UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20429

                                   FORM 10-KSB

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the fiscal year ended December 31, 2005

                                                                       OR

[ ]  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: 000-51832
                             ---------

                                SBT Bancorp, Inc.
                                -----------------
        (Exact name of small business issuer as specified in its charter)

           Connecticut                                          20-4346972
----------------------------------------                 -----------------------
  (State or other jurisdiction of                           (I.R.S. Employer
   Incorporation or organization)                          Identification No.)

          760 Hopmeadow Street,
             P.O. Box 248,
             Simsbury, CT                                         06070
----------------------------------------                 -----------------------
(Address of principal executive offices)                        (Zip Code)

Issuer's telephone number, including area code: (860) 408-5493
                                                --------------

Securities registered under Section 12(b) of the Exchange Act:

                                                Name of each exchange
                Title of each class              On which registered
                -------------------             ---------------------
                       None                            None

Securities registered under Section 12(g) of the Exchange Act:

                               Title of each class
                               -------------------
                           Common Stock, no par value


     Check  whether  the issuer is not  required  to file  reports  pursuant  to
Section 13 or 15(d) of the Exchange Act. ___
     Note - checking the box above will not relieve any  registrant  required to
file  reports  pursuant to  Section13  or 15(d) of the  Exchange  Act from their
obligations under those Sections.



     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes  X  No
                                                                       ---   ---

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X]

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b02 of the Exchange Act). Yes    No  x
                                               ---    ---

     The issuer's revenues,  which include interest income and other income, for
its fiscal year ended December 31, 2005, were $10,730,595.

     As of February 14, 2006,  840,678 shares of Common Stock,  no par value per
share, were outstanding. The aggregate market value, held by non-affiliates,  of
shares of the Common Stock, based upon the average of the bid and ask prices for
such stock on that date, was approximately $28,583,052.

     Transitional small business disclosures format (check one):

                                   Yes  x No
                                ---    ---

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the SBT Bancorp,  Inc.  definitive Proxy Statement for the 2006
Annual Meeting of Shareholders to be held May 9, 2006 (the "Proxy Statement") to
be filed  with the  Securities  and  Exchange  Commission  are  incorporated  by
reference into Part III of this Form 10-KSB, and portions of The Simsbury Bank &
Trust  Company,  Inc.  Annual Report to  Shareholders  for the fiscal year ended
December 31, 2005 (the "Annual  Report") are incorporated by reference into Part
II of this Form 10-KSB.

     This Annual  Report on Form 10-KSB is being  filed by the  registrant,  SBT
Bancorp,  Inc.,  on behalf  of The  Simsbury  Bank & Trust  Company,  Inc.  (the
"Bank"),  as  successor  to the  Bank  pursuant  to an  Agreement  and  Plan  of
Reorganization  dated February 15, 2006. The  reorganization was effective as of
March 2, 2006. On March 7, 2006,  SBT Bancorp,  Inc.  filed a Current  Report on
Form  8-K12(g)(3)  succeeding to the  registration  of the Bank pursuant to Rule
12g-3(a) under the Exchange Act.

<PAGE>

                                      INDEX

                     THE SIMSBURY BANK & TRUST COMPANY, INC.

                                                                        Page No.
                                                                        --------

                                     PART I

Item 1.  Description of Business                                            3-9

Item 2.  Description of Property                                           9-10

Item 3.  Legal Proceedings                                                   10

Item 4.  Submission of Matters to a Vote of Security Holders                 10

                                     PART II

Item 5.  Market for Common Equity, Related Stockholder Matters and
           Small Business Issuer Purchases of Equity Securities              10

Item 6.  Management's Discussion and Analysis or Plan of Operation           10

Item 7.  Financial Statements                                                10

Item 8.  Changes In and Disagreements with Accountants on Accounting
           and Financial Disclosure                                          10

Item 8A. Controls and Procedures                                             11

Item 8B. Other Information                                                   11

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange                     11

Item 10. Executive Compensation                                              12

Item 11. Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters                        12

Item 12. Certain Relationships and Related Transactions                      12

Item 13. Exhibits                                                         13-14

Item 14. Principal Accountant Fees and Services                              14

SIGNATURES                                                                   56

Exhibit Index                                                                57

<PAGE>

ITEM 1. DESCRIPTION OF BUSINESS

General

     The Simsbury Bank & Trust Company,  Inc. (the "Bank") was  incorporated  on
April 28, 1992 and commenced operations as a Connecticut chartered bank on March
31, 1995.  The Bank's  deposit  accounts are insured  under the Federal  Deposit
Insurance Act, up to the maximum  applicable  limits thereof.  The Bank is not a
member of the Federal  Reserve  System.  The Bank's  main  office and  corporate
offices are located in the town of  Simsbury,  Connecticut.  The Bank has branch
offices in Avon, Canton and Granby, Connecticut.  Simsbury has a population over
23,000. The aggregate population for the Bank's market area is 75,000 people and
is comprised of approximately  29,000  households.  The towns of Avon and Granby
have  had  some of the most  significant  growth  in the  Farmington  Valley  of
Connecticut over the last ten years. The Bank's customer base consists primarily
of individual  consumers and small businesses in the Farmington Valley. The Bank
has over 19,000 deposit accounts.

     The Bank also has five ATMs; two are located at its main office including a
drive-through  ATM, and one at each branch  office.  The ATMs generate  activity
fees based upon utilization by other banks' customers.

     The Bank  offers a full range of  commercial  banking  services,  including
making commercial loans, term real estate loans,  construction  loans, SBA loans
and various  types of consumer  loans;  accepting  checking,  savings,  and time
deposits;  NOW,  Super NOW and money  market  deposit  accounts;  and  providing
travelers'  checks,  safe  deposit  and  other  customary   non-deposit  banking
services. The Bank does not have a trust department.  The Bank offers investment
products to customers  through SBT  Investment  Services,  Inc., a  wholly-owned
subsidiary  of the  Bank,  and  through  its  affiliation  with  the  securities
broker/dealer Infinex Financial Services.

     As of December 31, 2005, approximately 72% of the Bank's loans were secured
by residential property located in Connecticut.

     The deposit growth  experienced during the Bank's first ten years continued
during 2005.  Deposits  increased by $8.0  million  (4.3%) in 2005,  compared to
$11.1 million in growth  during 2004.  Total assets grew to almost $210 million,
ending the year at $209.5 million, an increase of $7.3 million.  The Bank's loan
portfolio also grew, increasing by $4.6 million (3.2%) to end the year at $147.5
million.  The Bank's  loan-to-deposit  ratio,  an important  determinant  of net
interest income remained steady at 77% at year-end 2005,  substantially the same
as year-end 2004.

