   |
|                                             |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY       |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:                    |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits                 |   | $       | 103,550 |    |     | $      | 139 |   |   |   | 0.54 | % |   | $ | 102,593 |   |   | $ | 258 |   |   |   | 1.02 | % |
| Savings deposits                                 |   |    | 289,805 |    |     |   | 581 |   |   |   | 0.81 |   |   |   | 289,251 |   |   |   | 901 |   |   |   | 1.26 |   |
| Time deposits                                    |   |    | 174,620 |    |     |   | 1,097 |   |   |   | 2.55 |   |   |   | 251,774 |   |   |   | 1,813 |   |   |   | 2.92 |   |
| Total interest-bearing deposits                  |   |    | 567,975 |    |     |   | 1,817 |   |   |   | 1.30 |   |   |   | 643,618 |   |   |   | 2,972 |   |   |   | 1.87 |   |
| Borrowed funds and subordinated debentures       |   |    | 90,465  |    |     |   | 950 |   |   |   | 4.20 |   |   |   | 100,500 |   |   |   | 1,077 |   |   |   | 4.29 |   |
| Total interest-bearing liabilities               |   | $       | 658,440 |    |     | $      | 2,767 |   |   |   | 1.70 | % |   | $ | 744,118 |   |   | $ | 4,049 |   |   |   | 2.20 | % |
| Noninterest-bearing liabilities:                 |   |    |    |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand deposits                                  |   |    | 88,797  |    |     |   |   |   |   |   |   |   |   |   | 83,164 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                |   |    | 3,530   |    |     |   |   |   |   |   |   |   |   |   | 4,069 |   |   |   |   |   |   |   |   |   |
| Total noninterest-bearing liabilities            |   |    | 92,327  |    |     |   |   |   |   |   |   |   |   |   | 87,233 |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity                       |   |    | 69,769  |    |     |   |   |   |   |   |   |   |   |   | 67,743 |   |   |   |   |   |   |   |   |   |
| Total Liabilities and Shareholders’ Equity |   | $       | 820,536 |    |     |   |   |   |   |   |   |   |   | $ | 899,094 |   |
| Net interest spread                              |   |    |    |    |     | $      | 7,528 |   |   |   | 3.64 | % |   |   |   |   |   | $ | 7,494 |   |   |   | 3.27 | % |
| Tax-equivalent basis adjustment                  |   |    |    |    |     |   | (53 | )  |   |   |   |   |   |   |   |   |   |   | (30 | )  |   |   |   |   |
| Net interest income                              |   |    |    |    |     | $      | 7,475 |   |   |   |   |   |   |   |   |   |   | $ | 7,464 |   |   |   |   |   |
| Net interest margin                         |   |    |    |    |     |   |   |   |   |   | 3.92 |  % |   |   |   |   |   |   |   |   |   |   | 3.57  | % |

| A)   | Yields related to securities and loans exempt from federal and state income taxes are stated on a fully tax-equivalent basis.  They are reduced by the nondeductible portion of interest expense, assuming a federal tax rate of 34 percent and applicable state tax rates. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| B)   | The loan averages are stated net of unearned income, and the averages include loans on which the accrual of interest has been discontinued. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                             |   | Three months ended March 31, 2011 versus March 31, 2010 |   |
|--------------------------------------------------|--------|---------------------------------------------------------|--------|
|                                             |   | Increase (Decrease) Due to Change in                    |   |
| (In thousands on a tax-equivalent basis)         |   | Volume                                                  |   |   | Rate |   |   | Net |   |
| Interest Income:                                 |   |                                                    |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold and interest-bearing deposits |   | $                                                  | 1      |   |   | $  | (16 | )  |   | $  | (15 | )  |
| Federal Home Loan Bank stock                     |   |                                                    | (3     | )  |   |   | 35 |   |   |   | 32 |   |
| Investment securities                            |   |                                                    | (351   | )  |   |   | (93 | )  |   |   | (444 | )  |
| Net loans                                        |   |                                                    | (572   | )  |   |   | (249 | )  |   |   | (821 | )  |
| Total interest income                            |   | $                                                  | (925   | )  |   | $  | (323 | )  |   | $  | (1,248 | )  |
| Interest Expense:                                |   |                                                    |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing demand deposits                 |   | $                                                  | 2      |   |   | $  | (121 | )  |   | $  | (119 | )  |
| Savings deposits                                 |   |                                                    | 2      |   |   |   | (322 | )  |   |   | (320 | )  |
| Time deposits                                    |   |                                                    | (506   | )  |   |   | (210 | )  |   |   | (716 | )  |
| Total deposits                                   |   |                                                    | (502   | )  |   |   | (653 | )  |   |   | (1,155 | )  |
| Borrowed funds and subordinated debentures       |   |                                                    | (105   | ) |   |   | (22 | )  |   |   | (127 | )  |
| Total interest expense                           |   |                                                    | (607   | )  |   |   | (675 | )  |   |   | (1,282 | )  |
| Net interest income – fully tax-equivalent |   | $                                                  | (318   | ) |   | $  | 352 |   |   |   | 34 |   |
| Increase in tax-equivalent adjustment            |   |                                                    |   |   |   |   |   |   |   |   | (23 | ) |
| Net interest income                              |   |                                                    |   |   |   |   |   |   |   | $ |  11 |   |

