UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                 For the Quarterly period ended: March 31, 2009

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

           For the transition period from ___________ to ___________.

                         Commission File Number: 0-28815

                     FIRST LITCHFIELD FINANCIAL CORPORATION
                     --------------------------------------
             (Exact name of Registrant as specified in its Charter)

             Delaware                                         06-1241321
             --------                                         ----------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation of organization)                            Identification No.)

      13 North Street, Litchfield, CT                            06759
      -------------------------------                            -----
(Address of principal executive offices)                       (Zip Code)

       Registrant's telephone number, including area code: (860) 567-8752

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been sub(j)ect to such filing
requirements for the past 90 days.

                                 Yes |X|    No |_|

Indicate by check mark whether the registrant is a large accele(r)ated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company as
defined in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer |_|             Accelerated filer |_|

Non-accelerated filer  |_|              Smaller reporting company |X|

Indicate by check mark whether the  registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act).

                                 Yes |_|     No |X|

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock,  as of the latest  practicable  date:  2,356,875  shares of Common
Stock, par value $.01 per share, were outstanding at May 10, 2009.


                                       1
<PAGE>

                     FIRST LITCHFIELD FINANCIAL CORPORATION
                                    FORM 10-Q
                                      INDEX

<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>                                                                                 <C>
Part I - Financial Information

        Item 1 - Financial Statements

        Consolidated Balance Sheets - March 31, 2009 and December 31, 2008
        (unaudited) .............................................................    3

        Consolidated Statements of Income - Three months ended
        March 31, 2009 and 2008 (unaudited) .....................................    4

        Consolidated Statements of Changes in Shareholders' Equity - Three months
        ended March 31, 2009 and 2008 (unaudited) ...............................    5

        Consolidated Statements of Cash Flows - Three months ended
        March 31, 2009 and 2008 (unaudited) .....................................    6

        Notes to Consolidated Financial Statements (unaudited) ..................    7

        Item 2 - Management's Discussion and Analysis of Financial Condition
        and Results of Operations ...............................................   20

        Item 4T - Controls and Procedures .......................................   30

Part II - Other Information

        Item 1 - Legal Proceedings ..............................................   31

        Item 2 - Unregistered Sales of Equity Securities and
        Use of Proceeds [not applicable] ........................................   31

        Item 3 - Defaults Upon Senior Securities [not applicable] ...............   31

        Item 4 - Submission of Matters to a Vote of Security Holders ............   31

        Item 5 - Other Information ..............................................   31

        Item 6 - Exhibits .......................................................   32

Signatures ......................................................................   33
</TABLE>


                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

FIRST LITCHFIELD FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)

<TABLE>
<CAPTION>
                                                                                                     March 31,        December 31,
                                                                                                        2009               2008
                                                                                                    -------------     -------------
<S>                                                                                                 <C>               <C>
ASSETS
     Cash and due from banks                                                                        $   9,582,536     $   9,238,320
     Interest - bearing accounts due from banks                                                            52,081               463
                                                                                                    -------------     -------------
                                                       CASH AND CASH EQUIVALENTS                        9,634,617         9,238,783
                                                                                                    -------------     -------------
     Securities:
        Available for sale securities, at fair value                                                  115,129,861       113,486,201
        Held to maturity securities (fair value $16,402-2009 and $16,553-2008)                             16,084            16,550
                                                                                                    -------------     -------------
                                                                TOTAL SECURITIES                      115,145,945       113,502,751
                                                                                                    -------------     -------------

     Federal Home Loan Bank stock, at cost                                                              5,427,600         5,427,600
     Federal Reserve Bank stock, at cost                                                                  225,850           225,850
     Other restricted stock, at cost                                                                      100,000           100,000
     Loans held for sale                                                                                       --         1,013,216
     Loan and lease receivables, net of allowance for loan and lease
        losses of  $3,593,824 -2009, $3,698,820-2008

                                                            NET LOANS AND LEASES                      392,506,130       366,392,079

     Premises and equipment, net                                                                        7,243,155         7,370,252
     Foreclosed property                                                                                  475,000                --
     Deferred income taxes                                                                              5,248,056         5,082,957
     Accrued interest receivable                                                                        2,198,905         2,262,918
     Cash surrender value of life insurance                                                            10,513,365        10,416,651
     Due from broker for security sales                                                                        --         9,590,823
     Other assets                                                                                       1,566,064         1,633,727
                                                                                                    -------------     -------------

                                                                    TOTAL ASSETS                    $ 550,284,687     $ 532,257,607
                                                                                                    =============     =============
LIABILITIES
     Deposits:
        Noninterest bearing                                                                         $  69,381,530     $  69,548,261
        Interest bearing                                                                              290,600,357       273,778,363
                                                                                                    -------------     -------------
                                                                  TOTAL DEPOSITS                      359,981,887       343,326,624
     Federal Home Loan Bank advances                                                                   98,800,000        81,608,000
     Repurchase agreements with financial institutions                                                 22,500,000        26,450,000
     Repurchase agreements with customers                                                              19,094,439        18,222,571
     Junior subordinated debt issued by unconsolidated trust                                           10,104,000        10,104,000
     Collateralized borrowings                                                                          1,132,621         1,375,550
     Capital lease obligation                                                                           1,060,912         1,065,563
     Due to broker for security purchases                                                                      --        12,994,945
     Accrued expenses and other liabilities                                                             5,280,781         4,643,090
                                                                                                    -------------     -------------

                                                               TOTAL LIABILITIES                      517,954,640       499,790,343
                                                                                                    -------------     -------------
EQUITY
SHAREHOLDERS' EQUITY

     Preferred stock $.00001 par value; 1,000,000 shares authorized, 10,000 shares outstanding                 --                --
       as of 3/31/09 and 12/31/08
     Common stock $.01 par value
        Authorized - 5,000,000 shares
        2009 - Issued - 2,506,622 shares, outstanding - 2,356,875 shares
        2008 - Issued - 2,506,622 shares, outstanding - 2,356,875 shares                                   25,040            25,038
     Additional paid-in capital                                                                        37,907,553        37,892,831
     Accumulated deficit                                                                               (3,177,514)       (3,325,920)
     Less: Treasury stock at cost- 149,747 as of 3/31/09 and12/31/08                                   (1,154,062)       (1,154,062)
     Accumulated other comprehensive loss, net of taxes                                                (1,344,985)       (1,024,498)
                                                                                                    -------------     -------------
                                    TOTAL FIRST LITCHFIELD FINANCIAL CORPORATION

                                                            SHAREHOLDERS' EQUITY                       32,256,032        32,413,389
                                                                                                    -------------     -------------
NONCONTROLLING INTERESTS                                                                                   74,015            53,875
                                                                                                    -------------     -------------
                                                                    TOTAL EQUITY                       32,330,047        32,467,264
                                                                                                    -------------     -------------

                                      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    $ 550,284,687     $ 532,257,607
                                                                                                    =============     =============
</TABLE>

See Notes to Consolidated Financial Statements.


                                       3
<PAGE>

FIRST LITCHFIELD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

<TABLE>
<CAPTION>
                                                                                Three Months Ended
                                                                                      March 31,
                                                                                2009              2008
                                                                             -----------      -----------
<S>                                                                          <C>              <C>
INTEREST AND DIVIDEND INCOME
       Interest and fees on loans and leases                                 $ 5,389,717      $ 5,527,083
                                                                             -----------      -----------
       Interest and dividends on securities:
           Mortgage-backed securities                                            699,516          673,328
           US Treasury and other securities                                      175,372          501,942
           State and municipal securities                                        213,282          336,419
           Corporate bonds and other securities                                   68,504          118,621
                                                                             -----------      -----------
            Total interest on securities                                       1,156,674        1,630,310
                                                                             -----------      -----------
       Other interest income                                                      14,838           99,043
                                                                             -----------      -----------
                                     TOTAL INTEREST AND DIVIDEND INCOME        6,561,229        7,256,436
                                                                             -----------      -----------
INTEREST EXPENSE
       Interest on deposits:
           Savings                                                               111,497          189,676
           Money market                                                          280,172          456,767
           Time certificates of deposit                                          885,931        1,452,676
                                                                             -----------      -----------
                                              TOTAL INTEREST ON DEPOSITS       1,277,600        2,099,119
       Interest on Federal Home Loan Bank advances                               877,308        1,007,798
       Interest on repurchase agreements                                         295,213          338,420
       Interest on subordinated debt                                             101,624          189,948
       Interest on collateralized borrowings                                      22,819           29,424
       Interest on capital lease obligation                                       14,098           14,338
                                                                             -----------      -----------
                                                  TOTAL INTEREST EXPENSE       2,588,662        3,679,047
                                                                             -----------      -----------
                                                     NET INTEREST INCOME       3,972,567        3,577,389
PROVISION FOR LOAN AND LEASE LOSSES                                              270,000           75,000
                                                                             -----------      -----------
                                     NET INTEREST INCOME AFTER PROVISION
                                               FOR LOAN AND LEASE LOSSES       3,702,567        3,502,389
                                                                             -----------      -----------
NONINTEREST INCOME
       Banking service charges and fees                                          363,187          345,179
       Trust                                                                     272,056          339,524
       Gains on available for sale securities                                         --           11,942
       Increase in cash surrender value of life insurance                         96,715           97,743
       Other                                                                      82,088           61,634
                                                                             -----------      -----------
                                                TOTAL NONINTEREST INCOME         814,046          856,022
                                                                             -----------      -----------
NONINTEREST EXPENSE
       Salaries                                                                1,563,142        1,597,635
       Employee benefits                                                         477,760          441,749
       Net occupancy                                                             325,250          311,826
       Equipment                                                                 147,396          159,614
       Legal fees                                                                115,863           62,952
       Directors fees                                                             46,750           50,100
       Computer services                                                         292,145          272,973
       Supplies                                                                   37,149           45,504
       Commissions, services and fees                                            131,085          116,242
       Postage                                                                    36,870           40,203
       Advertising                                                               115,474          137,015
       Other                                                                     733,995          563,230
                                                                             -----------      -----------
                                               TOTAL NONINTEREST EXPENSE       4,022,879        3,799,043
                                                                             -----------      -----------
                                              INCOME BEFORE INCOME TAXES         493,734          559,368
PROVISION FOR INCOME TAXES                                                        69,914           60,845
                                                                             -----------      -----------
                              NET INCOME BEFORE NONCONTROLLING INTERESTS         423,820          498,523
                                               NET INCOME ATTIBUTABLE TO
                                                NONCONTROLLING INTERESTS         (20,140)              --
                                                                             -----------      -----------
                                                              NET INCOME         403,680          498,523
                                                                             -----------      -----------
                             DIVIDENDS AND ACCRETION ON PREFERRED SHARES         137,430               --
                                                                             -----------      -----------
                             NET INCOME AVAILABLE TO COMMON SHAREHOLDERS     $   266,250      $   498,523
                                                                             ===========      ===========
INCOME PER SHARE
                                       BASIC NET INCOME PER COMMON SHARE     $      0.11      $      0.21
                                                                             ===========      ===========
                                     DILUTED NET INCOME PER COMMON SHARE     $      0.11      $      0.21
                                                                             ===========      ===========
DIVIDENDS PER SHARE                                                          $      0.05      $      0.15
                                                                             ===========      ===========
</TABLE>

See Notes to Consolidated Financial Statements.


                                       4
<PAGE>

FIRST LITCHFIELD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)

<TABLE>
<CAPTION>

                                                                                                              Additional
                                                    Noncontrolling       Preferred          Common             Paid-In
                                                       Interests           Stock             Stock             Capital
                                                    --------------     --------------    --------------    --------------
<S>                                                 <C>                <C>               <C>               <C>
Three months ended March 31, 2008
Balance, December 31, 2007                          $       50,000     $           --    $       25,012    $   27,858,841
Adoption of EITF 06-4 as of January 1, 2008                     --                 --                --                --
Comprehensive income:
Net income                                                      --                 --                --                --
Other comprehensive income (loss), net of taxes:
      Net unrealized holding loss on available
            for sale securities                                 --                 --                --                --
      Net actuarial loss and prior service
            cost for pension benefits

Other comprehensive loss

Total comprehensive loss
Cash dividends declared: $0.15 per share                        --                 --                --                --
Restricted stock grants and expense                             --                 --                 1             1,529
                                                    --------------     --------------    --------------    --------------
Balance, March 31, 2008                             $       50,000     $           --    $       25,013    $   27,860,370
                                                    ==============     ==============    ==============    ==============

Three months ended March 31, 2009
Balance, December 31, 2008                          $       53,875     $           --    $       25,038    $   37,892,831
Comprehensive income (loss):
Net income                                                  20,140                 --                --                --
Other comprehensive loss, net of taxes:
      Net unrealized holding loss on available
            for sale securities                                 --                 --                --                --
      Net unrealized holding loss on cash
            flow hedges
      Net actuarial loss and prior service
            cost for pension benefits                           --                 --                --                --

Other comprehensive loss

Total comprehensive income
Cash dividends declared: $0.05 per share                        --                 --                --                --
Restricted stock grants and expense                             --                 --                 2             2,292
Preferred stock dividends
Accretion of discount on preferred stock                                                                           12,430
                                                    --------------     --------------    --------------    --------------
Balance, March 31, 2009                             $       74,015     $           --    $       25,040    $   37,907,553
                                                    ==============     ==============    ==============    ==============