     Net  income of  $1,673,677  ($2.00 per  common  share) for the year  ending
December 31, 2005 was a 6% decrease from the net income of $1,778,250 ($2.17 per
common share)  reported for the year ended December 31, 2004.  This decrease was
primarily  due to the  expenses  incurred  for the  opening of the new branch in
Canton.

     Banking is a business that depends on rate differentials.  In general,  the
difference  between the  interest  rate paid by the Bank on its deposits and its
other borrowings and the interest rate received by the Bank on loans extended to
its customers and  securities  held in the Bank's  portfolio  comprise the major
portion of the Bank's earnings. These rates are highly sensitive to many factors
that are beyond the control of the Bank. Accordingly, the earnings and growth of
the  Bank  are  subject  to the  influence  of  domestic  and  foreign  economic
conditions, including inflation, recession and unemployment.

     The commercial  banking  business is not only affected by general  economic
conditions  but is also  influenced  by the monetary and fiscal  policies of the
federal  government and the policies of regulatory  agencies,  particularly  the
Federal Reserve Board.  The Federal Reserve Board implements  national  monetary
policies (with objectives such as curbing inflation and combating recessions) by


                                       3
<PAGE>


its open-market operations in United States Government securities,  by adjusting
the required level of reserves for financial institutions subject to its reserve
requirements  and by varying the discount  rates  applicable  to  borrowings  by
depository institutions. The actions of the Federal Reserve Board in these areas
influence  the growth of bank loans,  investments  and  deposits and also affect
interest  rates charged on loans and paid on deposits.  The nature and impact of
any future changes in monetary policies cannot be predicted.

Recent Developments

     On March 2, 2006 the Bank completed a reorganization into a holding company
structure.  As a result of the  reorganization,  the Bank became a  wholly-owned
subsidiary of SBT Bancorp,  Inc. (the "Company") and the former  shareholders of
the Bank became shareholders of the Company. On March 7, 2006, the Company filed
a Current Report on Form 8-K12(g)(3)  succeeding to the registration of the Bank
pursuant to Rule 12g-3(a) under the Securities  Exchange Act of 1934. The common
stock of the Company is  currently  quoted on the OTC  Bulletin  Board under the
trading symbol "SBTB."

Market Area

     The towns of Simsbury,  Granby and Avon,  which comprise the Bank's primary
market, are located in Northwestern  Connecticut,  west of the Connecticut River
near the  northern  corner of  Hartford.  All  three  towns  are  situated  near
Interstate Routes 91 and 84. Bradley  International  Airport is within ten miles
of  Simsbury,  Granby and Avon and  provides a  convenient  alternative  to road
systems for passengers or cargo.

     The road  network from each of the towns  included in the Bank's  secondary
market of  Barkhamsted,  Canton,  East Granby and New  Hartford,  leads  through
Simsbury, Granby or Avon. Residents of these communities,  therefore, may travel
near the Bank's offices and may find it convenient to bank there.

     Based on the most current  information  available,  the Bank's  primary and
secondary  markets have a median household income of $73,673.  This level places
the  overall   market   approximately   36%  above  the  median  income  of  all
Connecticut's  households.  Compared to the nation as a whole, the median income
in the Bank's primary and secondary  markets is  approximately  75% greater than
the median income for all U.S. households. By themselves,  the towns of Simsbury
and Avon had median household incomes of over $82,428, placing them 96% over the
median  income  for the  U.S.  and  almost  53% over the  median  income  of all
households in Connecticut.

     Educational  attainment  in the Bank's  primary  and  secondary  markets is
similarly high.  Fifty-seven  percent of the residents aged twenty-five and over
in the seven towns are college  graduates.  In Simsbury,  Granby and Avon,  this
figure averages 63%.

Employees

     At December 31, 2005, the Bank employed a total of 59 people,  52 full-time
employees and 7 part-time employees. The Bank's employees are not represented by
any union or other  collective  bargaining  agreement  and the Bank believes its
employee relations are satisfactory.

Competition

     The banking and financial services business in Connecticut  generally,  and
in the Bank's market areas specifically, is highly competitive. The increasingly
competitive environment is a result primarily of changes in regulation,  changes
in  technology  and  product  delivery  systems,  and the  accelerating  pace of
consolidation  among financial services  providers.  The Bank competes for loans
and deposits and customers for financial  services with other commercial  banks,
savings and loan  associations,  securities  and brokerage  companies,  mortgage
companies,  insurance companies,  finance companies,  money market funds, credit
unions and other nonbank financial service providers.  Many of these competitors
are much  larger in total  assets and  capitalization,  have  greater  access to
capital  markets and offer a broader array of financial  services than the Bank.
In order to  compete  with the  other  financial  services  providers,  the Bank


                                       4
<PAGE>

principally  relies upon local promotional  activities,  personal  relationships
established  by  officers,  directors  and  employees  with its  customers,  and
specialized  services  tailored to meet its customers' needs. In those instances
where the Bank is unable to accommodate a customer's  needs,  the Bank will seek
to have those services provided by its correspondents.

     The  Bank's  primary  and  secondary  markets  have  a  number  of  banking
institutions  which  offer  a  variety  of  financial  products.  The  types  of
institutions  range  from large  nationwide  banks to  various  institutions  of
smaller  size.  Other  than the Bank,  no bank is  headquartered  in the  Bank's
primary market area. Simsbury is served by seven depository  institutions with a
total of seven offices. Of these institutions, there are three commercial banks,
two  savings  banks and two  credit  unions.  Avon is  served by ten  depository
institutions  with  thirteen  offices.  Of these  institutions,  there are three
commercial banks, five savings banks and two credit unions.  Granby is served by
five  depository  institutions  with the same  number of  offices.  Two of these
institutions are commercial banks and three are savings banks.  Canton is served
by four depository institutions with five offices. Two of these institutions are
commercial  banks and two are savings banks.  The total  seven-town  area of the
Bank's primary and secondary markets is served by thirteen institutions.

     As of June 30, 2005, by deposit  account market share,  the top three banks
in Simsbury are Bank of America (31%),  Simsbury Bank & Trust Company (27%), and
Webster Bank (20%). The top three banks in Avon are People's Bank (22%), Bank of
America (21%),  and Webster Bank (16%). In Granby,  the top three banks are Bank
of  America  (32%),  Windsor  Federal  Savings  And Loan  Association  (24%) and
Simsbury  Bank & Trust  Company  (24%).  In  Canton,  the top  three  banks  are
Collinsville  Savings  Society  (41%),  Webster  Bank  (28%) and Bank of America
(25%). In the Bank's primary market (Simsbury, Granby and Avon), the top 3 banks
are Bank of America with 26% of the market,  The Simsbury  Bank & Trust  Company
with 17% and Webster Bank with 14%. In the total  seven-town  area of the Bank's
primary and secondary markets,  the top three banks are Bank of America with 26%
of the market,  Webster Bank with 15% and The Simsbury Bank & Trust Company with
13%.