|                                         |   |    | For the three months ended March 31, |   |
|----------------------------------------------|--------|---------|--------------------------------------|--------|
| (In thousands)                               |   |    | 2011                                 |   |   |   | 2010 |   |
| Branch fee income                            |   | $  | 344                                  |   |   | $ | 362 |   |
| Service and loan fee income                  |   |    | 243                                  |   |   |   | 209 |   |
| Gain on sale of SBA loans held for sale, net |   |    | 111                                  |   |   |   | - |   |
| Gain on sale of mortgage loans               |   |    | 169                                  |   |   |   | 145 |   |
| Bank owned life insurance                    |   |    | 73                                   |   |   |   | 73 |   |
| Net security gains                           |   |    | 125                                  |   |   |   | 4 |   |
| Other income                                 |   |    | 190                                  |   |   |   | 117 |   |
| Total noninterest income                     |   | $  | 1,255                                |   |   | $ | 910 |   |

| ·   | Branch fee income was relatively flat for the three months ended March 31, 2011, when compared to the same period a year ago.                                                                                                                                                                                                                                |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | For the three months ended March 31, 2011, service and loan fee income increased $34 thousand when compared to the same period in the prior year.  The increase is primarily due to higher levels of late-charge fees.                                                                                                                                       |
| ·   | Net gains on SBA loan sales amounted to $111 thousand for the three months ended March 31, 2011, on  $1.2 million of SBA loans sold during the quarter.  There were no gains on SBA loan sales for the three months ended March 31, 2010.                                                                                                               |
| ·   | For the three months ended March 31, 2011, gains on the sale of mortgage loans increased $24 thousand, when compared to the same period in the prior year.  The increase is directly related to a higher volume of mortgage loans originated.  Sales of mortgage loans totaled $9.7 million for the three months ended March 31, 2011.                       |
| ·   | In December 2004, the Company purchased $5.0 million of bank owned life insurance (“BOLI”).  An additional $2.5 million was purchased in January 2010 to offset the rising costs of employee benefits.  The increase in the cash surrender value of the BOLI was $73 thousand for the three months ended March 31, 2011 and March 31, 2010. |

----

| ·   | For the three months ended March 31, 2011 and 2010, net gains on sales of securities totaled $125 thousand and $4 thousand, respectively.  The gross gains during the three months ending March 31, 2011 are primarily attributed to the Company selling approximately $5 million in book value of mortgage-backed securities, resulting in pretax gains of approximately $126 thousand.  These gains were partially offset by losses of $1 thousand on the sale of approximately $30 thousand in book value of two mortgage-backed securities.   The gross gains of $244 thousand in the first three months of 2010 are primarily attributed to the Company selling approximately $6.4 million in book value of mortgage-backed securities, resulting in pretax gains of approximately $241 thousand on the sales and one called structured agency security with a resulting gain of  $3 thousand.   These gains were partially offset by losses of $150 thousand on the sale of two mortgage backed securities and losses of $90 thousand on the sale of five held to maturity tax-exempt municipal securities with a total book value of $2.0 million  Although designated as held to maturity, these municipal securities were sold due to the deterioration in the issuer’s creditworthiness, as evidences by downgrades in their credit ratings.   |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | For the three months ended March 31, 2011, other income increased $73 thousand, when compared to the same period in the prior year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