<CAPTION>
                                                          Retained                             Accumulated
                                                          Earnings                                Other              Total
                                                        (Accumulated        Treasury          Comprehensive      Shareholders'
                                                          Deficit)            Stock               Loss              Equity
                                                       --------------     --------------     --------------     --------------
<S>                                                    <C>                <C>                <C>                <C>
Three months ended March 31, 2008
Balance, December 31, 2007                             $    2,623,110     $     (926,964)    $   (1,267,387)    $   28,362,612
Adoption of EITF 06-4 as of January 1, 2008                   (12,272)                --                 --            (12,272)
Comprehensive income:
Net income                                                    498,523                 --                               498,523
Other comprehensive income (loss), net of taxes:
      Net unrealized holding loss on available
            for sale securities                                    --                 --           (764,757)          (764,757)
      Net actuarial loss and prior service
            cost for pension benefits                                                              (236,780)          (236,780)
                                                                                                                --------------
Other comprehensive loss                                                                                            (1,001,537)
                                                                                                                --------------
Total comprehensive loss                                                                                              (503,014)
Cash dividends declared: $0.15 per share                     (355,736)                --                 --           (355,736)
Restricted stock grants and expense                                --                 --                 --              1,530
                                                       --------------     --------------     --------------     --------------
Balance, March 31, 2008                                $    2,753,625     $     (926,964)    $   (2,268,924)    $   27,493,120
                                                       ==============     ==============     ==============     ==============

Three months ended March 31, 2009
Balance, December 31, 2008                             $   (3,325,920)    $   (1,154,062)    $   (1,024,498)    $   32,467,264
Comprehensive income (loss):
Net income                                                    403,680                 --                               423,820
Other comprehensive loss, net of taxes:
      Net unrealized holding loss on available
            for sale securities                                    --                 --            (85,707)           (85,707)
      Net unrealized holding loss on cash
            flow hedges                                                                            (184,613)          (184,613)
      Net actuarial loss and prior service
            cost for pension benefits                              --                 --            (50,167)           (50,167)
                                                                                                                --------------
Other comprehensive loss                                                                                              (320,487)
                                                                                                                --------------
Total comprehensive income                                                                                             103,333
Cash dividends declared: $0.05 per share                     (117,844)                --                              (117,844)
Restricted stock grants and expense                                --                 --                 --              2,294
Preferred stock dividends                                    (125,000)                                                (125,000)
Accretion of discount on preferred stock                      (12,430)                                                      --
                                                       --------------     --------------     --------------     --------------
Balance, March 31, 2009                                $   (3,177,514)    $   (1,154,062)    $   (1,344,985)    $   32,330,047
                                                       ==============     ==============     ==============     ==============
</TABLE>


                                       5
<PAGE>

FIRST LITCHFIELD FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

<TABLE>
<CAPTION>
                                                                                       Three months ended March 31,
                                                                                          2009               2008
                                                                                      ------------      ------------
<S>                                                                                   <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                            $    403,680      $    498,523
Adjustments to reconcile net income to net cash provided by operating activities:
            Net income attributable to non-controlling interest                             20,140                --
            Amortization (accretion) amortization of discounts and premiums
             on investment securities, net                                                  52,251           (24,676)
            Provision for loan and lease losses                                            270,000            75,000
            Depreciation and amortization                                                  178,556           188,905
            Gains on sale of available for sale securities                                      --           (11,942)
            Losses on sale of repossessed assets                                           115,387             5,030
            Loans originated for sale                                                   (3,677,254)         (505,000)
            Proceeds from sales of loans held for sale                                   4,739,544           509,071
            Gains on sales of loans held for sale                                          (49,074)           (4,071)
            Stock based compensation                                                         2,294             1,530
            Decrease (increase) in accrued interest receivable                              64,013           (92,708)
            (Increase) decrease in other assets                                            (26,274)           30,079
            Increase in cash surrender value of life insurance                             (96,714)          (97,743)
            Increase in deferred loan origination costs                                    (45,966)          (30,414)
            (Decrease) increase in accrued expenses and other liabilities                 (561,195)          751,601
                                                                                      ------------      ------------
             Net cash provided by operating activities                                   1,389,388         1,293,185
                                                                                      ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Available for sale securities:
            Proceeds from maturities and principal payments                             25,297,500        14,272,834

            Purchases                                                                  (41,118,213)      (42,586,928)
            Proceeds from sales                                                         10,590,823         1,265,587
Held to maturity mortgage-backed securities:
            Proceeds from maturities and principal payments                                    466               563
Purchase of restricted stock                                                                    --          (293,300)

Net increase in loans and leases                                                       (25,898,621)       (3,978,796)
Purchase of bank premises and equipment                                                    (51,459)          (66,933)
Proceeds from sale of repossessed assets                                                    44,295            75,633
                                                                                      ------------      ------------
            Net cash used in investing activities                                      (31,135,209)      (31,311,340)
                                                                                      ------------      ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in savings, money market and demand deposits                               (2,220,837)       (2,559,969)
Net increase in certificates of deposit                                                 18,876,100         8,514,016
Net increase in Federal Home Loan Bank overnight borrowings                             17,192,000                --
Net (decrease) increase in repurchase agreements with financial institutions            (3,950,000)       25,000,000
Net increase (decrease) in repurchase agreements with customers                            871,868        (4,547,198)
Net decrease in collateralized borrowings                                                 (242,929)         (284,106)
Principal repayments on capital lease obligation                                            (4,651)           (4,412)
Dividends paid on common stock                                                            (379,896)         (355,230)
                                                                                      ------------      ------------
            Net cash provided by financing activities                                   30,141,655        25,763,101
                                                                                      ------------      ------------
            Net decrease in cash and cash equivalents                                      395,834        (4,255,054)
CASH AND CASH EQUIVALENTS, at beginning of period                                        9,238,783        21,497,194
                                                                                      ------------      ------------
CASH AND CASH EQUIVALENTS, at end of period                                           $  9,634,617      $ 17,242,140
                                                                                      ============      ============
SUPPLEMENTAL INFORMATION Cash paid during the period for:
            Interest on deposits and borrowings                                       $  2,612,221      $  3,527,280
                                                                                      ============      ============
            Income taxes                                                              $      1,000      $      1,000
                                                                                      ============      ============
Noncash investing and financing activities:
            Accrued dividends declared                                                $    242,844      $    355,736
                                                                                      ============      ============
            Transfer of loans to repossessed assets                                   $     65,747      $     61,516
                                                                                      ============      ============
            Transfer of loans to foreclosed assets                                    $    475,000      $         --
                                                                                      ============      ============
            Increase in leases and other liabilities for
            equipment payable related to financed leases                              $    980,211      $         --
                                                                                      ============      ============
            Increase in liabilities and decrease in retained earnings for
            adoption of EITF 06-4                                                     $         --      $     12,272
                                                                                      ============      ============
            Change in other liabilities related to the unfunded pension liability     $    (76,010)     $   (358,757)
                                                                                      ============      ============
</TABLE>

See Notes to Consolidated Financial Statements.


                                       6
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.    The  consolidated  balance sheet at December 31, 2008 of First  Litchfield
      Financial  Corporation  (the  "Company") has been derived from the audited
      financial  statements  at that  date,  but  does  not  include  all of the
      information  and  footnotes  required by accounting  principles  generally
      accepted  in  the  United   States  of  America  for  complete   financial
      statements.

2.    The accompanying  unaudited  consolidated financial statements and related
      notes have been  prepared  pursuant  to the rules and  regulations  of the
      Securities and Exchange Commission.  Accordingly,  certain information and
      footnote disclosures normally included in financial statements prepared in
      accordance with  accounting  principles  generally  accepted in the United
      States  of  America  have  been   omitted   pursuant  to  such  rules  and
      regulations.  The  accompanying  financial  statements  and related  notes
      should be read in conjunction with the audited financial statements of the
      Company and notes thereto for the fiscal year ended December 31, 2008.

      These  financial  statements  reflect,  in the opinion of Management,  all
      adjustments,  consisting of only normal recurring  adjustments,  necessary
      for a fair  presentation  of the  Company's  financial  position  and  the
      results of its  operations  and its cash flows for the periods  presented.
      The results of  operations  for the three  months ended March 31, 2009 are
      not  necessarily  indicative  of the  results  of  operations  that may be
      expected for all of 2009.

      During the first  quarter of 2009,  the Company  entered into two interest
      rate swap agreements to hedge certain interest rate exposures. The Company
      does not use  derivatives for  speculative  purposes.  The Company applies
      Statement of Financial  Accounting Standard ("SFAS") No. 133,  "Accounting
      for  Derivative  Instruments  and  Hedging  Activities,"  ("SFAS  133") as
      amended,   which  establishes   accounting  and  reporting  standards  for
      derivative  instruments  and hedging  activities.  SFAS 133  requires  the
      Company to recognize all  derivatives  as either assets or  liabilities in
      its Consolidated  Balance Sheets and to measure those  instruments at fair
      value.  The estimated  fair value is based  primarily on projected  future
      swap rates.

      The Company  applies  cash flow hedge  accounting  to interest  rate swaps
      designated as hedges of the variability of future cash flows from floating
      rate  liabilities  due to the benchmark  interest  rate.  The Company uses
      regression  analysis to perform an ongoing  prospective and  retrospective
      assessment  of these hedging  relationships.  Changes in the fair value of
      these  interest  rate swaps are recorded to "net holding loss on cash flow
      hedges" as a component of accumulated other comprehensive income (loss) in
      Shareholders'  equity, to the extent they are effective.  Amounts recorded
      to accumulated other comprehensive  income (loss) are then reclassified to
      interest  expense as interest on the hedged  borrowing is recognized.  Any
      ineffective  portion of the change in fair value of these  instruments  is
      recorded to interest expense.

3.    The  Company is  required  to present  basic  income per share and diluted
      income  per share in its  statements  of  income.  Basic  income per share
      amounts are computed by dividing net income by the weighted average number
      of common shares outstanding. Diluted income per share assumes exercise of
      all  potential  common  stock   equivalents  in  weighted  average  shares
      outstanding,  unless  the  effect is  antidilutive.  The  Company  is also
      required to provide a reconciliation of the numerator and denominator used
      in the  computation  of both basic and  diluted  income per share.  Income
      available  to common  shareholders  has been  reduced by  preferred  share
      dividends and discount accretion related to the Company`s participation in
      TARP Capital  Purchase  program.  For the period ended March 31, 2009 this
      amount totaled $137,430.


                                       7
<PAGE>

    The following is information about the computation of net income per share
    for the three month periods ended March 31, 2009 and 2008.

<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                                            March 31, 2009
                                                               -------------------------------------------
                                                                  Net                           Per Share
                                                                 Income           Shares          Amount
                                                               -----------     -----------     -----------
<S>                                                            <C>               <C>           <C>
      Basic Net Income Per Share
            Income available to common shareholders            $   266,250       2,356,875     $      0.11
                                                                                               ===========
      Effect of Dilutive Securities
            Options Outstanding                                         --              --
                                                               -----------     -----------
      Diluted Net Income Per Share
            Income available to common shareholders
            plus assumed conversions                           $   266,250       2,356,875     $      0.11
                                                               ===========     ===========     ===========

<CAPTION>
                                                                            Three Months Ended
                                                                              March 31, 2008
                                                               -------------------------------------------
                                                                  Net                           Per Share
                                                                 Income           Shares          Amount
                                                               -----------     -----------     -----------
      Basic Net Income Per Share
<S>                                                            <C>               <C>           <C>
                   Income available to common shareholders     $   498,523       2,369,989     $      0.21
                                                                                               ===========
      Effect of Dilutive Securities
                   Options Outstanding                                  --             939
                                                               -----------     -----------
      Diluted Net Income Per Share
                   Income available to common shareholders
                   plus assumed conversions                    $   498,523       2,370,928     $      0.21
                                                               ===========     ===========     ===========
</TABLE>

4.    Other  comprehensive  loss which is comprised of the change in  unrealized
      gains and losses on available for sale  securities,  net cash flow hedges,
      as well as net pension loss, is as follows:

<TABLE>
<CAPTION>
                                                                                         Three Months Ended
                                                                                           March 31, 2009
                                                                             --------------------------------------------
                                                                              Before-Tax          Tax         Net-of-Tax
                                                                                Amount           Effect         Amount
                                                                             -----------      -----------     -----------
<S>                                                                          <C>              <C>             <C>
Unrealized holding losses arising during the period                          $  (129,859)     $    44,152     $   (85,707)
Less: reclassification adjustment for amounts recognized in net income                --               --              --
                                                                             -----------      -----------     -----------
Unrealized holding losses on available for sale securities, net of taxes        (129,859)          44,152         (85,707)
Net cash flow hedges, net of taxes                                              (279,717)          95,104        (184,613)
Net pension loss, net of taxes                                                   (76,010)          25,843         (50,167)
                                                                             -----------      -----------     -----------
Total other comprehensive loss, net of taxes                                 $  (485,586)     $   165,099     $  (320,487)
                                                                             ===========      ===========     ===========

<CAPTION>
                                                                                         Three Months Ended
                                                                                            March 31, 2008
                                                                             --------------------------------------------
                                                                              Before-Tax          Tax         Net-of-Tax
                                                                                Amount           Effect          Amount
                                                                             -----------      -----------     -----------
<S>                                                                          <C>              <C>             <C>
Unrealized holding losses arising during the period                          $(1,146,781)     $   389,905     $  (756,876)
Add: reclassification adjustment for amounts recognized in net income            (11,942)           4,061          (7,881)
                                                                             -----------      -----------     -----------
Unrealized holding losses on available for sale securities, net of taxes      (1,158,723)         393,966        (764,757)
Net pension loss, net of taxes                                                  (358,757)         121,977        (236,780)
                                                                             -----------      -----------     -----------
Total other comprehensive loss, net of taxes                                 $(1,517,480)     $   515,943     $(1,001,537)
                                                                             ===========      ===========     ===========
</TABLE>


                                       8
<PAGE>

5.    The Company's  subsidiary,  The First  National  Bank of  Litchfield  (the
      "Bank") has a  noncontributory  defined  benefit pension plan (the "Plan")
      that covers  substantially  all employees  who have  completed one year of
      service  and have  attained  age 21.  The  benefits  are based on years of
      service  and the  employee's  compensation  during  the last five years of
      employment.  During the first quarter of 2005, the Bank's pension plan was
      curtailed. Prior to the Plan's curtailment,  the Bank's funding policy was
      to contribute  amounts to the plan  sufficient to meet the minimum funding
      requirements set forth in ERISA, plus such additional  amounts as the Bank
      determined to be appropriate from time to time. The actuarial  information
      has been calculated using the projected unit credit method.