     The present bank regulatory scheme is undergoing  significant  change, both
as it affects the banking industry itself and as it affects  competition between
banks and  non-banking  financial  institutions.  There  has been a  significant
regulatory  change in the bank merger and acquisition  area, in the products and
services  banks can  offer,  and in the  non-banking  activities  in which  bank
holding  companies  may  engage.  Under the  Gramm-Leach-Bliley  Act  enacted by
Congress  on  November  12,  1999,  banks  and bank  holding  companies  may now
affiliate with insurance and securities companies.  In part as a result of these
changes,  banks are now actively  competing  with other types of  non-depository
institutions,  such as money market funds,  brokerage firms, insurance companies
and other financial service enterprises.

     Moreover,  certain  legislation and regulatory  proposals that could affect
the Bank and the banking  industry  in general are pending or may be  introduced
before the United States Congress,  the Connecticut General Assembly and various
governmental  agencies.  These proposals include measures that may further alter
the structure, regulation and competitive relationship of financial institutions
and that may subject the Bank to increased regulation,  disclosure and reporting
requirements.  In addition,  the various banking regulatory  agencies frequently
propose  rules  and  regulations  to  implement  and  enforce  already  existing
regulation.  It cannot be predicted  whether or in what form any  legislation or
regulations will be enacted or the extent to which the business of the Bank will
be affected thereby.

Supervision and Regulation

     Banks are extensively regulated under both federal and state law. Set forth
below is a summary description of certain laws which relate to the regulation of
the Bank.  The  description  does not purport to be complete and is qualified in
its entirety by reference to the applicable laws and regulations.

     The Bank, as a Connecticut state-chartered bank, is subject to supervision,
periodic  examination and regulation by the Connecticut  Commissioner of Banking
(the "Commissioner") and the Federal Deposit Insurance Corporation (the "FDIC").
If, as a result of an examination of a bank, the FDIC should  determine that the
financial  condition,  capital  resources,  asset quality,  earnings  prospects,
management,   liquidity  or  other   aspects  of  the  bank's   operations   are
unsatisfactory  or that the bank or its  management is violating or has violated
any law or regulation, various remedies are available to the FDIC. Such remedies
include  the  power  to  enjoin  "unsafe  or  unsound"  practices,   to  require


                                       5
<PAGE>


affirmative  action to correct any  conditions  resulting  from any violation or
practice,  to issue an administrative order that can be judicially enforced,  to
direct an  increase in capital,  to restrict  the growth of the bank,  to assess
civil monetary penalties, to remove officers and directors,  and ultimately,  to
terminate a bank's deposit  insurance,  which for a Connecticut  state-chartered
bank would result in a revocation of the bank's charter.  The  Commissioner  has
many of the same remedial powers.

     The  deposits  of the Bank are insured by the FDIC in the manner and to the
extent provided by law. For this protection, the Bank is subject to a semiannual
statutory assessment.  (See "Premiums for Deposit Insurance.") Although the Bank
is not a member of the Federal  Reserve System,  it is  nevertheless  subject to
certain regulations of the Board of Governors of the Federal Reserve System.

     Various  requirements  and  restrictions  under  the  laws of the  State of
Connecticut  and the United States affect the operations of the Bank.  State and
federal  statutes  and  regulations   relate  to  many  aspects  of  the  Bank's
operations,  including  reserves  against  deposits,  interest  rates payable on
deposits, loans, investments, mergers and acquisitions,  borrowings,  dividends,
locations  of branch  offices and  capital  requirements.  Further,  the Bank is
required to maintain certain levels of capital.

     Capital Standards

     The FDIC has adopted risk-based  capital guidelines to which  FDIC-insured,
state-chartered  banks that are not members of the Federal Reserve System,  such
as the Bank,  are subject.  The  guidelines  establish a  systematic  analytical
framework  that makes  regulatory  capital  requirements  more  sensitive to the
differences in risk profiles among banking organizations.  Banks are required to
maintain  minimum  levels of capital  based upon  their  total  assets and total
"risk-weighted assets." For purposes of these requirements, capital is comprised
of both Tier 1 and Tier 2 capital.  Tier 1 capital consists  primarily of common
stock and  retained  earnings.  Tier 2 capital  consists  primarily of loan loss
reserves,  subordinated debt, and convertible  securities.  In determining total
capital,  the  amount  of Tier 2 capital  may not  exceed  the  amount of Tier 1
capital.  A bank's total  "risk-based  assets" are  determined  by assigning the
bank's assets and  off-balance  sheet items (e.g.,  letters of credit) to one of
four risk  categories  based upon their relative  credit risks.  The greater the
risk associated with an asset, the greater the amount of such asset that will be
subject to capital requirements.  Banks must satisfy the following three minimum
capital standards: (1) Tier 1 capital in an amount equal to between 4% and 5% of
total assets (the "leverage ratio"); (2) Tier 1 capital in an amount equal to 4%
of  risk-weighted  assets;  and (3) total Tier 1 and Tier 2 capital in an amount
equal to 8% of risk- weighted assets.

     The  Federal  Deposit  Insurance   Corporation   Improvement  Act  of  1991
("FDICIA")  defines  specific  capital  categories  based upon an  institution's
capital  ratios.  The capital  categories,  in  declining  order,  are: (i) well
capitalized;   (ii)  adequately  capitalized;   (iii)   undercapitalized;   (iv)
significantly  undercapitalized;  and  (v)  critically  undercapitalized.  Under
FDICIA and the FDIC's prompt  corrective action rules, the FDIC may take any one
or more of the following  actions  against an  undercapitalized  bank:  restrict
dividends  and  management   fees,   restrict  asset  growth  and  prohibit  new
acquisitions, new branches or new lines of business without prior FDIC approval.
If a bank is significantly undercapitalized,  the FDIC may also require the bank
to raise capital, restrict interest rates a bank may pay on deposits,  require a
reduction in assets,  restrict any activities that might cause risk to the bank,
require   improved   management,   prohibit  the  acceptance  of  deposits  from
correspondent  banks and restrict  compensation to any senior executive officer.
When a bank becomes  critically  undercapitalized,  (i.e., the ratio of tangible
equity to total  assets is equal to or less than 2%),  the FDIC must,  within 90
days thereafter, appoint a receiver for the bank or take such action as the FDIC
determines  would better  achieve the purposes of the law. Even where such other
action is taken,  the FDIC  generally  must appoint a receiver for a bank if the
bank remains critically  undercapitalized  during the calendar quarter beginning
270 days after the date on which the bank became critically undercapitalized.