|                          |   | For the three months ended March 31, |   |
|-------------------------------|--------|-------------------------------------------|--------|
| (In thousands)                |   |                                      | 2011   |   |   |   | 2010 |   |
| Compensation and benefits     |   | $                                    | 3,057  |   |   | $ | 2,999 |   |
| Occupancy                     |   |                                      | 720    |   |   |   | 677 |   |
| Processing and communications |   |                                      | 507    |   |   |   |  524 |   |
| Furniture and equipment       |   |                                      | 384    |   |   |   | 423 |   |
| Professional services         |   |                                      | 202    |   |   |   |  229 |   |
| Loan collection costs         |   |                                      | 224    |   |   |   | 184 |   |
| OREO expenses                 |   |                                      | 222    |   |   |   | 30 |   |
| Deposit insurance             |   |                                      | 319    |   |   |   | 330 |   |
| Advertising                   |   |                                      | 118    |   |   |   | 106 |   |
| Other expenses                |   |                                      | 405    |   |   |   | 439 |   |
| Total noninterest expense     |   | $                                    | 6,158  |   |   | $ |  5,941 |   |

| ·   | Compensation and benefits expense, the largest component of noninterest expense, increased $58 thousand for the three months ended March 31, 2011, when compared to the same period in 2010.  This increase is attributed to higher employee medical benefits costs and increased residential mortgage commissions due to a larger sales volume, partially offset by lower incentive bonus payments. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Occupancy expense increased $43 thousand for the three months ended March 31, 2011, when compared to the same period in 2010, primarily due to seasonal snow removal expenses.                                                                                                                                                                                                                            |
| ·   | Processing and communications expenses remained relatively flat for the three months ended March 31, 2011 when compared to the same period in 2010.                                                                                                                                                                                                                                                       |
| ·   | Furniture and equipment expense decreased $39 thousand for the three months ended March 31, 2011, when compared to the same period in 2010.  This decrease was primarily due to lower depreciation expense.                                                                                                                                                                                          |
| ·   | Professional service fees decreased $27 thousand for the three months ended March 31, 2011, when compared to the same period in 2010, due to lower consulting, loan review, accounting and tax and legal fees.                                                                                                                                                                                            |
| ·   | Loan collection costs increased $40 thousand for the three months ended March 31, 2011, when compared to the same period in 2010.  The increase is primarily due to increased legal and appraisal costs.                                                                                                                                                                                        |
| ·   | OREO expenses increased $192 thousand for the three months ended March 31, 2011, when compared to the same period in 2010, due to increased real estate carrying costs and valuation adjustments on OREO properties.                                                                                                                                                                                      |
| ·   | Deposit insurance expense remained relatively flat for the three months ended March 31, 2011, when compared to the same period in 2010.                                                                                                                                                                                                                                                                        |
| ·   | Advertising expense remained relatively flat for the three months ended March 31, 2011, when compared to the same period in 2010.                                                                                                                                                                                                                                                                              |
| ·   | Other expenses decreased $34 thousand for the three months ended March 31, 2011, when compared to the same period in 2010.                                                                                                                                                                                                                                                                                |

----

| ·  | $3.6 million in principal payments, maturities and called bonds |
|--------------|-----------------------------------------------------------------|
| ·  | $50 thousand in net accretion of discounts.                |

----

|                 |   | March 31, 2011 |    |   | December 31, 2010 |   |
|----------------------|--------|----------------|---------|--------|-------------------|--------|
| (In thousands)       |   | Amount         |    |   | % of Total        |   |   | Amount |   |   | % of Total |   |
| SBA held for sale    |   | $              | 9,933   |   |              |   | 1.6 | % |   | $ | 10,397 |   |   |   | 1.7 | % |
| SBA held to maturity |   |           | 74,657  |   |              |   | 12.1 |   |   |   | 75,741 |   |   |   | 12.3 |   |
| SBA 504              |   |           | 60,092  |   |              |   | 9.8 |   |   |   | 64,276 |   |   |   | 10.4 |   |
| Commercial           |   |           | 283,135 |   |              |   | 46.1 |   |   |   | 281,205 |   |   |   | 45.7 |   |
| Residential mortgage |   |           | 132,512 |   |              |   | 21.6 |   |   |   | 128,400 |   |   |   | 20.8 |   |
| Consumer             |   |           | 54,193  |   |              |   | 8.8 |   |   |   | 55,917 |   |   |   | 9.1 |   |
| Total loans          |   | $              | 614,522 |   |              |   | 100.0 | %  |   | $ | 615,936 |   |   |   | 100.0 | % |