      Components  of net periodic  benefit cost for the three months ended March
      31:

                                                  2009            2008
                                               ----------      ----------
           Service cost                        $       --      $       --
           Interest cost                           46,818          46,306
           Expected return on plan assets         (43,104)        (50,363)
           Amortization of unrealized loss         23,935          14,812
                                               ----------      ----------
           Net periodic benefit cost           $   27,649      $   10,755
                                               ==========      ==========

6.    The  Bank is a  member  of the  Federal  Home  Loan  Bank of  Boston  (the
      "FHLBB").  As a member of the FHLBB,  the Bank has access to a preapproved
      line of credit of up to 2% of its total  assets and the capacity to borrow
      up to 30% of its total assets.  In accordance  with an agreement  with the
      FHLBB, the Bank is required to maintain qualified  collateral,  as defined
      in the  FHLBB  Statement  of  Products  Policy,  free and  clear of liens,
      pledges and encumbrances  for the advances.  FHLBB stock and certain loans
      which aggregate  approximately 100% of the outstanding advance are used as
      collateral.  The  Company  views its  investment  in the FHLBB  stock as a
      long-term  investment.  Accordingly,  when evaluating for impairment,  the
      value is determined based on the ultimate recovery of the par value rather
      than recognizing temporary declines in value. The determination of whether
      a decline affects the ultimate recovery is influenced by criteria such as:
      1) the  significance of the decline in net assets of the FHLBB as compared
      to the capital stock amount and length of time a decline has persisted; 2)
      impact of  legislative  and  regulatory  changes on the FHLBB;  and 3) the
      liquidity position of the FHLBB. The FHLBB announced in February 2009 that
      it will suspend its dividend  for the first  quarter of 2009,  will likely
      not pay any  dividends  for the  remainder of 2009,  and will continue its
      moratorium on excess stock  repurchases  announced in December  2008.  The
      FHLBB  noted  their  primary  concern  related to the impact of other than
      temporary   impairment   ("OTTI")   charges   recorded  on  private  label
      mortgage-backed securities (MBS) as of December 31, 2008.

      While the FHLBB  announced that it remained  adequately  capitalized as of
      December 31, 2008 in its February  announcement,  the Company is unable to
      determine if the potential additional charges to earnings will change this
      regulatory capital  classification.  The Company does not believe that its
      investment  in the  FHLBB  is  impaired  as of this  date.  However,  this
      estimate could change in the near term as a result of any of the following
      events:  1) additional  significant  impairment losses are incurred on the
      MBS  causing a  significant  decline  in the  FHLBB's  regulatory  capital
      status; 2) the economic losses resulting from credit  deterioration on the
      MBS increases significantly;  and 3) capital preservation strategies being
      utilized by the FHLBB become ineffective.


                                       9
<PAGE>

      Federal Home Loan Bank advances as of March 31, 2009 are as follows:

          overnight               $ 18,800,000  @  0.3125%
          due        10/02/2009      6,000,000  @    4.50%
          due        11/30/2009      5,000,000  @    3.95%
          due         6/24/2010      5,000,000  @    4.15%
          due        11/02/2010     10,000,000  @    4.45%
          due         5/29/2012      5,000,000  @    4.32%
          due         5/02/2014      7,000,000  @    4.59% , callable 5/3/2010
          due         8/20/2014      7,000,000  @    4.25% , callable 8/20/2009
          due         5/05/2016     10,000,000  @    4.53% , callable 5/5/2009
          due         3/23/2017     10,000,000  @    4.29% , callable 6/23/2009
          due         7/20/2017     10,000,000  @    4.29% , callable 4/22/2009
          due        11/20/2017      5,000,000  @    4.29% , callable 11/19/2012
                                  ------------
                          Total   $ 98,800,000
                                  ============

      As of March 31, 2009, the Bank had borrowings under repurchase  agreements
      with financial  institutions  totaling  $22,500,000.  This amount includes
      borrowings:

          due         3/12/2013    12,500,000   @    3.19% , callable 3/12/2011
          due         5/23/2013    10,000,000   @    3.64% , callable 5/23/2011
                                 ------------
                          Total  $ 22,500,000
                                 ============

7.    A  reconciliation  of the  anticipated  income tax  expense  (computed  by
      applying the Federal statutory income tax rate of 34% to the income before
      taxes) to the provision for income taxes as reported in the  statements of
      income is as follows:

<TABLE>
<CAPTION>
                                                                 For the three months ended March 31,
                                                         ---------------------------------------------------
                                                                    2009                         2008
                                                         ----------------------       ----------------------
<S>                                                      <C>                 <C>      <C>                 <C>
Provision for income taxes at statutory Federal rate     $  167,870          34%      $  190,185          34%
Increase (decrease) resulting from:
      Tax exempt income                                    (107,950)        (22)        (148,844)        (27)
      Nondeductible interest expense                          6,560           1           14,233           3
      Other                                                   3,434           1            5,271           1
                                                         ----------      ------       ----------      ------
Provision for income taxes                               $   69,914          14%      $   60,845          11%
                                                         ==========      ======       ==========      ======
</TABLE>


                                       10
<PAGE>

8.    The amortized cost, gross unrealized  gains,  gross unrealized  losses and
      approximate  fair values of securities  which are  classified as available
      for sale and held to maturity at March 31, 2009 and  December 31, 2008 are
      as follows:

<TABLE>
<CAPTION>
AVAILABLE FOR SALE                                                                      March 31, 2009
                                                            ------------------------------------------------------------------------
                                                                                   Gross               Gross
                                                              Amortized         Unrealized           Unrealized             Fair
                                                                 Cost              Gains               Losses               Value
                                                            -------------      -------------       -------------       -------------
<S>                                                         <C>                <C>                 <C>                 <C>
Debt Securities:
     U.S. Treasury securities                               $   3,100,704      $      90,274       $          --       $   3,190,978
     U.S. Government Agency securities                         15,000,000             28,720             (12,280)         15,016,440
     State and Municipal Obligations                           19,927,961             47,006            (983,740)         18,991,227
     Trust Preferred Securities                                   486,493            105,968                  --             592,461
                                                            -------------      -------------       -------------       -------------
                                                               38,515,158            271,968            (996,020)         37,791,106
                                                            -------------      -------------       -------------       -------------
Mortgage-Backed Securities:
     GNMA                                                       9,458,200            176,100              (1,021)          9,633,279
     FNMA                                                      34,027,854            568,570             (81,523)         34,514,901
     FHLMC                                                     30,958,875            301,713             (90,782)         31,169,806
                                                            -------------      -------------       -------------       -------------
                                                               74,444,929          1,046,383            (173,326)         75,317,986
                                                            -------------      -------------       -------------       -------------

Marketable Equity Securities                                    2,060,106                 --             (39,337)          2,020,769
                                                            -------------      -------------       -------------       -------------

Total available for sale securities                         $ 115,020,193      $   1,318,351       $  (1,208,683)      $ 115,129,861
                                                            =============      =============       =============       =============

<CAPTION>
                                                                                     December 31, 2008
                                                            ------------------------------------------------------------------------
                                                                                   Gross               Gross
                                                              Amortized         Unrealized           Unrealized             Fair
                                                                 Cost              Gains               Losses               Value
                                                            -------------      -------------       -------------       -------------
<S>                                                         <C>                <C>                 <C>                 <C>
Debt Securities:
     U.S. Treasury securities                               $   3,110,574      $     107,876       $          --       $   3,218,450
     U.S. Government Agency securities                         26,500,000             65,763              (3,386)         26,562,377
     State and Municipal Obligations                           19,931,000             77,501            (376,069)         19,632,432
     Trust Preferred Securities                                   493,615                 --                  --             493,615
                                                            -------------      -------------       -------------       -------------
                                                               50,035,189            251,140            (379,455)         49,906,874
                                                            -------------      -------------       -------------       -------------
Mortgage-Backed Securities:
     GNMA                                                       9,495,917                 12              (8,094)          9,487,835
     FNMA                                                      35,675,421            467,875            (263,567)         35,879,729
     FHLMC                                                     14,994,269            210,723              (9,228)         15,195,764
                                                            -------------      -------------       -------------       -------------
                                                               60,165,607            678,610            (280,889)         60,563,328
                                                            -------------      -------------       -------------       -------------

Marketable Equity Securities                                    3,045,878                 --             (29,879)          3,015,999
                                                            -------------      -------------       -------------       -------------

Total available for sale securities                         $ 113,246,674      $     929,750       $    (690,223)      $ 113,486,201
                                                            =============      =============       =============       =============

<CAPTION>
HELD TO MATURITY                                                                          March 31, 2009
                                                            ------------------------------------------------------------------------
                                                                                   Gross               Gross
                                                              Amortized         Unrealized           Unrealized             Fair
                                                                 Cost              Gains               Losses               Value
                                                            -------------      -------------       -------------       -------------
<S>                                                         <C>                <C>                 <C>                 <C>
Mortgage-Backed Securities:
     GNMA                                                   $      16,084      $         318       $          --       $      16,402
                                                            =============      =============       =============       =============

<CAPTION>
                                                                                         December 31, 2008
                                                            ------------------------------------------------------------------------
                                                                                   Gross               Gross
                                                              Amortized         Unrealized           Unrealized             Fair
                                                                 Cost              Gains               Losses               Value
                                                            -------------      -------------       -------------       -------------
<S>                                                         <C>                <C>                 <C>                 <C>
Mortgage-Backed Securities:
     GNMA                                                   $      16,550      $           3       $          --       $      16,553
                                                            =============      =============       =============       =============
</TABLE>


                                       11
<PAGE>

      At March 31, 2009,  thirty-seven  securities  have unrealized  losses.  At
      March 31, 2009, gross unrealized  holding losses on available for sale and
      held to maturity  securities  totaled  $1,208,683.  Of the securities with
      unrealized  losses,  there  were  sixteen  securities  that have been in a
      continuous unrealized loss position for a period of twelve months or more.
      The unrealized  losses on these  securities  totaled $818,176 at March 31,
      2009. The following  summarizes by investment security type, the basis for
      the  conclusion  that the  applicable  investment  securities  within  the
      Company's  available for sale  portfolio  were not  other-than-temporarily
      impaired at March 31, 2009.

      Trust Preferred Securities - As of March 31, 2009 there were no unrealized
      losses on the  Company's  investment in corporate  bonds and notes.  As of
      March 31, 2009,  this  portfolio  consisted of two pooled trust  preferred
      securities  with a  carrying  value  of  $486,493  and a  market  value of
      $592,461.   During  the  first  quarter  of  2009,  both  securities  were
      downgraded to a rating of Ca indicating a more severe deterioration in the
      creditworthiness  of the  underlying  issuers  of these  securities.  As a
      result, the Company recorded OTTI losses effective as of December 31, 2008
      and wrote them down to their current carrying values.

      Equity securities - The unrealized  losses on the Company's  investment in
      four marketable equity securities  totaled $39,337,  which was an increase
      from the unrealized losses of $29,879 as of December 31, 2008. As of March
      31, 2009, this portfolio  consists of a marketable  investment fund with a
      fair  value  of  $1,960,663,  a money  market  fund  with a fair  value of
      $60,104, and perpetual preferred stock of government sponsored enterprises
      which  have  been  written  down to a fair  value of $2.  Given  the small
      unrealized  loss  remaining  in this  segment  of the  portfolio,  and the
      Company's  ability  and intent to hold the  investments  for a  reasonable
      period of time sufficient for a forecasted recovery of amortized cost, the
      Company does not consider these  investments to be  other-than-temporarily
      impaired at March 31, 2009.

      Mortgage-backed  securities  - The  unrealized  losses  on  the  Company's
      investment  in  mortgage-backed  securities  decreased  from  $280,889  at
      December  31,  2008 to  $173,326  at March 31,  2009.  There  were no OTTI
      charges for the three months ended March 31, 2009.  These  securities  are
      U.S.  Government Agency or sponsored agency securities and the contractual
      cash flows for these  investments  are performing as expected.  Management
      believes  the  decline  in  fair  value  is   attributable  to  investor's
      perception  of credit and the lack of  liquidity in the  marketplace.  The
      Company expects to collect all principal and interest on these  securities
      and has the ability and intent to hold these  investments until a recovery
      of amortized cost, which may be at maturity. The Company does not consider
      these investments to be other-than-temporarily impaired at March 31, 2009.

      State and Municipal  Obligations - The unrealized  losses on the Company's
      investment in state and municipal  obligations  increased from $376,069 at
      December  31,  2008 to  $983,740  at March 31,  2009.  There  were no OTTI
      charges  for these  securities  during  the  first  quarter  of 2009.  The
      increase  in the  unrealized  loss at March 31,  2009 is  attributable  to
      concerns about the economy,  credit,  lack of bank  participation  in this
      market and  downgrades of the monoline  insurers as well as some perceived
      lack of credibility of the credit rating  agencies.  As of March 31, 2009,
      all securities are  performing,  the Company is receiving all interest and
      principal  payments as contractually  agreed, and all these securities are
      rated as investment grade. The Company does not consider these investments
      to be other-than-temporarily impaired at March 31, 2009.

      U.S. Government Agency Securities - The unrealized losses on the Company's
      investment in these securities  increased from $3,386 at December 31, 2008
      to $12,280 at March 31, 2009. Given the small unrealized loss remaining in
      this segment of the  portfolio,  and the  Company's  ability and intent to
      hold the  investments  for a reasonable  period of time  sufficient  for a
      recovery  of  amortized   cost,   the  Company  does  not  consider  these
      investments to be other-than-temporarily impaired at March 31, 2009.