     To be considered  "adequately  capitalized,"  an institution must generally
have a leverage ratio of at least 4%, a Tier 1 capital to  risk-weighted  assets
ratio of at least 4% and total Tier 1 and Tier 2 capital to risk-weighted assets
ratio of at least 8%. As of December 31, 2005 the most recent  notification from
the FDIC categorized the Bank as well capitalized under the regulatory framework


                                       6
<PAGE>


for prompt corrective  action.  To be categorized as well capitalized,  the Bank
must maintain  minimum total  risk-based,  Tier 1 risk-based and Tier 1 leverage
ratios as set forth in the table below.  There are no conditions that Management
believes have changed the Bank's category.

     The  following  table  presents the amounts of  regulatory  capital and the
capital  ratios  for  the  Bank  compared  to  its  minimum  regulatory  capital
requirements as of December 31, 2005 and 2004.
<TABLE>
<CAPTION>
<S>                                 <C>                  <C>             <C>            <C>
                                     December 31, 2005                  December 31, 2004
                             ---------------------------------   -------------------------------
                                              Capital Minimum                   Capital Minimum
                                 Ratio          Requirement         Ratio         Requirement
                             ------------   ------------------   ----------   ------------------
Leverage ratio                   7.61%            4.00%             7.11%           4.00%
Tier 1 risk-based ratio         12.41%            4.00%            12.02%           4.00%
Total risk-based ratio          13.66%            8.00%            13.27%           8.00%
</TABLE>

   Safety and Soundness Standards

     Federal  law  requires  each  federal   banking  agency  to  prescribe  for
depository  institutions  under its  jurisdiction  standards  relating to, among
other things:  internal controls;  information  systems and audit systems;  loan
documentation;  credit underwriting;  interest rate risk exposure; asset growth;
compensation;  fees and  benefits;  and such other  operational  and  managerial
standards as the agency deems appropriate.  The federal banking agencies adopted
final regulations and Interagency  Guidelines  Establishing Standards for Safety
and  Soundness  (the  "Guidelines")  to  implement  these  safety and  soundness
standards.  The Guidelines set forth the safety and soundness standards that the
federal  banking  agencies  use to  identify  and  address  problems  at insured
depository  institutions before capital becomes impaired. The Guidelines address
internal  controls  and  information  systems;  internal  audit  system;  credit
underwriting;  loan documentation;  interest rate risk exposure;  asset quality;
earnings and compensation; fees and benefits. If the appropriate federal banking
agency determines that an institution  fails to meet any standard  prescribed by
the  Guidelines,  the agency may require the institution to submit to the agency
an acceptable  plan to achieve  compliance  with the standard set by the Federal
Deposit Insurance Act, as amended. The final regulations establish deadlines for
submission and review of such safety and soundness compliance plans.

     The federal banking  agencies also have adopted final  regulations for real
estate  lending  prescribing  uniform  guidelines for real estate  lending.  The
regulations  require insured  depository  institutions to adopt written policies
establishing  standards,  consistent  with such  guidelines,  for  extensions of
credit  secured  by real  estate.  The  policies  must  address  loan  portfolio
management,  underwriting  standards and loan to value limits that do not exceed
the supervisory limits prescribed by the regulations.

     Appraisals  for "real  estate-related  financial  transactions,"  generally
transactions  with a value of $250,000 or more, must be conducted,  depending on
the  value of the  transaction  by  either  state  certified  or state  licensed
appraisers. State certified appraisers are required for: all transactions with a
transaction value of $1,000,000 or more;  nonresidential  transactions valued at
$250,000 or more; and  transactions of $250,000 or more involving  "complex" 1-4
family residential properties. An appraisal or real estate "evaluation" executed
by a state  licensed  appraiser  is  required  for all other  federally  related
transactions.  Federally related transactions include the sale, lease, purchase,
investment in, or exchange of, real property or interests in real property,  the
financing  or  refinancing  of real  property,  and the use of real  property or
interests  in real  property as  security  for a loan or  investment,  including
mortgage-backed securities.

   Premiums for Deposit Insurance

     The FDIC has  implemented a risk-based  assessment  system,  under which an
institution's  deposit insurance premium  assessment is based on the probability


                                       7
<PAGE>


that  the  deposit  insurance  fund  will  incur  a  loss  with  respect  to the
institution,  the likely  amount of any such loss,  and the revenue needs of the
deposit insurance fund.

     Under this risk-based  assessment system, banks are categorized into one of
three  capital  categories  (well  capitalized,   adequately  capitalized,   and
undercapitalized)  and one of three categories based on supervisory  evaluations
by its primary  federal  regulator  (in the Bank's  case,  the FDIC).  The three
supervisory  categories are:  financially sound with only a few minor weaknesses
(Group  A),   demonstrates   weaknesses   that  could   result  in   significant
deterioration (Group B), and poses a substantial  probability of loss (Group C).
The  capital  ratios  used by the FDIC to  define  well-capitalized,  adequately
capitalized and  undercapitalized  are the same in the FDIC's prompt  corrective
action regulations.  The Bank is currently  considered a "Well Capitalized Group
A"  institution  and,  therefore,  is not  subject  to any  quarterly  FDIC Bank
Insurance   Fund  ("BIF")  or  Savings   Association   Insurance  Fund  ("SAIF")
assessments.  This could change in the future based on the capitalization of the
BIF and SAIF.  The Bank is,  however,  subject to quarterly  assessments  by The
Financing  Corporation ("FICO") to service the interest on its bond obligations.
The rate for this  assessment is  determined  quarterly and is paid based on the
Bank's  average  deposits  for a given  quarter.  The Bank paid  $24,348 in FICO
assessments during 2005.

   Interstate Banking and Branching

     The  Riegle-Neal  Interstate  Banking and Branching  Efficiency Act of 1994
("Riegle-Neal")   was  enacted  to  ease  restrictions  on  interstate  banking.
Effective  September 25, 1995,  Riegle-Neal  allows the Federal Reserve Board to
approve an application of an adequately  capitalized and adequately managed bank
holding  company to acquire control of, or acquire all or  substantially  all of
the assets of, a bank located in a state other that such holding  company's home
state,  without  regard to whether the  transaction is prohibited by the laws of
any state.  The Federal  Reserve Board may not approve the acquisition of a bank
that has not been in  existence  for a minimum time period (not  exceeding  five
years)  specified  by the  statutory  law of the host  state.  Riegle-Neal  also
prohibits  the  Federal  Reserve  Board from  approving  an  application  if the
applicant (and its depository institution  affiliates) controls or would control
more than 10% of the insured deposits in the United States or 30% or more of the
deposits  in the  target  bank's  home state or in any state in which the target
bank maintains a branch.  Riegle-Neal does not affect the authority of states to
limit the percentage of total insured deposits in the state which may be held or
controlled by a bank or bank holding  company to the extent such limitation does
not  discriminate   against   out-of-state  banks  or  bank  holding  companies.
Individual  states  may  also  waive  the  30%  state-wide  concentration  limit
contained in Riegle-Neal.