----

|                                               |   | Concentration |    |
|----------------------------------------------------|--------|---------------|---------|
| (In thousands)                                     |   | Balance       |    |   | Percent |   |
| Commercial real estate – owner occupied      |   | $             | 142,844 |   |   |   | 50.5 | % |
| Commercial real estate – investment property |   |          | 114,061 |   |   |   | 40.3 |   |
| Undeveloped land                                   |   |          | 16,486  |   |   |   | 5.8 |   |
| Other non-real estate collateral                   |   |          | 9,744   |   |   |   | 3.4 |   |
| Total commercial loans                             |   | $             | 283,135 |   |   |   | 100.0 | %  |

----

| (In thousands)                                        |   | March 31, 2011 |   |   | December 31, 2010 |   |   | March 31, 2010 |   |
|-------------------------------------------------------|--------|----------------|--------|--------|-------------------|--------|--------|----------------|--------|
| Nonperforming by category:                            |   |           |   |   |              |   |   |           |   |
| SBA (1)                                               |   | $              | 9,057  |   |              | $      | 8,162  |           |   | $ | 6,788 |   |
| SBA 504                                               |   |           | 4,300  |   |              |   | 2,714  |           |   |   | 2,730 |   |
| Commercial                                            |   |           | 5,751  |   |              |   | 5,452  |           |   |   | 10,021 |   |
| Residential mortgage                                  |   |           | 4,409  |   |              |   | 5,085  |           |   |   | 6,730 |   |
| Consumer                                              |   |           | 406    |   |              |   | 249    |           |   |   | 385 |   |
| Total nonperforming loans                             |   | $              | 23,923 |   |              | $      | 21,662 |           |   | $ | 26,654 |   |
| OREO                                                  |   |           | 2,602  |   |              |   | 2,346  |           |   |   | 3,318 |   |
| Total nonperforming assets                            |   | $              | 26,525 |   |              | $      | 24,008 |           |   | $ | 29,972 |   |
| Past due 90 days or more and still accruing interest: |   |           |   |   |              |   |   |           |   |   |   |   |
| SBA                                                   |   | $              | 299    |   |              | $      | 374    |           |   | $ | 762 |   |
| SBA 504                                               |   |           | 1,339  |   |              |   | -      |           |   |   | - |   |
| Commercial                                            |   |           | 1,124  |   |              |   | -      |           |   |   | 1,569 |   |
| Residential mortgage                                  |   |           | 1,486  |   |              |   | -      |           |   |   | 636 |   |
| Consumer                                              |   |           | -      |   |              |   | -      |           |   |   | 94 |   |
| Total                                                 |   | $              | 4,248  |   |              | $      | 374    |           |   | $ | 3,061 |   |
| Nonperforming loans to total loans                    |   |           | 3.89   | %      |              |   | 3.52   | %              |   |   | 4.09  | % |
| Nonperforming assets to total loans and OREO          |   |           | 4.30   |   |              |   | 3.88   |           |   |   | 4.58 |   |
| Nonperforming assets to total assets                  |   |           | 3.23   |   |              |   | 2.93   |           |   |   | 3.37 |   |
| (1) SBA loans guaranteed                              |   | $              | 3,355  |   |              | $      | 2,706  |           |   | $ | 2,205 |   |