                                       12
<PAGE>

9.    A summary of the Bank's  loan and lease  portfolio  at March 31,  2009 and
      December 31, 2008 is as follows:

<TABLE>
<CAPTION>
                                                                                          2009                 2008
                                                                                     -------------        -------------
<S>                                                                                  <C>                  <C>
            Real estate--residential mortgage                                        $ 195,574,353        $ 192,561,108
            Real estate--commercial mortgage                                            76,397,014           67,454,925
            Real estate--construction                                                   41,524,670           38,153,503
            Commercial Loans                                                            47,023,206           46,249,689
            Commercial Leases (net of unearned
              discount of $3,225,580-2009, $2,501,895-2008)                             28,349,650           19,785,870
            Installment                                                                  4,867,299            5,113,400
            Other                                                                        1,689,679              128,574
                                                                                     -------------        -------------
                                                  TOTAL LOANS AND LEASES               395,425,871          369,447,069
            Net deferred loan origination costs                                            608,208              562,242
            Premiums on purchased loans                                                     65,875               81,588
            Allowance for loan and lease losses                                         (3,593,824)          (3,698,820)
                                                                                     -------------        -------------
                                                    NET LOANS AND LEASES             $ 392,506,130        $ 366,392,079
                                                                                     =============        =============
</TABLE>

      The  following  information  relates to impaired  loans and leases,  which
      include  all  nonaccrual  loans and leases and other loans and leases past
      due 90 days or more, and all restructured  loans and leases, as of and for
      the three months ended March 31, 2009 and December 31, 2008.

<TABLE>
<CAPTION>
                                                                                         March 31,        December 31,
                                                                                            2009              2008
                                                                                       --------------    --------------
<S>                                                                                    <C>               <C>
Loans and leases receivable for which there is a related allowance for loan
   and lease losses                                                                    $    3,373,637    $    6,225,481
                                                                                       ==============    ==============

Loans and leases receivable for which there is no related allowance for loan
   and lease losses                                                                    $    4,604,784    $    2,657,655
                                                                                       ==============    ==============

Allowance for loan and lease losses related to impaired loans and leases               $      647,724    $      939,066
                                                                                       ==============    ==============
</TABLE>

10.   A summary of the Bank's  deposits at March 31, 2009 and  December 31, 2008
      is as follows:

<TABLE>
<CAPTION>
                                                                                           2009                2008
                                                                                       ------------       ------------
<S>                                                                                    <C>                <C>
            Noninterest bearing:
                  Demand                                                               $ 69,381,530       $ 69,548,261
                                                                                       ------------       ------------
            Interest bearing:
                  Savings                                                                65,303,876         58,582,376
                  Money market                                                           84,309,520         93,085,126
                  Time certificates of deposit in
                    denominations of $100,000 or more                                    63,537,494         41,003,855
                  Other time certificates of deposit                                     77,449,467         81,107,006
                                                                                       ------------       ------------
                  Total Interest bearing deposits                                       290,600,357        273,778,363
                                                                                       ------------       ------------
                                                           TOTAL DEPOSITS              $359,981,887       $343,326,624
                                                                                       ============       ============
</TABLE>


                                       13
<PAGE>

      Included  in  deposits  as of March 31,  2009 and  December  31,  2008 are
      approximately  $26,834,285  and  $15,902,000,  respectively,  of  brokered
      deposits  which have varying  maturities  through  March 2010 and December
      2009, respectively.

11.   During  2007,  the  Company  approved a  restricted  stock plan (the "2007
      Plan") for senior  management.  On February 15, 2008, the Company  granted
      3,500  restricted  stock awards to senior  management  from the 2007 Plan.
      These  awards  vest over a  five-year  period,  or  earlier  if the senior
      manager ceases to be a senior manager for any reason other than cause, for
      example,  retirement. The holders of these awards participate fully in the
      rewards of stock ownership of the Company,  including  voting and dividend
      rights.  The senior managers are not required to pay any  consideration to
      the Company for the restricted stock awards. The Company measures the fair
      value of the awards  based on the  average of the high price and low price
      at which the Company's  common stock traded on the date of the grant.  For
      the  three  months  ended  March  31,  2009,   $2,294  was  recognized  as
      compensation expense under the 2007 Plan. At March 31, 2009,  unrecognized
      compensation  cost of $35,179  related to these awards is expected to vest
      over a weighted average period of 4 years.

      A summary of unvested  shares as of and for the three  months  ended March
      31, 2009, is as follows:

                                                             Weighted Average
                                                Shares          Grant Date
                                            (in thousands)      Fair Value
                                            --------------   ----------------
            Unvested at January 1, 2009             3,493      $     13.11

                           Granted                     --               --
                           Vested                      (2)              --
                           Forfeited                   --               --
                                              -----------      -----------

            Unvested at March 31, 2009              3,491      $     13.11
                                              ===========      ===========

12.   The Company has two operating  segments for purposes of reporting business
      line results: Community Banking and Leasing. The Community Banking segment
      is defined as all the operating  results of the Company and the Bank.  The
      Leasing  segment  is defined as the  results of First  Litchfield  Leasing
      Corporation.  Because First Litchfield Leasing Corporation is a relatively
      new subsidiary,  methodologies  and  organizational  hierarchies are newly
      developed  and will be  subject  to  periodic  review  and  revision.  The
      following presents the operating results and total assets for the segments
      of the  Company as of and for the three  months  ended  March 31, 2009 and
      2008.  The  Company  uses  an  internal   reporting   system  to  generate
      information by operating  segment.  Estimates and allocations are used for
      noninterest expenses and income taxes. The Company uses a matched maturity
      funding concept to allocate  interest expense to First Litchfield  Leasing
      Corporation. The matched maturity funding concept utilizes the origination
      date and the maturity  date of the lease to assign an interest  expense to
      each lease.


                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                    March 31, 2009
                                         -----------------------------------------------------------------------
                                           Community                            Elimination         Consolidated
                                            Banking            Leasing            Entries               Total
                                         -------------      -------------      -------------       -------------
<S>                                      <C>                <C>                <C>                 <C>

Net interest income                      $   3,699,571      $     272,996      $          --       $   3,972,567
Provision for credit losses                    233,574             36,426                 --             270,000
                                         -------------      -------------      -------------       -------------

Net interest income after provision          3,465,997            236,570                 --           3,702,567
Noninterest income                             814,046                 --                 --             814,046
Noninterest expense                          3,935,944             86,935                 --           4,022,879
                                         -------------      -------------      -------------       -------------

Income before income taxes                     344,099            149,635                 --             493,734
Income tax provision                            20,981             48,933                 --              69,914
                                         -------------      -------------      -------------       -------------

Net income                               $     323,118      $     100,702      $          --       $     423,820
                                         =============      =============      =============       =============

Total assets as of March 31, 2009        $ 561,220,666      $  31,369,892      $ (42,305,871)      $ 550,284,687
                                         =============      =============      =============       =============

<CAPTION>
                                                                Three Months Ended
                                                                  March 31, 2008
                                         -----------------------------------------------------------------------
                                           Community                            Elimination         Consolidated
                                            Banking            Leasing            Entries               Total
                                         -------------      -------------      -------------       -------------
<S>                                      <C>                <C>                <C>                 <C>
Net interest income                      $   3,444,275      $     133,114      $          --       $   3,577,389
Provision for credit losses                     42,987             32,013                 --              75,000
                                         -------------      -------------      -------------       -------------

Net interest income after provision          3,401,288            101,101                 --           3,502,389
Noninterest income                             856,022                 --                 --             856,022
Noninterest expense                          3,706,383             92,660                 --           3,799,043
                                         -------------      -------------      -------------       -------------

Income before income taxes                     550,927              8,441                 --             559,368
Income tax provision                            58,640              2,205                 --              60,845
                                         -------------      -------------      -------------       -------------

Net income                               $     492,287      $       6,236      $          --       $     498,523
                                         =============      =============      =============       =============

Total assets as of March 31, 2008        $ 556,409,543      $  14,865,306      $ (37,249,245)      $ 534,025,604
                                         =============      =============      =============       =============
</TABLE>

13.   Effective  January 1, 2008,  the Company  adopted  Statement  of Financial
      Accounting  Standards ("SFAS") No. 157, "Fair Value  Measurements"  ("SFAS
      157") which provides a framework for measuring and  disclosing  fair value
      under  generally  accepted  accounting   principles.   SFAS  157  requires
      disclosures  about the fair value of assets and liabilities  recognized in
      the balance sheet in periods  subsequent to initial  recognition,  whether
      the   measurements   are  made  on  a   recurring   basis  (for   example,
      available-for-sale  investment securities) or on a nonrecurring basis (for
      example, impaired loans).

      Effective  January 1,  2009,  the  Company  adopted  Financial  Accounting
      Standards Board Staff Position ("FSP") No. 157-2,  "Effective Date of FASB
      Statement   No.   157,"  for   non-financial   assets  and   non-financial
      liabilities.

      SFAS 157 defines fair value as the  exchange  price that would be received
      for an asset or paid to  transfer  a  liability  (an  exit  price)  in the
      principal  or most  advantageous  market for the asset or  liability in an
      orderly  transaction  between market participants on the measurement date.
      SFAS 157 also  establishes a fair value hierarchy which requires an entity
      to  maximize  the  use  of  observable  inputs  and  minimize  the  use of
      unobservable  inputs when  measuring  fair value.  The standard  describes
      three levels of inputs that may be used to measure fair value:


                                       15
<PAGE>

      Level  1    Quoted  prices  in  active  markets  for  identical  assets or
                  liabilities. Level 1 assets include debt and equity securities
                  that are traded in an active exchange market,  as well as U.S.
                  Treasury  securities,  that are highly liquid and are actively
                  traded in over-the-counter markets.

      Level 2     Observable  inputs  other than  Level 1 prices  such as quoted
                  prices for similar  assets or  liabilities;  quoted  prices in
                  markets  that  are  not  active;  or  other  inputs  that  are
                  observable or can be  corroborated  by observable  market data
                  for  substantially the full term of the assets or liabilities.
                  Level 2 assets and  liabilities  include debt  securities with
                  quoted   prices   that  are  traded   less   frequently   than
                  exchange-traded  instruments whose value is determined using a
                  pricing model with inputs that are observable in the market or
                  can be derived  principally from or corroborated by observable
                  market  data.  This  category  generally  includes  other U.S.
                  Government  and agency  mortgage-backed  and debt  securities,
                  state and  municipal  obligations,  corporate and other bonds,
                  and equity  securities  quoted in markets that are not active.
                  Also    included    are   interest    rate   swaps,    certain
                  collateral-dependent impaired loans and foreclosed property.

      Level 3     Unobservable  inputs that are supported by little or no market
                  activity  and that are  significant  to the fair  value of the
                  assets or liabilities.  Level 3 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.  For example,  this category could include certain
                  private equity investments,  and certain  collateral-dependent
                  impaired loans.

      The following table details the financial  instruments that are carried at
fair value and measured at fair value on a recurring  basis as of March 31, 2009
and December 31, 2008 and  indicates  the fair value  hierarchy of the valuation
techniques utilized by the Company to determine fair value:

                Fair Value Measurements at March 31, 2009, Using

<TABLE>
<CAPTION>
                                                           Quoted Prices in                             Significant
                                           March          Active Markets for      Significant Other     Unobservable
                                         31, 2009          Identical Assets       Observable Inputs        Inputs
                                           Total               (Level 1)              (Level 2)          (Level 3)
                                       -------------     -------------------      -----------------     -------------
<S>                                    <C>                  <C>                      <C>                <C>
Assets:
   Available for sale securities       $ 115,129,861        $   5,151,643            $ 109,978,218      $          --
                                       =============        =============            =============      =============

Liabilities:
   Interest rate swaps                 $     279,717        $          --            $     279,717      $          --
                                       =============        =============            =============      =============
</TABLE>

               Fair Value Measurements at December 31, 2008, Using

<TABLE>
<CAPTION>
                                                          Quoted Prices in                              Significant
                                         December        Active Markets for       Significant Other     Unobservable
                                         31, 2008         Identical Assets        Observable Inputs        Inputs
                                           Total              (Level 1)               (Level 2)          (Level 3)
                                       -------------     -------------------      -----------------     -------------
<S>                                    <C>                  <C>                      <C>                <C>
Assets:
    Available for sale securities      $ 113,486,201        $   5,188,571            $ 108,297,630      $          --
                                       =============        =============            =============      =============

Liabilities:
    Interest rate swaps                $          --        $          --            $          --      $          --
                                       =============        =============            =============      =============
</TABLE>

      As of March 31, 2009 and December 31, 2008, U.S.  Treasury  securities and
      one equity  security,  with carrying  values of $5,151,643 and $5,188,571,
      respectively,  are the only  assets  whose fair  values are  measured on a
      recurring basis using Level 1 inputs (active market quotes).


                                       16
<PAGE>

      The fair values of U. S. Government and agency mortgaged backed securities
      and debt  securities,  State and Municipal  obligations,  trust  preferred
      securities,  and certain  equity  securities  are  measured on a recurring
      basis,  using  Level  2  inputs  of  observable  market  data  on  similar
      securities.  As of March 31, 2009 and  December  31,  2008,  the  carrying
      values  of  these  securities   totaled   $109,978,218  and  $108,297,630,
      respectively.

      Interest  rate swaps are reported at fair value  utilizing  Level 2 inputs
      obtained from third parties to value interest rate swaps.  Fair values are
      compared to other independent third party values for reasonableness.