   Community Reinvestment Act

     Under the Community  Reinvestment Act, as amended,  ("CRA"), as implemented
by FDIC  regulations,  the  Bank has a  continuing  and  affirmative  obligation
consistent  with its safe and sound  operation  to help meet the credit needs of
its entire community, including low and moderate-income  neighborhoods.  The CRA
does not  prescribe  specific  lending  requirements  or programs for  financial
institutions nor does it limit an institution's  discretion to develop the types
of products  and  services  that it believes  are best suited to its  particular
community,  consistent  with the CRA. The CRA requires the FDIC,  in  connection
with its  examination  of a savings  institution,  to assess  the  institution's
record of meeting the credit needs of its community and to take such record into
account in its  evaluation  of certain  applications  by such  institution.  The
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) amended the
CRA to require public  disclosure of an institution's CRA rating and require the
FDIC to  provide  a  written  evaluation  of an  institution's  CRA  performance
utilizing a four-tiered descriptive rating system. The Bank's latest CRA rating,
received from the FDIC, was "satisfactory."


                                       8
<PAGE>


Executive Officers

     The following table shows the name,  age,  positions held with the Bank and
principal  occupations  during  the  past  five  years of the  Bank's  executive
officers.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
NAME                                AGE   POSITIONS HELD / PRINCIPAL OCCUPATIONS                     YEAR OF HIRE

Martin J. Geitz                     49    President and Chief Executive Officer of the Bank              2004
  President and Chief                     since October 2004; Vice President of Massachusetts
  Executive Officer                       Mutual Life Insurance Company, 2003 to 2004; Chief
                                          Executive Officer and Chief Financial Officer of
                                          Cigna Bank & Trust Company, 2000 to
                                          2003; President of Fleet Development
                                          Ventures, LLC and Fleet Community
                                          Development Corp, 1997 to 2000.

Charles D. Forgie                   63    Executive Vice President and Chief Lending Officer of          1995
  Executive Vice President                the Bank since 1995.
  and Chief Lending Officer

Anthony F. Bisceglio, Ph.D.         58    Executive Vice President and CFO of the Bank since             1995
  Executive Vice President and              January 2005; Senior Vice President and Chief
  Chief Financial Officer                 Financial Officer of the Bank from 1995 through
                                          January, 2005.

Terry L. Boulton                    49    Senior Vice President and Chief Retail Banking                 2005
  Senior Vice President                   Officer of the Bank since January 2005; Vice
                                          President of Bank of America, formerly
                                          Fleet Bank, from 1988 through January,
                                          2005.
</TABLE>

ITEM 2. DESCRIPTION OF PROPERTY

     The  Bank's  main  office is  located at 981  Hopmeadow  Street,  Simsbury,
Connecticut. The Bank leases its main office pursuant to a lease with an initial
term of ten years, expiring 2011, and which contains renewal options for a total
of an additional ten years.  The Bank also has the option to purchase the office
during  the fifth  year of the  lease.  This  lease  also  covers the lot at 989
Hopmeadow  Street and the building at 987 Hopmeadow Street that is being used as
additional  administrative  offices and is  partially  subleased  to small local
businesses.

     The Bank's Granby branch office is located at 11 Hartford  Avenue,  Granby,
Connecticut.  The Bank leases  this  office  pursuant to a lease with an initial
term of fifteen years,  expiring in 2013, and which contains renewal options for
a total of an additional ten years.

     The  Bank's  Avon  branch  office  is  located  at  27  Dale  Road,   Avon,
Connecticut.  The Bank leases  this  office  pursuant to a lease with an initial
term of fifteen years,  expiring in 2014, and which contains renewal options for
a total of an additional ten years.

     The Bank's Canton Branch office is located at 250 Albany Turnpike,  Canton,
Connecticut.  The Bank leases  this  office  pursuant to a lease with an initial
term of ten years,  expiring in 2015, and which contains  renewal  options for a
total of an additional fifteen years.

     The Bank's  administrative  offices  are located at 760  Hopmeadow  Street,
Simsbury, Connecticut. The Bank leases this building pursuant to a lease with an
initial term of 63 months  commencing in February  2001,  and which contains two
renewal options of five years each.

     The Bank made $400,962 in total rental payments during 2005.


                                       9
<PAGE>


     The Bank's Investment Policy permits the Bank to invest in  mortgage-backed
securities. It is the policy of the Bank to invest in mortgage-backed securities
that have no more risk than the underlying mortgages. The Investment Policy also
permits  the Bank to invest  in  Preferred  Stock  issued  by  Federal  National
Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC).


ITEM 3. LEGAL PROCEEDINGS

     The  Bank  is not a  party  to any  pending  legal  proceeding,  nor is its
property  the  subject of any  pending  legal  proceeding,  other  than  routine
litigation that is incidental to its business,  and the Bank is not aware of any
pending or threatened  litigation that could have a material adverse effect upon
its business,  operating results, or financial condition.  Moreover, the Bank is
not a party to any  administrative  or judicial  proceeding,  including  but not
limited to proceedings  arising under Section 8 of the Federal Deposit Insurance
Act.

     To the best of our knowledge, no director, officer, affiliate or holder, of
record or  beneficially,  of 5% or more of our  securities is a party adverse to
the Bank or has a material interest adverse to the Bank in any proceeding.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were  submitted to a vote of security  holders during the fourth
quarter of the fiscal year ended December 31, 2005.


                                     PART II


ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES

     The  information  required  by this Item 5 is  incorporated  into this Form
10-KSB by reference to the Bank's Annual  Report under the caption  "SHAREHOLDER
DATA."

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     The  information  required  by this Item 6 is  incorporated  into this Form
10-KSB by reference to the Bank's Annual Report under the caption  "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

ITEM 7. FINANCIAL STATEMENTS

     The  information  required  by this Item 7 is  incorporated  into this Form
10-KSB by reference  to the Bank's  Annual  Report under the captions  "SELECTED
FINANCIAL AND OTHER DATA" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

     During  the fiscal  years  ended  December  31,  2005 and 2004,  the Bank's
principal independent accountant was not dismissed and did not resign or decline
to stand for reelection.


                                       10
<PAGE>


ITEM 8A. CONTROLS AND PROCEDURES

     The  Bank  has   initiatives  in  place  to  ensure   compliance  with  the
Sarbanes-Oxley  Act of 2002 (the  "Act").  The Bank has an  Internal  Compliance
Committee  that is responsible  for the  monitoring of and  compliance  with all
federal  regulations.  This  committee  reports  to  the  Audit  and  Compliance
Committee of the Board of Directors.

Evaluation of Disclosure Control Procedures

     The  Bank's  Chief  Executive  Officer  and Chief  Financial  Officer  have
evaluated the effectiveness of the Bank's disclosure  controls and procedures as
of  December  31,  2005 and have  concluded  that,  as of that date,  the Bank's
disclosure  controls and  procedures  were  effective at ensuring  that required
information will be disclosed on a timely basis. This conclusion is based on the
above-referenced officers' evaluation of such controls and procedures.