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|                              |                       |                             |        | For the three months ended March 31, |         |
|-----------------------------------|----------------------------|----------------------------------|-------------|--------------------------------------|--------------|
|                              |                       | (In thousands)                   |        |                                 | 2011         |   |   |   | 2010 |   |
| Balance, beginning of period      |                       | $                           | 14,364      |                                 |         | $  | 13,842 |   |
| Provision charged to expense      |                       |                             |  2,500 |                                 |         |   |  1,500 |   |
| Charge-offs:                      |                       |                             |        |                                 |         |   |   |   |
|                              | SBA                        |                             |        | 711                                  |         |   |   | - |   |
|                              | SBA 504                    |                             |        |  -                              |         |   |   | 750 |   |
|                              | Commercial                 |                             |        | 848                                  |         |   |   | 485 |   |
|                              | Residential mortgage       |                             |        |  142                            |         |   |   | 100 |   |
|                              | Consumer                   |                             |        |  -                              |         |   |   | - |   |
|                              |                       | Total charge-offs                |        |                                 |  1,701  |   |   |   | 1,335 |   |
| Recoveries:                       |                       |                             |        |                                 |         |   |   |   |
|                              | SBA                        |                             |        | 8                                    |         |   |   | 45 |   |
|                              | SBA 504                    |                             |        |  -                              |         |   |   | - |   |
|                              | Commercial                 |                             |        | 98                                   |         |   |   | 3 |   |
|                              | Residential mortgage       |                             |        | 4                                    |         |   |   | - |   |
|                              | Consumer                   |                             |        | 2                                    |         |   |   | - |   |
|                              |                       | Total recoveries                 |        |                                 | 112          |   |   |   | 48 |   |
|                              |                       | Total net charge-offs            |        | $                               |  1,589  |   |   | $ | 1,287 |   |
|                              |                       | Balance, end of period           |        | $                                    |  15,275 |   |   | $ |  14,055 |   |
| Selected loan quality ratios:     |                       |                             |        |                                 |         |   |   |   |
| Net charge-offs to average loans: |                       |                             |        |                                 |         |   |   |   |
|                              |  SBA                  |                             |        |                                 |  3.56   | %  |   |   | (0.19 | )% |
|                              |  SBA 504              |                             |        |  -                              |         |   |   |  4.32 |   |
|                              |  Commercial           |                             |        |  1.08                           |         |   |   | 0.67 |   |
|                              |  Residential mortgage |                             |        |  0.27                           |         |   |   | 0.30 |   |
|                              |  Consumer             |                             |        |  (0.01                          | )       |   |   | 0.00 |   |
|                              |                       | Total loans                      |        |                                 | 1.05         |   |   |   | 0.80 |   |
|                              |                       | Allowance to total loans         |        |                                 |  2.49   |   |   |   | 2.16 |   |
|                              |                       | Allowance to nonperforming loans |        |                                 |  63.85  |   |   |   |  52.73 |   |

----

| (In thousands)              |   | March 31, 2011 |   |   | December 31, 2010 |   |
|-----------------------------|--------|----------------|--------|--------|-------------------|--------|
| FHLB borrowings:            |   |           |   |   |              |   |
| Fixed rate advances         |   | $              | 30,000 |   |              | $      | 30,000 |   |
| Repurchase agreements       |   |           | 30,000 |   |              |   | 30,000 |   |
| Other repurchase agreements |   |           | 15,000 |   |              |   | 15,000 |   |
| Subordinated debentures     |   |           | 15,465 |   |              |   | 15,465 |   |

----

----

|                            |   | Actual |   |   | For CapitalAdequacy Purposes |   |   | To Be Well-CapitalizedUnder Prompt Corrective Action Provisions |   |
|---------------------------------|--------|--------|--------|--------|------------------------------|--------|--------|-----------------------------------------------------------------|--------|
| (In thousands)                  |   | Amount |   |   | Ratio                        |   |   | Amount                                                          |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| As of March 31, 2011            |   |   |   |   |                         |   |   |                                                            |   |   |   |   |   |   |   |   |   |   |
| Leverage ratio                  |   | $      | 83,046 |   |                         |   | 10.15  | %                                                               |   | ≥ $ 32,716 |   |   |   | 4.00 | % |   | ≥ $ 40,895 |   |   |   | N/A |   |
| Tier I risk-based capital ratio |   |   | 83,046 |   |                         |   | 13.04  |                                                            |   |   | 25,476 |   |   |   | 4.00 |   |   |   | 38,214 |   |   |   | N/A |   |
| Total risk-based capital ratio  |   |   | 91,098 |   |                         |   | 14.30  |                                                            |   |   | 50,951 |   |   |   | 8.00 |   |   |   | 63,689 |   |   |   | N/A |   |
| As of December 31, 2010         |   |   |   |   |                         |   |   |                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage ratio                  |   | $      | 83,550 |   |                         |   | 9.97   | %                                                               |   | ≥ $ 33,531 |   |   |   | 4.00 | % |   | ≥ $ 41,914 |   |   |   | N/A |   |
| Tier I risk-based capital ratio |   |   | 83,550 |   |                         |   | 13.04  |                                                            |   |   | 25,628 |   |   |   | 4.00 |   |   |   | 38,442 |   |   |   | N/A |   |
| Total risk-based capital ratio  |   |   | 91,638 |   |                         |   | 14.30  |                                                            |   |   | 51,257 |   |   |   | 8.00 |   |   |   | 64,071 |   |   |   | N/A |   |