      The  following  tables detail the assets and  liabilities  carried at fair
      value and measured at fair value on a  nonrecurring  basis as of March 31,
      2009 and December  31, 2008 and  indicate the fair value  hierarchy of the
      valuation techniques utilized by the Company to determine the fair value:

<TABLE>
<CAPTION>
                                                                          March 31, 2009
                                          -----------------------------------------------------------------------------
                                                              Quoted Prices in        Significant          Significant
                                              Balance        Active Markets for       Observable          Unobservable
                                               as of          Identical Assets          Inputs               Inputs
                                          March 31, 2009         (Level 1)             (Level 2)            (Level 3)
                                          --------------     ------------------     --------------       --------------
<S>                                       <C>                  <C>                  <C>                  <C>
Financial assets held at fair value
 Foreclosed Property (1)                  $      475,000       $           --       $      475,000       $           --
                                          ==============       ==============       ==============       ==============
 Impaired Loans (1)                       $    5,473,572       $           --       $           --       $    5,473,572
                                          ==============       ==============       ==============       ==============
</TABLE>

      (1)   Represents   carrying  value  and  related   write-downs  for  which
            adjustments are based on the appraised value.

<TABLE>
<CAPTION>
                                                                        December 31, 2008
                                          -----------------------------------------------------------------------------
                                                              Quoted Prices in        Significant          Significant
                                              Balance        Active Markets for       Observable          Unobservable
                                               as of          Identical Assets          Inputs               Inputs
                                        December 31, 2008         (Level 1)             (Level 2)            (Level 3)
                                        -----------------    ------------------     --------------       --------------
<S>                                       <C>                  <C>                  <C>                  <C>
Financial assets held at fair value
 Foreclosed Property (1)                  $           --       $           --       $           --       $           --
                                          ==============       ==============       ==============       ==============
 Impaired Loans (1)                       $    3,271,452       $           --       $      694,650       $    2,576,802
                                          ==============       ==============       ==============       ==============
</TABLE>

      (1)   Represents   carrying  value  and  related   write-downs  for  which
            adjustments are based on the appraised value.

      The Company has no other  assets or  liabilities  carried at fair value or
      measured at fair value on a nonrecurring basis.

14.   Interest Rate Swaps and Derivative Instruments

      The Company manages its interest rate risk by using derivative instruments
      in the form of interest rate swaps  designed to reduce  interest rate risk
      by effectively  converting a portion of floating rate debt into fixed rate
      debt. This action reduces the Company's risk of incurring  higher interest
      costs in  periods of rising  interest  rates.  On  February  2, 2009,  the
      Company  entered into two interest rate swap  agreements  through March of
      2014 and 2019,  respectively;  however,  the  settlements  under the swaps
      commenced March 30, 2009. Payments under the swap agreements will continue
      on the  30th of each  quarter  end.  The  Company  is  accounting  for the
      interest rate swap  agreements as effective  cash flow hedges (see Notes 4
      and 13). The notional principal amounts of these swaps were $6,800,000 and
      $3,000,000  and the  variable  interest  rate amounts on related debt were
      swapped for effective fixed rates of 5.79% and 4.86%, respectively.  These
      swaps are designated as cash flow hedges and qualify for hedge  accounting
      treatment under SFAS No 133,  "Accounting  for Derivative  Instruments and
      Hedging Activities" (SFAS No 133').

      In accordance with SFAS No 133, the Company's  derivative  instruments are
      recorded as assets or  liabilities  at fair  value.  Changes in fair value
      derivatives  that have been designated as cash flow hedges


                                       17
<PAGE>

      are included in "Unrealized  losses on cash flow hedges" as a component of
      other  comprehensive  income to the  extent of the  effectiveness  of such
      hedging  instruments.  Any ineffective portion of the change in fair value
      of  the  designated   hedging   instruments   would  be  included  in  the
      Consolidated  Statements of Income in interest (income) expense.  No hedge
      ineffectiveness on cash flow hedges was recognized during the three months
      ended March 31, 2009, and Management  does not anticipate to recognize any
      throughout the terms of the swaps.  Gains and losses are reclassified from
      accumulated other comprehensive  income to the Consolidated  Statements of
      Income in the period the hedged transaction affects earnings.

      Amounts  reported in  accumulated  other  comprehensive  income related to
      derivatives will be reclassified to interest expense as interest  payments
      are  made  on  the  Company's   variable-rate   debt.   Amounts  in  other
      comprehensive  income will be reclassified  into interest expense over the
      term of the swap agreements to achieve the fixed rate on the debt.

      Over the next  twelve  months,  the  Company  estimates  that an  addition
      $166,767 will be reclassified as an increase to interest expense.

      The gross  carrying  values of the interest rate contracts as of March 31,
      2009  were  $279,717  and  were  recorded  in  other  liabilities  on  the
      Consolidated  Balance  Sheets.  For the three months ended March 31, 2009,
      the amount of loss  recognized on the effective  portion of these interest
      rate contracts in accumulated other comprehensive  income on the condensed
      Consolidated Balance Sheets was $184,613.  For the quarter ended March 31,
      2009, there were no losses on the effective portion of these interest rate
      contracts  reclassified from accumulated other  comprehensive  loss on the
      balance  sheet into  interest  expense on the  Consolidated  Statement  of
      Income. These interest rate swap agreements contain no credit-risk-related
      contingency  features.  Associated with these swaps, as of March 31, 2009,
      the Company was  required to post  collateral  with a fair value  totaling
      $300,000  to  cover  the  estimated  peak  exposure  of  these  swaps.  No
      additional collateral is or will be required to be posted.

15.   Recent Accounting Pronouncements

      Effective  January 1, 2008, the Company adopted the provisions of SFAS No.
      157,  "Fair  Value  Measurements,"  for  financial  assets  and  financial
      liabilities.  SFAS 157 defines  fair value,  establishes  a framework  for
      measuring  fair value in  generally  accepted  accounting  principles  and
      expands  disclosures about fair value  measurements.  Effective January 1,
      2009, Company adopted Financial  Accounting Standards Board Staff Position
      ("FSP")  No.  157-2,  "Effective  Date of FASB  Statement  No.  157,"  for
      non-financial assets and non-financial liabilities.

      In December 2007, the FASB issued SFAS No. 160, "Noncontrolling  Interests
      in Consolidated  Financial Statements - an amendment of ARB No. 51" ("SFAS
      160"). SFAS 160 establishes new accounting and reporting standards for the
      noncontrolling  interest in a subsidiary and for the  deconsolidation of a
      subsidiary.  Before this statement, limited guidance existed for reporting
      noncontrolling  interests (minority interest).  As a result,  diversity in
      practice  exists.  In  some  cases  minority  interest  is  reported  as a
      liability and in others it was reported in the mezzanine  section  between
      liabilities and equity. Specifically, SFAS 160 requires the recognition of
      a   noncontrolling   interest   (minority   interest)  as  equity  in  the
      consolidated  financials statements and separate from the parent's equity.
      The amount of net income attributable to the noncontrolling interest is to
      be  included  in  consolidated  net  income  on the  face  of  the  income
      statement.  SFAS  160  clarifies  that  changes  in a  parent's  ownership
      interest in a subsidiary that do not result in deconsolidation  are equity
      transactions if the parent retains its controlling  financial interest. In
      addition,  this statement requires that a parent recognize gain or loss in
      net income when a subsidiary is deconsolidated. Such gain or loss is to be
      measured using the fair value of the  noncontrolling  equity investment on
      the  deconsolidation  date.  SFAS 160 also  includes  expanded  disclosure
      requirements  regarding the interests of the parent and its noncontrolling
      interests.  Earlier  adoption is prohibited.  The


                                       18
<PAGE>

      Company  adopted  SFAS  160  beginning  on  January  1,  2009 and with the
      adoption,  presented  $74,015  as  equity  in the  Company's  consolidated
      financial  statements  and  modified  the  presentation  of the  Company's
      financial  statements  as of March 31, 2009 and  December 31, 2008 and the
      periods ended March 31, 2009 and 2008.

      In June 2008,  the FASB  issued  FASB Staff  Position  (FSP) EITF  03-6-1,
      "Determining   Whether   Instruments   Granted  in   Share-Based   Payment
      Transactions Are  Participating  Securities."  This FSP addresses  whether
      instruments granted in share-based payment  transactions are participating
      securities  prior to vesting  and,  therefore,  need to be included in the
      earnings  allocation  in  computing  earnings  per share  (EPS)  under the
      two-class  method  described in paragraphs 60 and 61 of FASB Statement No.
      128,  Earnings per Share.  This FSP is effective for financial  statements
      issued for fiscal years  beginning  after  December 15, 2008,  and interim
      periods within those years.  All  prior-period EPS data presented shall be
      adjusted   retrospectively   (including   interim  financial   statements,
      summaries of earnings,  and selected  financial  data) to conform with the
      provisions of this FSP. Early  application  is not permitted.  The Company
      adopted the FSP for the quarter ended March 31, 2009; the adoption of this
      FSP  did  not  have  a  significant  effect  on  the  Company's  financial
      statements.

      In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
      Instruments  and Hedging  Activities -- an amendment of FASB Statement No.
      133" ("SFAS No. 161").  SFAS No. 161 requires  enhanced  disclosures about
      how  and  why  an  entity  uses  derivative  instruments,  how  derivative
      instruments and related items are accounted for under SFAS No. 133 and how
      derivative  instruments  and  related  hedged  items  affect  an  entity's
      financial  position,  financial  performance  and cash flows.  The Company
      adopted this standard  January 1, 2009. SFAS No. 161 enhanced  disclosures
      as required under SFAS No. 161 and are included in the Company's financial
      statements for March 31, 2009.

      In January  2009,  the FASB  issued FASB Staff  Position  ("FSP") No. EITF
      99-20-1,  "Amendments to the Impairment Guidance of EITF Issue No. 99-20,"
      ("FSP No. EITF 99-20-1"), which amends the impairment guidance in Emerging
      Issues  Task Force  ("EITF")  Issue No.  99-20,  "Recognition  of Interest
      Income and  Impairment on Purchased  Beneficial  Interests and  Beneficial
      Interests  that  Continue  to  be  Held  by a  Transferor  in  Securitized
      Financial  Assets,"  ("EITF No.  99-20").  The FSP  revises  EITF  99-20's
      impairment  guidance for beneficial  interests to make it consistent  with
      the  requirements  of FASB  Statement  No.  115,  "Accounting  for Certain
      Investments  in  Debt  and  Equity   Securities,"  ("SFAS  No.  115")  for
      determining  whether an impairment of other debt and equity securities has
      occurred. The impairment model in SFAS No. 115 enables greater judgment to
      be exercised in determining whether an OTTI loss needs to be recorded. The
      impairment   model   previously   provided  for  in  EITF  99-20   limited
      management's  use of judgment in applying the impairment  model.  FSP EITF
      No.  99-20-1 was effective as of January 1, 2009.  The adoption of FSP No.
      EITF  No.  99-20-1  did  not  have a  material  impact  on  the  Company's
      consolidated financial statements.

      In April 2009, the FASB issued Staff Position No. FAS 157-4,  "Determining
      Fair  Value  When the  Volume  and  Level  of  Activity  for the  Asset or
      Liability Have Significantly  Decreased and Identifying  Transactions That
      Are Not Orderly,"  ("FSP  157-4").  This FSP addresses  concerns that FASB
      Statement  No.  157,  Fair Value  Measurements,  emphasized  the use of an
      observable market transaction even when that transaction may not have been
      orderly or the market for that  transaction may not have been active.  FSP
      157-4 provides additional guidance on: (a) determining when the volume and
      level of activity for the asset or liability has significantly  decreased;
      (b) identifying  circumstances in which a transaction is not orderly;  and
      (c) understanding the fair value measurement  implications of both (a) and
      (b).  The  effective  date of  disclosures  for this new  standard  is for
      interim and annual  reporting  periods  ending after June 15,  2009,  with
      early adoption  permitted for periods ending after March 15, 2009, only if
      this FSP is  adopted  at the same time as FSP No.  FAS 115-2 and FAS 124-2
      and FSP No. FAS 107-1 and


                                       19
<PAGE>

      APB 28-1.  The Company is  evaluating  the impact of this new standard and
      will adopt this new standard for the three months ended June 30, 2009.

      In April 2009, the FASB issued Staff Position No. FAS 115-2 and FAS 124-2,
      "Recognition and Presentation of Other-Than-Temporary  Impairments," ("FSP
      115-2 and 124-2").  This FSP amends the OTTI guidance for debt  securities
      to make the guidance more  operational and to improve the presentation and
      disclosure  of OTTI in the  financial  statements.  The  most  significant
      change the FSP brings is a revision to the amount of  other-than-temporary
      loss of a debt  security  recorded  in  earnings.  The  effective  date of
      disclosures  for this new  standard is for  interim  and annual  reporting
      periods  ending after June 15, 2009,  with early  adoption  permitted  for
      periods  ending after March 15,  2009,  only if this FSP is adopted at the
      same time as FSP No.  FAS 157-4  and FSP No.  FAS 107-1 and APB 28-1.  The
      Company is evaluating  the impact of this new standard and will adopt this
      new standard for the three months ended June 30, 2009.