Changes in Internal Controls

     There were no  significant  changes in the Bank's  internal  controls  over
financial  reporting  or in other  factors that could  significantly  affect the
Bank's controls during the fiscal year ended December 31, 2005.

ITEM 8B. OTHER INFORMATION

Not Applicable.

                                    PART III


ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors

     The  information  required  by this Item 9 is  incorporated  into this Form
10-KSB by reference to the Proxy  Statement of SBT Bancorp,  Inc. for the annual
meeting  of  shareholders  of the  Company  to be held on May 9, 2006  under the
caption "ELECTION OF DIRECTORS."

Executive Officers

     The  information  required  by this Item 9 is  incorporated  into this Form
10-KSB  by  reference  to  the  Company's  Proxy  Statement  under  the  caption
"INFORMATION ABOUT OUR DIRECTORS."  Additional  information regarding the Bank's
executive officers is included in Item 1 of part I of this Form 10-KSB.

Compliance with Section 16(a)

     The  information  required  by this item 9 is  incorporated  into this Form
10-KSB by reference to the Company's Proxy Statement under the caption  "SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE."

Code of Ethics

     The Bank has  adopted a Code of Ethics and  Conflicts  of  Interest  Policy
applicable to directors,  officers and employees. The text of the Bank's Code of
Ethics and  Conflicts of Interest  Policy was filed  previously as an exhibit to
the Bank's Form  10-KSB for the fiscal year ended  December  31,  2003.  We will
provide to any shareholder,  without charge, upon written request, a copy of our
Code of Ethics and Conflicts of Interest  Policy.  All such  requests  should be
directed  to  The  Simsbury  Bank  &  Trust  Company,  Attention:  Jane  F.  von
Holzhausen,   Secretary,   981  Hopmeadow  Street,   P.O.  Box  248,   Simsbury,
Connecticut, 06070.


                                       11
<PAGE>


ITEM 10. EXECUTIVE COMPENSATION

     The  information  required by this Item 10 is  incorporated  into this Form
10-KSB  by  reference  to the  Company's  Proxy  Statement  under  the  captions
"EXECUTIVE COMPENSATION" and "EMPLOYMENT AGREEMENTS."

ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following  table sets forth the  securities  authorized  for issuance  under
equity compensation plans.
<TABLE>
<CAPTION>
<S>                                              <C>                     <C>                     <C>
                                                                                       Number of securities
                                                                                      remaining available for
                                            Number of                                  future issuance under
                                           securities to                                equity compensation
                                          be issued upon          Weighted-average       plans (excluding
                                            exercise of           exercise price of     securities reflected
                                        outstanding options      outstanding options        in column (a))
                                                (a)                    (b)                       (c)
                                      -----------------------------------------------------------------------
Equity compensation plans
      approved by security
      holders                                 63,204                  $24.34                  25,303
Equity compensation plans not
      approved by security
      holders                                      0                       0                       0
                                      -----------------------------------------------------------------------
                 Total                        63,204                  $24.34                  25,303
                                      =======================================================================
</TABLE>

     The  remaining  information  required by this Item 11 is  contained  in the
Company's  Proxy  Statement  under the caption  "SECURITY  OWNERSHIP  OF CERTAIN
BENEFICIAL  OWNERS  AND  MANAGEMENT"  and is hereby  incorporated  by  reference
herein.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information  required by Item 12 is incorporated  into this form 10-KSB
by  reference  to the  Company's  Proxy  Statement  under the  caption  "CERTAIN
TRANSACTIONS."


                                       12
<PAGE>


ITEM 13. EXHIBITS

Exhibits.

     The  following  exhibits  required  by Item 601 are filed  herewith  or are
incorporated  by reference to the filings  previously  made by the Bank as noted
below (the  reference  in  parentheses  at the end of an Exhibit  indicates  the
number of the Exhibit as it was filed in the document referenced below):


Exhibit No.     Description
-----------     -----------
3(i)            Certificate of Incorporation (incorporated by reference to
                Exhibit (b)(1)(a) of the Bank's Form F-1 dated April 26, 1996)

3(ii)           Bylaws (incorporated by reference to Exhibit (b)(1)(b) of the
                Bank's Form F-1 dated April 26, 1996 except for Section 3.2 as
                amended on January 19, 2000 and incorporated by reference to the
                Bank's Form 10-KSB dated March 30, 2000 and Section 3.4 as
                amended October 22, 2003)

4               Specimen Common Stock Certificate (incorporated by reference to
                Exhibit (b)(3) of the Bank's Form F-1 dated April 26, 1996)

10.1            Employment Agreement, dated as of September 1, 2004, by and
                between the Bank and Martin J. Geitz (incorporated by reference
                to Exhibit 10.13 of the Bank's 10-QSB dated November 12, 2004)

10.2            Employment Agreement, dated as of February 6, 2004, by and
                between the Bank and Charles D. Forgie and amended as of
                November 15, 2005 filed herewith

10.3            Employment Agreement, dated as of February 6, 2004, by and
                between the Bank and Anthony F. Bisceglio (incorporated by
                reference to Exhibit 10.3 of the Bank's Form 10-KSB dated
                March 17, 2004)

10.4            Supplemental Executive Retirement Plan Agreement, dated as of
                April 23, 2001, by and between the Bank and Charles D. Forgie
                (incorporated by reference to Exhibit 10.5 of the Bank's 10-KSB
                dated March 17, 2004)

10.5            Supplemental Executive Retirement Plan Agreement, dated as of
                April 23, 2001, by and between the Bank and Anthony F. Bisceglio
                (incorporated by reference to Exhibit 10.6 of the Bank's 10-KSB
                dated March 17, 2004)

10.6            Change in Control Agreement, dated as of July 30, 1999, by and
                between the Bank and Charles D. Forgie (incorporated by
                reference to Exhibit 10.7 of the Bank's 10-KSB dated March 17,
                2004)

10.8            Change in Control Agreement, dated as of July 30, 1999, by and
                between the Bank and Anthony F. Bisceglio (incorporated by
                reference to Exhibit 10.8 of the Bank's 10-KSB dated March 17,
                2004)

13              2005 Annual Report (except for those portions expressly
                incorporated by reference, the 2005 Annual Report is furnished
                for informational purposes and is not to be deemed filed as part
                of this Form 10-KSB)

14              Code of Ethics (incorporated by reference to Exhibit 14 of the
                Bank's 10-KSB dated March 17, 2004)

21              Subsidiaries (incorporated by reference to Exhibit 21 of the
                Bank's 10-KSB dated March 19, 2003)


                                       13
<PAGE>


31.1            Section Rule 13(a)-14(a)/15(d)-14(a) Certification by Chief
                Executive Officer

31.2            Section Rule 13(a)-14(a)/15(d)-14(a) Certification by Chief
                Financial Officer

32.1            Section 1350 Certification by Chief Executive Officer

32.2            Section 1350 Certification by Chief Financial Officer


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The  information  required by this Item 14 appears in the  Company's  Proxy
Statement  under  the  caption   "RATIFICATION  OF  APPOINTMENT  OF  INDEPENDENT
AUDITORS" and is incorporated by reference herein.