|                            |   | Actual |   |   | For CapitalAdequacy Purposes |   |   | To Be Well-CapitalizedUnder Prompt Corrective Action Provisions |   |
|---------------------------------|--------|--------|--------|--------|------------------------------|--------|--------|-----------------------------------------------------------------|--------|
| (In thousands)                  |   | Amount |   |   | Ratio                        |   |   | Amount                                                          |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
| As of March 31, 2011            |   |   |   |   |                         |   |   |                                                            |   |   |   |   |   |   |   |   |   |   |
| Leverage ratio                  |   | $      | 70,822 |   |                         |   | 8.67   | %                                                               |   | ≥ $ 32,684 |   |   |   | 4.00 | % |   | ≥ $ 40,855 |   |   |   | 5.00 | % |
| Tier I risk-based capital ratio |   |   | 70,822 |   |                         |   | 11.13  |                                                            |   |   | 25,445 |   |   |   | 4.00 |   |   |   | 38,167 |   |   |   | 6.00 |   |
| Total risk-based capital ratio  |   |   | 87,365 |   |                         |   | 13.73  |                                                            |   |   | 50,890 |   |   |   | 8.00 |   |   |   | 63,612 |   |   |   | 10.00 |   |
| As of December 31, 2010         |   |   |   |   |                         |   |   |                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage ratio                  |   | $      | 71,053 |   |                         |   | 8.48   | %                                                               |   | ≥ $ 33,497 |   |   |   | 4.00 | % |   | ≥ $ 41,871 |   |   |   | 5.00 | % |
| Tier I risk-based capital ratio |   |   | 71,053 |   |                         |   | 11.10  |                                                            |   |   | 25,595 |   |   |   | 4.00 |   |   |   | 38,393 |   |   |   | 6.00 |   |
| Total risk-based capital ratio  |   |   | 87,631 |   |                         |   | 13.69  |                                                            |   |   | 51,191 |   |   |   | 8.00 |   |   |   | 63,988 |   |   |   | 10.00 |   |

----

| (In thousands, except percentages and years)      |   | March 31, 2011 |   |   | December 31, 2010 |   |
|---------------------------------------------------|--------|----------------|--------|--------|-------------------|--------|
| Notional amount                                   |   | $              | 15,000 |   |              | $      | 15,000 |   |
| Weighted average pay rate                         |   |           | 4.05   | %      |              |   | 4.05 | % |
| Weighted average receive rate (three-month LIBOR) |   |           | 0.30   | %      |              |   | 0.34 | % |
| Weighted average maturity in years                |   |           | 0.66   |   |              |   | 0.90 |   |
| Unrealized loss relating to interest rate swaps   |   | $              | (360   | )      |              | $      | (499 | ) |

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ITEM 4

| (a) | The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2011.  Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective for recording, processing, summarizing and reporting the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the SEC's rules and forms. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | Changes in internal controls over financial reporting – No significant change in the Company’s internal control over financial reporting has occurred during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s control over financial reporting. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (a)    | Exhibits     |   Description                                                                                                                                                                                            |
|--------|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Exhibit 31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002                                                                       |
|   | Exhibit 31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002                                                                       |
|   | Exhibit 32.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

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|                                 | UNITY BANCORP, INC.                                  |
|--------------------------------------|------------------------------------------------------|
|                                 |                                                 |
| Dated:   May 11, 2011 | /s/ Alan J. Bedner, Jr.                              |
|                                 |  ALAN J. BEDNER, JR.                            |
|                                 | Executive Vice President and Chief Financial Officer |

----

|  EXHIBIT NO.  |   DESCRIPTION                                                                                                                                                                                         |
|-------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  31.1              |  Exhibit 31.1-Certification of James A. Hughes.  Required by Rule 13a-14(a) or Rule 15d-14(a) and section 302 of the Sarbanes-Oxley Act of 2002.                                                 |
|  31.2              |  Exhibit 31.2-Certification of Alan J. Bedner, Jr.  Required by Rule 13a-14(a) or Rule 15d-14(a) and section 302 of the Sarbanes-Oxley Act of 2002.                                         |
|  32.1              |  Exhibit 32.1-Certification of James A. Hughes and Alan J. Bedner.  Required by Rule 13a-14(b) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. |

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