      In April 2009,  the FASB issued  Staff  Position  No.  107-1 and APB 28-1,
      "Interim  Disclosures  about Fair Value of Financial  Instruments,"  ("FSP
      107-1"  and  "APB  28-1").   This  FSP  amends  FASB  Statement  No.  107,
      "Disclosures  about  Fair  Value of  Financial  Instruments,"  to  require
      disclosures  about  fair  value  of  financial   instruments  for  interim
      reporting  periods  of  publicly  traded  companies  as well as in  annual
      financial  statements.  This FSP also amends APB Opinion No. 28,  "Interim
      Financial Reporting," to require those disclosures in summarized financial
      information  at  interim   reporting   periods.   The  effective  date  of
      disclosures  for this new  standard is for  interim  and annual  reporting
      periods  ending after June 15, 2009,  with early  adoption  permitted  for
      periods  ending after March 15,  2009,  only if this FSP is adopted at the
      same time as FSP No. FAS 115-2 and FAS 124-2 and FSP No.  FAS  157-4.  The
      Company is evaluating  the impact of this new standard and will adopt this
      new standard for the three months ended June 30, 2009.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

First Litchfield Financial  Corporation (the "Company"),  a Delaware corporation
formed in 1988, is the one-bank  holding  company for The First National Bank of
Litchfield  (the "Bank"),  a national bank supervised and examined by the Office
of the  Comptroller  of the  Currency  (the  "OCC").  The Bank is the  Company's
primary subsidiary and only source of income.  The Bank has three  subsidiaries,
The Lincoln Corporation and Litchfield Mortgage Service  Corporation,  which are
Connecticut  corporations,  and First  Litchfield  Leasing  Corporation  ("First
Litchfield  Leasing"),  which is a  Delaware  corporation.  The  purpose  of The
Lincoln Corporation is to hold property such as real estate,  personal property,
securities,  or other  assets,  acquired  by the  Bank  through  foreclosure  or
otherwise  to  compromise  a  doubtful  claim  or  collect  a  debt   previously
contracted. The purpose of Litchfield Mortgage Service Corporation is to operate
as a passive  investment company in accordance with Connecticut law. The purpose
of First  Litchfield  Leasing  is to provide  equipment  financing  and  leasing
products to complement the Bank's array of commercial products.

Both the Company and the Bank are headquartered in Litchfield,  Connecticut. The
Bank is a full-service  commercial bank serving both  individuals and businesses
generally  within  Litchfield  County  Connecticut.  Deposits  are insured up to
specific  limits of the Federal Deposit  Insurance Act by the Deposit  Insurance
Fund, which is administered by the Federal Deposit  Insurance  Corporation.  The
Bank's lending  activities  include loans secured by residential  and commercial
mortgages.  Other  loan  products  include  consumer  and  business  installment
lending,  as well as other  secured  and  unsecured  lending.  The Bank has nine
banking  locations  located  in the  towns of  Canton,  Torrington,  Litchfield,
Washington,  Marble Dale, Goshen, Roxbury and New Milford, Connecticut. In 1975,
the Bank was  granted  Trust  powers by the OCC.  The  Bank's  Trust  Department
provides trust and fiduciary  services to individuals,  nonprofit  organizations
and  commercial


                                       20
<PAGE>

customers.  Additionally,  the Bank offers nondeposit retail investment products
such as mutual  funds,  annuities and insurance  through its  relationship  with
Infinex Investments, Inc.

On June 26, 2003, the Company formed First Litchfield  Statutory Trust I for the
purpose of issuing  trust  preferred  securities  and  investing the proceeds in
subordinated  debentures issued by the Company,  and on June 26, 2003, the first
series of trust preferred  securities were issued.  During the second quarter of
2006, the Company formed a second  statutory trust,  First Litchfield  Statutory
Trust II ("Trust II").  The Company owns 100% of Trust II's common stock.  Trust
II exists for the sole purpose of issuing  trust  securities  and  investing the
proceeds in subordinated  debentures issued by the Company.  In June 2006, Trust
II issued its first series of trust preferred securities.

The following  discussion and analysis of the Company's  consolidated  financial
condition  and  results of  operations  should be read in  conjunction  with the
consolidated  financial  statements  and  notes  to the  consolidated  financial
statements.

FINANCIAL CONDITION

Total assets as of March 31, 2009 were $550,284,687, an increase of $18,027,080,
or 3.39% from year-end 2008 total assets of $532,257,607.

Net loans and  leases  increased  $26,114,051  or 7.3%  over the  year-end  2008
amount. Net loans and leases as of March 31, 2009 were $392,506,130, as compared
to the  year-end  2008  level  of  $366,392,079.  Consistent  with  Management's
strategy to migrate to a more profitable loan  composition,  commercial loan and
lease  growth  was  strong  during the first  quarter  of 2009.  Leases,  net of
unearned  income,  were  $28,349,650 at March 31, 2009, which was an increase of
$8,563,780 or 43.28% from the year-end 2008 balance of  $19,785,870.  The growth
in the  leasing  portfolio  is in  relatively  short-term  equipment  financing.
Commercial  mortgages  totaled  $76,397,014  at March  31,  2009,  which  was an
increase  of  $8,942,089  or 13.26% from  year-end  2008.  Growth in  commercial
mortgages has been in fixed and variable  rate products to commercial  customers
located  in our  traditional  and  contiguous  markets.  Construction  mortgages
totaled  $41,524,670 as compared to the year-end balance of $38,153,503.  Growth
in this portfolio during the first quarter was in commercial construction loans.
The  residential  mortgage loan  portfolio  totaled  $195,574,353,  which was an
increase of $3,013,245  from year-end 2008.  Much of this growth was in the home
equity loans.

As of March 31, 2009, the securities portfolio totaled $115,145,945, as compared
to the year-end 2008 balance of $113,502,751.  During the first quarter of 2009,
approximately  $11 million in U.S.  Government  agency bonds were called.  These
bonds were replaced with  mortgage-backed  securities  with  characteristics  of
shorter duration and improved liquidity.

At year-end 2008, the due from broker for security sales totaled $9,590,823,  as
a result of a  security  traded  before  December  31,  2008 with  proceeds  not
received  until January 2009.  There were no similar  transactions  at March 31,
2009.

Cash and cash  equivalents  totaled  $9,634,617,  as  compared to the balance of
$9,238,783 at year-end  2008.  Cash and cash  equivalents  is comprised of vault
cash,  Federal  funds  sold,  balances  at  correspondent  banks and the Federal
Reserve Bank.

As of March 31, 2009,  the Company had a balance of $475,000 in foreclosed  real
estate. There was no similar amount at year-end 2008.

Total  liabilities were $517,954,640 as of March 31, 2009, which was an increase
of $18,164,297 from total liabilities of $499,790,343 as of year-end 2008. Total
deposits  increased by $16,655,263,  or 4.85% from their year-end  levels.  Time
certificates of deposit totaled  $140,986,961 as of March 31, 2009, which was an


                                       21
<PAGE>

increase of 15.46%,  or  $18,876,100  from year-end  2008.  The increase in time
deposits is  reflective of the  customer's  desire for yield and the shifting of
money market  deposits into short term  certificates  of deposit.  Additionally,
growth has also been in the Bank's CDARs  deposits,  which provides FDIC deposit
insurance,  beyond the $250,000 limit.  Savings deposits totaled  $65,303,876 at
March 31, 2009 which was an increase of 11.47% from the year-end  2008  balance.
Growth in savings  deposits has been in  traditional  savings and  municipal NOW
accounts.  Money market deposits decreased by $8,775,606,  or 9.43%, as a result
of  customers  seeking  higher  rates  as  well  to  lock  in  those  rates  via
certificates of deposit.

As of March 31, 2009,  repurchase agreements with customers totaled $19,094,439,
which was an increase of 4.78% from the year-end  2008  balance.  Because  these
accounts  represent  overnight  investments  by commercial  and  municipal  cash
management  customers,  fluctuations  in the  balances  of  these  accounts  are
reflective of the temporary  nature of these funds.  During the first quarter of
2009, advances under Federal Home Loan Bank borrowings increased by $17,192,000,
while repurchase agreements with financial institutions decreased by $3,950,000.
The overall  increase in  wholesale  borrowing  is a result of the growth in the
loan and lease portfolio during the first quarter. As mentioned previously,  the
growth in the loan and lease  portfolio  totaled  $26.1 million and outpaced the
$16.7 million in deposit growth.

RESULTS OF  OPERATIONS-  THREE  MONTHS  ENDED MARCH 31,  2009  COMPARED TO THREE
MONTHS ENDED MARCH 31, 2008

Summary

Net  income  available  to common  shareholders  for the first  quarter  of 2009
totaled  $266,250  versus net income of $498,523 for the first  quarter of 2008.
Basic and diluted net income per common share for the first quarter of 2009 were
both $.11,  compared to basic and diluted income per share of $.21 for the first
quarter of 2008. The decrease in net income available to common  shareholders is
due primarily to increases in the provision for loans and lease losses and other
noninterest expenses.  Additionally contributing to the decrease is the dividend
payable on preferred shares.

Net Interest Income

Net interest income is the largest  component of the Company's  operations.  Net
interest  income is defined as the  difference  between  interest  and  dividend
income from earning  assets,  primarily  loans and  investment  securities,  and
interest expense on deposits and borrowed money.  Interest income is the product
of the average balances  outstanding on loans,  securities and  interest-bearing
deposit  accounts  multiplied by their  effective  yields.  Interest  expense is
similarly  calculated as the result of the average balances of  interest-bearing
deposits and borrowed funds multiplied by the average rates paid on those funds.
Other  components  of  operating  income  are the  provision  for  loan  losses,
noninterest income such as service charges and trust fees,  noninterest expenses
and income taxes.

Net interest income on a fully tax-equivalent basis is comprised of the
following for the three months ended March 31,

                                              2009              2008
                                          -----------       -----------
      Interest and dividend income        $ 6,561,229       $ 7,256,436
      Tax-equivalent adjustments (1)          103,798           153,604
      Interest expense                     (2,588,662)       (3,679,047)
                                          -----------       -----------
      Net interest income                 $ 4,076,365       $ 3,730,993
                                          ===========       ===========

(1)   Interest  income is presented on a  tax-equivalent  basis which reflects a
      federal tax rate of 34% for all periods presented.


                                       22
<PAGE>

The following table presents on a tax-equivalent  basis,  the Company's  average
balance sheet amounts (computed on a daily basis), net interest income, interest
rates,  interest spread and net interest margin for the three months ended March
31, 2009 and 2008. Average loans outstanding include nonaccruing loans.

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL

<TABLE>
<CAPTION>
                                             Three months ended March 31, 2009            Three months ended March 31, 2008
                                        -----------------------------------------    ------------------------------------------
                                                             Interest                                   Interest
                                           Average           Earned/      Yield/        Average          Earned/         Yield/
                                           Balance            Paid         Rate         Balance           Paid           Rate
<S>                                     <C>               <C>               <C>      <C>               <C>                <C>
Assets
Interest Earning Assets:
Loans and leases                        $ 379,642,000     $   5,393,138     5.68%    $ 334,537,000     $   5,528,611      6.61%
Investment securities                     117,522,000         1,257,051     4.28%      145,219,000         1,834,637      5.05%
Other interest earning assets               4,486,000            14,838     1.32%        6,302,000            46,792      2.97%
                                        -------------     -------------              -------------     -------------
Total interest earning assets             501,650,000         6,665,027     5.31%      486,058,000         7,410,040      6.10%
                                        -------------     -------------    -----     -------------     -------------     -----
Allowance for loan and
 lease losses                              (3,723,000)                                  (2,173,000)
Cash and due from banks                    13,566,000                                   11,346,000
Premises and equipment                      7,333,000                                    7,726,000
Net unrealized losses on
 securities                                  (255,000)                                    (673,000)
Other assets                               20,387,000                                   15,978,000
                                        -------------                                -------------
Total Average Assets                    $ 538,958,000                                $ 518,262,000
                                        =============                                =============

Liabilities and Shareholders' Equity
Interest Bearing Liabilities:
Savings deposits                        $  63,882,000           111,497     0.70%    $  58,398,000           189,676      1.30%
Money Market deposits                      88,926,000           280,172     1.26%       82,963,000           456,767      2.20%
Time deposits                             133,130,000           885,931     2.66%      134,172,000         1,452,676      4.33%
Borrowed funds                            143,879,000         1,311,062     3.64%      144,321,000         1,579,928      4.38%
                                        -------------     -------------              -------------     -------------
Total interest bearing liabilities        429,817,000         2,588,662     2.41%      419,854,000         3,679,047      3.51%
                                                          -------------    -----                       -------------     -----
Demand deposits                            68,383,000                                   64,714,000
Other liabilities                           8,087,000                                    4,834,000
Shareholders' Equity                       32,671,000                                   28,860,000
                                        -------------                                -------------
Total liabilities and equity            $ 538,958,000                                $ 518,262,000
                                        =============                                =============

Net interest income                                       $   4,076,365                                $   3,730,993
                                                          =============                                =============
Net interest spread                                                         2.90%                                         2.59%
                                                                           =====                                         =====
Net interest margin                                                         3.25%                                         3.07%
                                                                           =====                                         =====
</TABLE>


                                       23
<PAGE>

RATE/VOLUME ANALYSIS

The following table, which is presented on a tax-equivalent  basis, reflects the
changes for the three  months  ended  March 31, 2009 when  compared to the three
months  ended March 31, 2008 in net  interest  income  arising  from  changes in
interest  rates and from asset and liability  volume mix. The change in interest
attributable  to both rate and volume has been  allocated  to the changes in the
rate and the volume on a pro rata basis.

<TABLE>
<CAPTION>
                                                   03/31/09 Compared to 03/31/08
                                                     Increase (Decrease) Due to
                                                     --------------------------

                                              Volume            Rate            Total
                                            -----------     -----------     -----------
<S>                                         <C>             <C>             <C>
      Interest earned on:
      Loans and leases                      $   694,143     $  (829,616)    $  (135,473)
      Investment securities                    (379,656)       (197,930)       (577,586)
      Other interest earning assets             (10,928)        (21,026)        (31,954)
                                            -----------     -----------     -----------
      Total interest earning assets             303,559      (1,048,572)       (745,013)
                                            -----------     -----------     -----------

      Interest paid on:
      Deposits                                   76,526        (898,045)       (821,519)
      Borrowed money                             (4,853)       (264,013)       (268,866)
                                            -----------     -----------     -----------
      Total interest bearing liabilities         71,673      (1,162,058)     (1,090,385)
                                            -----------     -----------     -----------

      Increase in net interest income       $   231,886     $   113,486     $   345,372
                                            ===========     ===========     ===========
</TABLE>

Tax-equivalent  net  interest  income  for the  first  quarter  of 2009  totaled
$4,076,365,  an increase of $345,372,  or 9.13% from the first  quarter of 2008.
Both the increase in the volume of earning assets as well as increased  interest
margin  contributed  to the  improvement in net interest  income.  The effect of
increased volume of earning assets over interest bearing  liabilities  increased
net interest income by $231,886. Also, the Company was able to decrease its cost
of deposit  interest  to a greater  degree than the  interest  earned on earning
assets which resulted in $113,486 in additional net interest income.