                                       14
<PAGE>

<TABLE>
<CAPTION>
<S>                                               <C>                 <C>               <C>
Selected Financial and Other Data
--------------------------------------------------------------------------------------------------
                                              At 12/31/05         At 12/31/04       At 12/31/03
                                            ----------------   ----------------- -----------------
Balance Sheet Data:
    Total assets                               $209,544,654       $202,154,436   $   188,407,171
    Loans, net                                  145,805,738        141,229,419       131,124,094
    Investment securities                        41,196,740         39,448,449        37,964,879
    Federal funds sold and other
        interest earning deposits                 6,833,970         10,010,972         8,871,466
    Deposits                                    191,115,680        183,132,283       172,076,021
    Stockholders' equity                         15,375,598         14,255,257        12,772,123



                                              For the Year       For the Year      For the Year
                                             Ended 12/31/05     Ended 12/31/04    Ended 12/31/03
                                            ----------------   ----------------- -----------------
Statement of Income Data:
    Total interest and dividend income         $  9,759,483       $  8,670,263   $     8,667,076
    Total interest expense                        2,126,399          1,662,982         1,988,070
    Net interest and dividend income              7,633,084          7,007,281         6,679,006
    Provision for loan losses                        30,000             25,000           180,000
    Net interest and dividend income after
        provision for loan losses                 7,603,084          6,982,281         6,499,006
    Gains on loans sold, net                         61,222             44,726            67,293
    Other noninterest income                        909,890            841,702           831,006
    Noninterest expense                           6,055,101          5,186,427         4,776,205
    Income tax expense                              845,418            904,032           898,466
    Net income                                    1,673,677          1,778,250         1,722,634

    Earnings per common share                  $       2.00       $       2.17   $          2.16
    Earnings per common share,
        assuming dilution                      $       1.96       $       2.10   $          2.10
Other Data:
    Net interest spread                                3.80%              3.66%             3.75%
    Net interest margin                                4.06%              3.85%             3.96%
    Return on average assets                           0.83%              0.92%             0.96%
    Return on average stockholders' equity            11.19%             13.17%            14.26%
    Average stockholders' equity to
        average assets                                 7.45%              6.99%             6.72%
</TABLE>


                                       15
<PAGE>


Management's Discussion and Analysis of
Financial Conditions and Results of Operations
--------------------------------------------------------------------------------

Forward Looking Statements

     When used in this Annual Report or any press release,  public  announcement
or filing, the words "intends,"  "expects,"  "plans,"  "estimates,"  "projects,"
"believes,"  "anticipates"  and  similar  expressions  are  intended to identify
forward-looking  statements.  The Bank (defined below) has made and may continue
to make various  forward-looking  statements  with  respect to earnings,  credit
quality and other  financial  and  business  matters for periods  subsequent  to
December 31, 2005. All statements,  other than  statements of historical  facts,
are  forward-looking  statements.  The Bank cautions that these  forward-looking
statements are not guarantees of future  performance and are subject to numerous
assumptions, risks and uncertainties, and that statements relating to subsequent
periods are subject to greater uncertainty  because of the increased  likelihood
of changes in underlying  factors and  assumptions.  Actual results could differ
materially  from  forward-looking  statements.  In  addition  to  those  factors
previously  disclosed by the Bank and those factors identified elsewhere herein,
the following  factors could cause actual results to differ materially from such
forward-looking  statements:  competitive  pressures on loan and deposit product
pricing;  other  actions of  competitors;  changes in economic  conditions;  the
extent and timing of actions of the  Federal  Reserve  Board;  customer  deposit
disintermediation;  changes in customers'  acceptance of the Bank's products and
services;  and the extent and timing of legislative  and regulatory  actions and
reforms.

     Please  do not  rely  unduly  on any  forward-looking  statement,  as  such
statements  speak only as of the date made and the Bank undertakes no obligation
to revise or update such statements to reflect events or circumstances after the
date  hereof  or  to  reflect  the   occurrence  of   unanticipated   events  or
circumstances.


General

     This  discussion  is  designed  to assist you in better  understanding  the
Bank's  financial  condition,  results  of  operations,  liquidity  and  capital
resources  and  any  significant  changes  and  trends  related  thereto.   This
discussion  should be read in conjunction  with the financial  statements of the
Bank.

     The Simsbury Bank & Trust Company,  Inc. (the "Bank") was  incorporated  on
April 28, 1992 and commenced operations as a Connecticut chartered bank on March
31, 1995.  The Bank's  deposit  accounts are insured  under the Federal  Deposit
Insurance Act, up to the maximum  applicable  limits thereof.  The Bank is not a
member of the Federal Reserve  System.  The Bank's main office and its corporate
offices are located in the town of  Simsbury,  Connecticut.  The Bank has branch
offices in the towns of Granby,  Avon and Canton,  Connecticut.  Simsbury  has a
population of more than 23,000.  The aggregate  population for the Bank's market
area is  75,000,  comprised  of  approximately  29,000  households.  The  Bank's
customer base consists primarily of individual consumers and small businesses in
the Farmington  Valley of Connecticut.  The Bank has in excess of 19,000 deposit
accounts.

     The Bank  offers a full  range of  banking  services  including  commercial
loans,  term real estate loans,  construction  loans, SBA loans and a variety of
consumer  loans;  checking,  savings,  certificates  of deposit and money market
deposit  accounts;  and  travelers'  checks,  safe  deposit and other  customary
non-deposit banking services. As of December 31, 2005,  approximately 72% of the
Bank's loans were secured by residential  property  located in Connecticut.  The
Bank  has  two  ATMs at its  main  office  and  one  ATM at  each of its  branch
locations.  The ATMs  generate  activity  fees based upon  utilization  by other
banks'  customers.  The Bank does not have a trust  department.  The Bank offers
investment  products to  customers  through SBT  Investment  Services,  Inc.,  a
wholly-owned  subsidiary  of the Bank,  and  through  its  affiliation  with the
securities broker/dealer Infinex Financial Services.

     The  deposit  growth  experienced  during  the  Bank's  first  ten years of
operation  continued during 2005.  Deposits  increased by $8.0 million (4.4%) in
2005,  compared to $11.1 million growth during 2004. Total assets ended the year
at $209.5  million,  an increase of $7.3 million  (3.6%) over $202.2  million at
year-end 2004.  The Bank's loan portfolio also grew,  increasing by $4.6 million
(3.2%) to end the year at $147.5 million. The Bank's  loan-to-deposit  ratio, an
important determinant of net interest income, remained steady at 77% at year-end
2005, substantially the same as year-end 2004.