Average earning assets for the first quarter of 2009 totaled $501,650,000, which
was  $15,592,000  or 3.21%  higher  than  average  earning  assets for the first
quarter of 2008 which totaled  $486,058,000.  This  increase in earning  assets,
contributed to an additional $303,559 in net interest income.  Average loans and
leases increased by $45,105,000,  or 13.48%, while average investments decreased
by  $27,697,000  or 19.07%.  The  increase in loans and leases came from organic
growth  in  commercial  leasing  and  mortgage  lending.  The  decrease  in  the
securities  portfolio is the result of the strategy to change the mix of earning
assets  from  investments  to loans.  The mix of  earning  assets  for the first
quarter of 2009 was 76% loans to 23%  investments  versus the first quarter 2008
mix of 69% loans to 30% investments.

The tax  equivalent net interest  margin  improved 18 basis points from 3.07% in
the first quarter of 2008 to 3.25% for the first quarter of 2009.  Funding costs
decreased by 110 basis points while the tax  equivalent  yield on earning assets
decreased by 79 basis points.  The continued low interest rate  environment  has
allowed  management to decrease its deposit  rates over the last year.  Although
yields  on  earning   assets  have  been  subject  to  similar   declines,   the
aforementioned  strategy to shift to a more profitable mix of earning assets has
offset some of this  decline.  Additionally,  many interest  earning  assets are
priced off of longer market indices,  which are not as dramatically  impacted by
decreases in short term rates.  Retail  deposits  are the primary  source of the
Company's funding; therefore, competition for these deposits remains the biggest
threat to the net interest margin.


                                       24
<PAGE>

Provision for Loan and Lease Losses

The  provision  for loan and lease losses for the first  quarter of 2009 totaled
$270,000,  which is an increase of $195,000 from the first quarter of 2008.  The
provision  for  loan and  lease  losses  is  determined  quarterly  based on the
calculation of the allowance for loan and lease losses.  (See  discussion of the
Allowance for Loan and Lease Losses.)

During the first  quarter of 2009,  the  Company  recorded  net  charge-offs  of
$374,996  compared to first quarter 2008 net charge-offs of $31,129.  The change
in the  level  of  charge-offs  from  2008 to 2009  is due to  residential  loan
charge-offs  in 2009 and higher levels of charge-off  activity from the consumer
automobile loan  portfolio,  which the Bank purchased in 2006. The change in the
level  of  charge-offs  from  2008 to 2009 is  considered  by  Management  to be
reflective of a weakening consumer credit environment.

Noninterest Income

Noninterest income for the first quarter of 2009 totaled $814,046,  versus first
quarter 2008 income of $856,022. The decrease in noninterest income is primarily
attributable  to lower  levels of fee income  from the  Bank's  Trust and Wealth
Management activities.

Trust  income  totaled  $272,056,  compared  to first  quarter  2008  income  of
$339,524.  The decline from first quarter 2008 levels is due to market  declines
of assets  under  management.  Income  from  banking  service  charges  and fees
increased by $18,008, or 5.22%, from the first quarter of 2008. This increase is
due primarily to higher levels of deposit service  charges,  wire transfer,  and
master money interchange fees. Other noninterest  income totaled $82,088,  which
was an  increase  of $20,454,  or 33.19%  from the first  quarter of 2008.  This
increase is a result of income from the sale of  residential  mortgage  loans in
the secondary market.

Noninterest Expense

First quarter 2009 noninterest expense totaled $4,022,879,  increasing 5.89%, or
$223,836  from the first  quarter  2008  expense  of  $3,799,043.  Increases  in
noninterest  expenses  are  reflected  in benefits,  legal,  computer  services,
consulting  fees and expenses for the management of foreclosed  properties.  The
impact  of  these  increases  was  mitigated  by cost  containment  efforts  for
advertising, salaries, insurance, travel and memberships.

Other noninterest expenses totaled $733,995 which is an increase of $170,765, or
30.32% from the first quarter of 2008.  The majority of the increase is a result
of higher  2009 costs for FDIC  insurance,  exam and audit  fees  which  totaled
$213,601  above first quarter 2008 costs.  In addition to the already  increased
premiums for FDIC insurance,  the Company is aware of the proposed  increases to
the FDIC insurance  expense via a one-time  special  assessment later this year.
This assessment could  significantly  increase other noninterest expense for the
year.

Income Taxes

The first quarter 2009 provision for income taxes totaled  $69,914,  which is an
increase  of $9,069  or  14.91%  from the first  quarter  of 2008  provision  of
$60,845.  The  effective  tax  rate  for the  first  quarter  of 2009 was 14% as
compared  to 11% for the first  quarter  of 2008.  The higher tax rate is due to
decreased proportion of tax-exempt to taxable income in 2009.


                                       25
<PAGE>

LIQUIDITY

Management's  objective  is to ensure  continuous  ability to meet cash needs as
they arise.  Such needs may occur from time to time as a result of  fluctuations
in loan  demand  and the level of total  deposits.  Accordingly,  the Bank has a
liquidity  policy that provides  flexibility  to meet cash needs.  The liquidity
objective is achieved through the maintenance of readily  marketable  investment
securities as well as a balanced flow of asset maturities and prudent pricing on
loan and deposit products.

The Bank is a member of the Federal Home Loan Bank system, which provides credit
to its  member  banks.  This  enhances  the  liquidity  position  of the Bank by
providing a source of  available  overnight  as well as  short-term  borrowings.
Additionally, federal funds, borrowings through the use of repurchase agreements
and the sale of mortgage  loans in the  secondary  market are  available to fund
short-term cash needs. (See Note 6 to the Consolidated  Financial Statements for
information on Federal Home Loan Bank borrowings and repurchase agreements.)

As of March 31,  2009,  the Company had  $124,907,713  in loan  commitments  and
credit  lines  outstanding.  Because  some  commitments  are  expected to expire
without  being  drawn upon,  the total  commitment  amount does not  necessarily
represent  all future cash  requirements.  The funding of these  commitments  is
anticipated  to be met through  deposits,  loan and security  amortizations  and
maturities.  Management  believes  liquidity is adequate to meet its present and
foreseeable needs.

CAPITAL

Shareholders'  equity totaled  $32,330,047 as of March 31, 2009 as compared with
$32,467,264 as of December 31, 2008. The decrease in shareholders' equity is due
to the Company's  unrealized  loss on available for sale  securities,  and other
comprehensive  income charges related to the recognition of the unfunded pension
liability  and cash flow  hedges,  as well as common  and  preferred  dividends,
offset by net income. From a regulatory  perspective,  the capital ratios of the
Company  and the Bank place  each  entity in the  "well-capitalized"  categories
under applicable  regulations.  During the third and fourth quarters of 2008 the
Company  increased its investment in the Bank's equity by a total of $4,000,000.
During the first quarter of 2009,  the Company  increased its  investment in the
Bank's equity by an additional $4,000,000. These actions were executed to insure
the Bank maintained capital at levels considered to be  well-capitalized  by the
federal banking agency capital adequacy guidelines.

The various capital ratios of the Company and the Bank are as follows as of
March 31, 2009:

<TABLE>
<CAPTION>
                                         Well-Capitalized
                                          Capital Levels       The Company      The Bank
                                          --------------       -----------      --------
<S>                                           <C>                <C>             <C>
TIER 1:
      Leverage capital ratio                   5.00%              7.44%           6.65%

      Risk-based capital ratio                 6.00%             10.36%           9.26%

      Total risk-based capital ratio          10.00%             11.29%          10.20%
</TABLE>

Included in the  Company's  capital used to determine  these ratios at March 31,
2009 is $9.8 million  related to the Company's  investment  in First  Litchfield
Statutory Trust I and First Litchfield  Statutory Trust II, which is recorded as
subordinated debt in the Company's balance sheets at March 31, 2009 and December
31, 2008,  respectively.  Trust  preferred  securities are currently  considered
regulatory  capital for purposes of  determining  the  Company's  Tier I capital
ratios.  On March 1, 2005, the Board of Governors of the Federal Reserve System,
which is the Company's  banking  regulator,  approved final rules that allow for


                                       26
<PAGE>

the  continued  inclusion  of  outstanding  and  prospective  issuances of trust
preferred securities in regulatory capital subject to new, stricter limitations.
The Company has until March 31, 2011,  (previously  March 31, 2009), to meet the
new  limitations.  Management  does not  believe  these  final rules will have a
significant impact on the Company. On December 12, 2008 the Company participated
in the United States Department of the Treasury's Troubled Assets Relief Program
("TARP") Capital Purchase Program ("CPP".) CPP (also known as TARP capital), and
issued $10,000,000 of cumulative  perpetual  preferred stock with a common stock
warrant attached to the U. S. Treasury.  The Company's  purpose in participating
in the TARP CPP was to  insure  that the  Company  and the Bank  maintained  its
well-capitalized status given the uncertain economic environment.

On December  12, 2008,  under the TARP CPP,  the Company  sold 10,000  shares of
senior preferred stock to the U.S.  Treasury,  having a liquidation amount equal
to  $1,000  per  share,  or  $10,000,000.  Although  the  Company  is  currently
well-capitalized under regulatory guidelines, the Board of Directors believed it
was advisable to take advantage of the TARP CPP to raise  additional  capital to
ensure that during these  uncertain  times,  the Company is  well-positioned  to
support the Company's existing  operations as well as anticipated future growth.
Additional information concerning the TARP CPP is included in the Company's 2008
Form  10-K/A  Amendment  Number  One,  as  filed  with the  Securities  Exchange
Commission on April 23, 2009.

The  Company  expects  that it (and the  banking  industry  as a  whole)  may be
required by market  forces  and/or  regulation  to operate  with higher  capital
ratios than in the recent past. In addition,  as the cumulative dividend rate on
the senior  preferred  stock issued in the TARP CPP  increases  from 5% to 9% in
2013,  the Company will incur  increased  capital costs if the senior  preferred
stock is not  redeemed  at or prior to that  time.  Therefore,  in  addition  to
maintaining  higher levels of capital,  the Company's  capital  structure may be
subject  to  greater  variation  over  the  next few  years  than has been  true
historically.

CRITICAL ACCOUNTING POLICIES

In the ordinary course of business,  the Bank has made a number of estimates and
assumptions  relating  to the  reported  results  of  operations  and  financial
condition in preparing its financial  statements in conformity  with  accounting
principles  generally  accepted in the United States of America.  Actual results
could differ significantly from those estimates under different  assumptions and
conditions.

The Bank utilizes a loan and lease review and rating  process  which  classifies
loans and leases according to the Bank's uniform  classification system in order
to identify  potential  problem  loans and leases at an early  stage,  alleviate
weaknesses in the Bank's lending policies, oversee the individual loan and lease
rating system and ensure compliance with the Bank's underwriting, documentation,
compliance  and  administrative  policies.  Loans and  leases  included  in this
process  are  considered  by  management  as being in need of special  attention
because of some deficiency related to the credit or documentation, but which are
still considered  collectable and performing.  Such attention is intended to act
as a preventative measure and thereby avoid more serious problems in the future.

ALLOWANCE FOR LOAN AND LEASE LOSSES:

The  allowance  for loan and lease  losses  consists  of  specific,  general and
unallocated components.  The specific component relates to loans and leases that
are  classified  as  impaired.  For  impaired  loans and leases an  allowance is
established  when the discounted  cash flows (or collateral  value or observable
market price) of the impaired loan or lease is lower than the carrying  value of
that loan or lease. The general component covers  non-impaired  loans and leases
and is based on historical loss experience adjusted for qualitative  factors. An
unallocated  component is  maintained to cover  uncertainties  that could affect


                                       27
<PAGE>

management's  estimate or probable  losses.  The  unallocated  component  of the
allowance  reflects  the  margin  of  imprecision  inherent  in  the  underlying
assumptions.

The Bank makes  provisions  for loan and lease  losses on a  quarterly  basis as
determined by a continuing  assessment of the adequacy of the allowance for loan
and lease  losses.  The Bank  performs an ongoing  review of loans and leases in
accordance  with an  individual  loan and lease rating  system to determine  the
required  allowance  for loan and lease losses at any given date.  The review of
loans and  leases  is  performed  to  estimate  potential  exposure  to  losses.
Management's judgment in determining the adequacy of the allowance is inherently
subjective  and is  based  on an  evaluation  of the  known  and  inherent  risk
characteristics  and size of the loan and lease  portfolios,  the  assessment of
current  economic and real estate  market  conditions,  estimates of the current
value of underlying collateral,  past loan and lease loss experience,  review of
regulatory  authority  examination reports and evaluations of impaired loans and
leases, and other relevant factors.  Loans and leases,  including impaired loans
and leases,  are charged  against the  allowance  for loan and lease losses when
management  believes that the  uncollectibility  of principal is confirmed.  Any
subsequent  recoveries  are credited to the  allowance for loan and lease losses
when received.  In connection with the  determination  of the allowance for loan
and lease losses and the valuation of foreclosed real estate, management obtains
independent appraisals for significant properties, when considered necessary.

There were no material changes in loan or lease  concentrations or loan or lease
quality that had a significant effect on the allowance for loan and lease losses
calculation  at March 31, 2009. In addition,  there were no material  changes in
the estimation methods and assumptions used in the Company's  allowance for loan
and lease losses  calculation,  and there were no material  reallocations of the
allowance among different parts of the loan or lease portfolio.

At March 31, 2009, the allowance for loan and lease losses was equivalent to 52%
of total  non-performing  assets as  compared  with 66% of total  non-performing
assets at December 31, 2008. As of March 31, 2009,  non-performing assets, loans
and leases were  $6,944,607  and  represented  1.77% of total loans,  leases and
OREO.  As of  December  31,  2008,  non-performing  assets  and loans and leases
totaled  $5,639,735 and represented  1.52% of total loans,  leases and OREO. The
ratio of the  allowance for such loan and lease losses to total loans and leases
at March 31, 2009 and  December 31, 2008 was 0.91% and 1.00%  respectively.  The
ratio of the  allowance  for loan and  lease  losses  to  non-performing  assets
declined  over  the  first  quarter  of  2009  due  mainly  to the  increase  in
non-performing assets, however, the increase in those non-performing assets were
comprised of collateral-based  loans which did not require a specific allocation
of the  allowance  for loan and lease losses and  therefore did not result in an
increase to the  allowance.  Changes in the  allowance for loan and lease losses
for the three month periods ended March 31, 2009 and 2008 are as shown below:

<TABLE>
<CAPTION>
      For the three months ended March 31,                         2009            2008
                                                               -----------     -----------
<S>                                                            <C>             <C>
      Balance at beginning of the year                         $ 3,698,820     $ 2,151,622

      Provision for loan and lease losses                          270,000          75,000
      Loans and leases charged off                                (420,125)        (36,260)
      Recoveries of loans and leases previously charged-off         45,129           5,131
                                                               -----------     -----------

      Balance as of March 31,                                  $ 3,593,824     $ 2,195,493
                                                               ===========     ===========
</TABLE>

The following table summarizes the Bank's Other Real Estate Owned ("OREO"), past
due  in  excess  of  90  days  and  non-accrual  loans  and  leases,  and  total
nonperforming assets as of March 31, 2009 and December 31, 2008.


                                       28
<PAGE>


<TABLE>
<CAPTION>
                                                     March 30, 2009    December 31, 2008
                                                     --------------    -----------------
<S>                                                   <C>                <C>
Nonaccrual loans and leases                           $  6,469,607       $  5,639,735

Other real estate owned                                    475,000                 --
                                                      ------------       ------------

Total nonperforming assets                            $  6,944,607       $  5,639,735
                                                      ============       ============

Loans and leases past due in excess of 90 days and
 accruing interest                                    $         --       $     19,603
                                                      ============       ============
</TABLE>

POTENTIAL PROBLEM LOANS

As of March 31, 2009,  there were five loans totaling $1.5 million which are not
disclosed above which cause  Management to have concern as to the ability of the
borrowers to comply with the present loan repayment  terms.  The Bank's carrying
value of these loans  totaled $1.5  million at March 31,  2009.  These loans are
still accruing interest but are classified as impaired. Although these loans are
currently performing, Management views them as having potential and well-defined
weaknesses that could jeopardize the liquidation of the debt.

OTHER THAN TEMPORARY  IMPAIRMENT ("OTTI"):  The Company's investment  securities
portfolio is comprised of available-for-sale  and held-to-maturity  investments.
The  available-for-sale  portfolio is carried at estimated fair value,  with any
unrealized  gains  or  losses,  net of  taxes,  reported  as  accumulated  other
comprehensive  income  or loss in  shareholders'  equity.  The  held-to-maturity
portfolio is carried at amortized cost. Management determines the classification
of a security at the time of its purchase.

The Company conducts a periodic review of our investment securities portfolio to
determine if the value of any security has declined  below its cost or amortized
cost,  and whether  such  decline is  other-than-temporary.  If such  decline is
deemed  other-than-temporary,  the  security is written down to a new cost basis
and  the  resulting  loss  is  reported  within   non-interest   income  in  the
consolidated statement of income.

Significant  judgment is involved in determining when a decline in fair value is
other-than-temporary.  The factors considered by Management include, but are not
limited to:

      o     The  Company's  intent and  ability to retain the  investment  for a
            period of time sufficient to allow for the  anticipated  recovery in
            market value, which may be until maturity;

      o     Percentage and length of time by which an issue is below book value;

      o     Financial  condition and near-term prospects of the issuer including
            their ability to meet contractual obligations in a timely manner;

      o     Credit ratings of the security;

      o     Whether the decline in fair value appears to be issuer  specific or,
            alternatively,   a   reflection   of  general   market  or  industry
            conditions;

      o     Whether the  decline is due to interest  rates and spreads or credit
            risk; and

      o     The value of underlying collateral.

Adverse  changes in the factors used by management to determine if a security is
OTTI  could  lead to  additional  impairment  charges.  Conditions  affecting  a
security  that the Company  determined  to be temporary  could become other than
temporary and warrant an impairment charge. Additionally, a security that had no
apparent  risk  could be  affected  by a sudden or acute  market  condition


                                       29
<PAGE>

and  necessitate an impairment  charge.  During the third and fourth quarters of
2008,  the Company  recorded  OTTI  losses  totaling  $9,422,650  related to the
Company's investments in Freddie Mac and Fannie Mae preferred stock/auction rate
securities holding such stock, and two pooled trust preferred securities.  There
have been no OTTI losses during 2009.

OFF-BALANCE SHEET ARRANGEMENTS

The Company is a party to financial  instruments with off-balance  sheet risk in
the normal course of business to meet the financing  needs of its customers such
as letters of credit.  In the opinion of  management,  these  off-balance  sheet
arrangements are not likely to have a material effect on the Company's financial
condition, results of operation, or liquidity.

At March 31,  2009,  there have been no  significant  changes  in the  Company's
off-balance sheet arrangements from December 31, 2008.

FORWARD-LOOKING STATEMENTS

This Quarterly Report and future filings made by the Company with the Securities
and Exchange  Commission,  as well as other filings,  reports and press releases
made or  issued  by the  Company  and the  Bank,  and  oral  statements  made by
executive  officers  of  the  Company  and  Bank,  may  include  forward-looking
statements  relating  to  such  matters  as (a)  assumptions  concerning  future
economic and business  conditions and their effect on the economy in general and
on the  markets  in  which  the  Company  and  the  Bank  do  business,  and (b)
expectations  for  increased  revenues  and  earnings  for the  Company and Bank
through growth resulting from acquisitions,  attractions of new deposit and loan
customers   and  the   introduction   of  new   products  and   services.   Such
forward-looking  statements are based on assumptions  rather than  historical or
current facts and, therefore,  are inherently uncertain and subject to risk. For
those  statements,  the  Company  claims the  protection  of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995.

The Company  notes that a variety of factors  could cause the actual  results or
experience  to  differ   materially  from  the  anticipated   results  or  other
expectations described or implied by such forward-looking  statements. The risks
and uncertainties that may affect the operations,  performance,  development and
results of the Company's and Bank's business include the following: (a) the risk
of adverse changes in business  conditions in the banking industry generally and
in the  specific  markets  in  which  the  Bank  operates;  (b)  changes  in the
legislative and regulatory  environment  that negatively  impact the Company and
Bank through increased operating expenses;  (c) increased competition from other
financial  and  nonfinancial  institutions;  (d)  the  impact  of  technological
advances;  and (e)  other  risks  detailed  from  time to time in the  Company's
filings with the Securities and Exchange  Commission.  Such  developments  could
have an adverse  impact on the Company  and the Bank's  financial  position  and
results of operation.

ITEM 4T. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures designed to ensure that
information  required to be  disclosed in the  Company's  Exchange Act report is
recorded,  processed,  summarized and reported within the time periods specified
in the SEC's  rules and forms,  and that such  information  is  accumulated  and
communicated to the Company's management,  including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required  disclosure.  In designing and evaluating  the disclosure  controls and
procedures,  management  recognized that any controls and procedures,  no matter


                                       30
<PAGE>

how well  designed  and  operated,  can provide  only  reasonable  assurance  of
achieving  the  desired  control  objectives,  and  management  necessarily  was
required  to apply its  judgment  in  evaluating  the  cost-benefit  of possible
controls and procedures.

As of the end of the period  covered by this report,  the Company's  management,
under  the  supervision  and  with  the  participation  of the  Company's  Chief
Executive  Officer and the Company's  Chief  Financial  Officer,  carried out an
evaluation  of the  effectiveness  of the design and  operation of the Company's
disclosure controls and procedures.  Based on the foregoing, the Company's Chief
Executive Officer and Chief Financial Officer concluded the Company's disclosure
controls and procedures were effective.

There were no changes in the Company's internal control over financial reporting
that  occurred  during the Company's  first quarter of 2009 that has  materially
affected,  or is reasonably likely to materially  affect, the Company's internal
control over financial reporting.

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

Neither the Company nor the Bank (or any of their  properties) is the subject of
any material  pending legal  proceedings  other than routine  litigation that is
incidental to its business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. Not
        applicable

Item 3. Defaults Upon Senior Securities. Not applicable

Item 4. Submission of Matters to a Vote of Security Holders. None

Item 5. Other Information. None


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<PAGE>

Item 6. Exhibits

                                  EXHIBIT INDEX

Exhibit
   No.        Exhibit
--------      -------

3.1           Certificate  of  Incorporation   of  First  Litchfield   Financial
              Corporation,  as amended.  Exhibit is incorporated by reference to
              Exhibit 3.1 set forth in the Company's  Registration  Statement on
              Form 10-SB as filed with the Securities and Exchange Commission on
              January 7, 2000.

3.1.1         Certificate  of   Designations   for  the  Fixed  Rate  Cumulative
              Perpetual  Preferred  Stock,  Series A,  filed  December  9, 2008.
              Exhibit  is  incorporated  by  reference  to  Exhibit  3.1  to the
              Company's  Current Report on Form 8-K as filed with the Securities
              and Exchange Commission on December 18, 2008.

3.2           Bylaws of First  Litchfield  Financial  Corporation,  as  amended.
              Exhibit is  incorporated  by reference to Exhibit 3.2 set forth in
              the Company's  Registration  Statement on Form 10-SB as filed with
              the Securities and Exchange Commission on January 7, 2000.

4.            Specimen  Common Stock  Certificate.  Exhibit is  incorporated  by
              reference  to Exhibit 4. set forth in the  Company's  Registration
              Statement on Form 10-SB as filed with the  Securities and Exchange
              Commission on January 7, 2000.

4.1           Amended  and  Restated  Declaration  of Trust of First  Litchfield
              Statutory Trust I. Exhibit is incorporated by reference to Exhibit
              10.52 set forth in the Company's  Quarterly  Report on Form 10-QSB
              for the quarter  ended June 30, 2003 as filed with the  Securities
              and Exchange Commission on August 13, 2003.

4.2           Indenture  for the  Company's  Floating  Rate Junior  Subordinated
              Deferrable  Interest  Debentures due 2033. Exhibit is incorporated
              by reference to Exhibit 10.53 set forth in the Company's Quarterly
              report on Form 10-QSB for the quarter ended June 30, 2003 as filed
              with the Securities and Exchange Commission on August 13, 2003.

4.3           Indenture dated June 16, 2006, between First Litchfield  Financial
              Corporation, as issuer, and Wilmington Trust Company, as indenture
              trustee.  Exhibit is  incorporated  by reference to Exhibit 4.1 to
              the Company's  Registration  Statement on Form 8-K/A as filed with
              the Securities and Exchange Commission on June 30, 2006.

4.4           Guarantee  Agreement  dated as of June  16,  2006,  between  First
              Litchfield  Financial  Corporation,  and Wilmington Trust Company.
              Exhibit  is  incorporated  by  reference  to  Exhibit  4.2  to the
              Company's  Registration  Statement on Form 8-K/A as filed with the
              Securities and Exchange Commission on June 30, 2006.

4.5           Form of Junior  Subordinated  Note.  Exhibit  is  incorporated  by
              reference to Exhibit 4.3 to the Company's  Registration  Statement
              on Form 8-K/A as filed with the Securities and Exchange Commission
              on June 30, 2006.

4.6           Warrant to purchase Common Stock dated December 12, 2008.  Exhibit
              is  incorporated  by  reference  to Exhibit  4.1 to the  Company's
              Current  Report  on Form 8-K as  filed  with  the  Securities  and
              Exchange Commission on December 18, 2008.


                                       32
<PAGE>

21.           List of Subsidiaries of First  Litchfield  Financial  Corporation.
              Exhibit is  incorporated  by  reference to Exhibit 21 set forth in
              the Company's  10-K for the year ended  December 31, 2008 as filed
              with the Securities and Exchange Commission on April 15, 2009.

23.           Consent of McGladrey & Pullen, LLP.

31.1          Rule  13a-14(a)/15-14(a)  Certification  of  the  Chief  Executive
              Officer of the Company.

31.2          Rule  13a-14(a)/15-14(a)  Certification  of  the  Chief  Financial
              Officer of the Company.

32.0          Certification  of  the  Chief  Executive  Officer  and  the  Chief
              Financial Officer of the Company,  pursuant to 18 U.S.C.  ss.1350,
              as adopted  pursuant to section 906 of the  Sarbanes-Oxley  Act of
              2002.


                                       33
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:  May 14, 2009                    FIRST LITCHFIELD FINANCIAL
                                        CORPORATION

                                          By: /s/ Joseph J. Greco
                                              -------------------
                                              Joseph J. Greco, President and
                                              Chief Executive Officer

Dated:  May 14, 2009                      By: /s/ Carroll A. Pereira
                                              ----------------------
                                              Carroll A. Pereira
                                              Principal Financial and
                                              Accounting Officer


                                       34