                                       16
<PAGE>


     Net  income of  $1,673,677  ($2.00  per  common  share)  for the year ended
December 31, 2005 was a 6% decrease from the net income of $1,778,250 ($2.17 per
common share)  reported for the year ended  December 31, 2004, and a 3% decrease
from the net income of $1,722,634 ($2.16 per common share) reported for the year
ended December 31, 2003.


Results of Operations for the Years Ended December 31, 2005, 2004 and 2003.

Net Interest Income and Net Interest Margin

     The Bank's earnings  depend largely upon the difference  between the income
received from its loan portfolio and investment securities and the interest paid
on its  liabilities,  mainly interest paid on deposits.  This difference is "net
interest  income." The net interest  income,  when  expressed as a percentage of
average  total  interest-earning  assets,  is  referred  to as the net  interest
margin.  The Bank's net  interest  income is affected by the change in the level
and  the  mix  of  interest-earning  assets  and  interest-bearing  liabilities,
referred to as volume  changes.  The Bank's net interest margin is also affected
by changes in yields earned on assets and rates paid on liabilities, referred to
as rate  changes.  Interest  rates  charged  on the  Bank's  loans are  affected
principally  by the demand for such  loans,  the supply of money  available  for
lending purposes and competitive factors.  These factors are in turn affected by
general economic conditions and other factors beyond the Bank's control, such as
federal  economic  policies,  the  general  supply  of  money  in  the  economy,
legislative tax policies, governmental budgetary matters, and the actions of the
Federal Reserve.

     Net interest and dividend  income,  which totaled  $7,633,084 in 2005,  has
increased  in each year since the Bank began  operations  in March of 1995.  The
majority of this  increase  has been due to an increase in the volume of earning
assets.  Earning assets have grown from $30 million on December 31, 1995 to over
$191  million at December  31, 2004 and to almost $194  million at December  31,
2005,  a growth  rate of 1.6% over the past year and a 36% growth  rate over the
last four  years.  The  Bank's  net  interest  spread  and net  interest  margin
increased  to 3.80% and 4.06%  during 2005 as compared to 3.66% and 3.85% during
2004.  This was primarily due to the rising interest rate  environment  that was
prevalent during the year.

     The following table presents the average amounts  outstanding for the major
categories   of  the  Bank's   interest-earning   assets  and   interest-bearing
liabilities and the average  interest rates earned or paid thereon for the years
ended December 31, 2005, 2004 and 2003.


                                       17
<PAGE>

<TABLE>
<CAPTION>
<S>                                                         <C>                    <C>             <C>
                               NET INTEREST INCOME
                             (Dollars in thousands)

                                                                   For the Year Ended 12/31/05
                                                      ------------------------------------------------------
                                                                                  (1)
                                                         Average Balance        Interest           Yield
                                                     ------------------------------------------------------
Federal funds sold and overnight deposits                   $  5,267              $  169            3.21%

Investments  (1)                                              40,636               1,628            4.01

Mortgage loans                                                80,376               4,364            5.43
Commercial loans                                              32,893               2,108            6.41
Consumer loans                                                30,938               1,579            5.10
Term federal funds sold                                          542                  14            2.58
                                                            --------              ------
        Total loans                                          144,749               8,065            5.57
                                                            --------              ------
        Total interest-earning assets                       $190,652              $9,862            5.17%
                                                            ========              ======

NOW deposits                                                $ 26,721              $   27            0.10%
Savings deposits                                              73,994                 597            0.81
Time deposits                                                 51,684               1,427            2.76
                                                            --------              ------
        Total interest-bearing deposits                      152,399               2,051            1.35

Securities sold under agreements to
  repurchase                                                   2,007                  32            1.59
Federal Home Loan Bank advances                                1,201                  44            3.66
                                                            --------              ------
        Total interest-bearing liabilities                  $155,607              $2,127            1.37%
                                                            ========              ======

        Net interest income                                                       $7,735
                                                                                  ======
        Net interest spread                                                                         3.80%
                                                                                                    ====
        Net interest margin                                                                         4.06%
                                                                                                    ====
</TABLE>

<TABLE>
<CAPTION>
<S>                                                             <C>              <C>            <C>
                                                                   For the Year Ended 12/31/04
                                                      ------------------------------------------------------
                                                                                 (1)
                                                        Average Balance        Interest           Yield
                                                      ------------------------------------------------------
Federal funds sold and overnight deposits                   $ 11,191              $  139            1.24%

Investments  (1)                                              39,603               1,478            3.73

Mortgage loans                                                83,349               4,619            5.54
Commercial loans                                              24,091               1,368            5.68
Consumer loans                                                25,560               1,161            4.54
Term federal funds sold                                          719                   8            1.11
                                                            --------              ------
        Total loans                                          133,719               7,156            5.35
                                                            --------              ------
        Total interest-earning assets                       $184,513              $8,773            4.75%
                                                            ========              ======

NOW deposits                                                $ 27,514              $   27            0.10%
Savings deposits                                              78,462                 635            0.81
Time deposits                                                 44,070                 963            2.19
                                                            --------              ------
        Total interest-bearing deposits                      150,046               1,625            1.08

Securities sold under agreements to
  repurchase                                                   2,889                  38            1.32
Federal Home Loan Bank advances                                    5                   -               -
                                                            --------              ------
        Total interest-bearing liabilities                  $152,940              $1,663            1.09%
                                                            ========              ======

        Net interest income                                                       $7,110
                                                                                  ======
        Net interest spread                                                                         3.66%
                                                                                                    ====
        Net interest margin                                                                         3.85%
                                                                                                    ====
</TABLE>


                                       18
<PAGE>

<TABLE>
<CAPTION>
<S>                                                          <C>                <C>             <C>
                                            NET INTEREST INCOME
                                           (Dollars in thousands)

                                                                   For the Year Ended 12/31/03
                                                      ------------------------------------------------------
                                                                                  (1)
                                                         Average Balance        Interest           Yield
                                                      ------------------------------------------------------
Federal funds sold and overnight deposits                   $ 16,638              $  165            0.99%

Investments (1)                                               30,483               1,286            4.22

Mortgage loans                                                82,644               5,042            6.10
Commercial loans                                              20,044               1,185            5.91
Consumer loans                                                20,682               1,083            5.24
Term federal funds sold                                          958                  10            1.04
                                                            --------              ------
        Total loans                                          124,328               7,320            5.89
                                                            --------              ------
        Total interest-earning assets                       $171,449              $8,771            5.12%
                                                            ========              ======

NOW deposits                                                $ 24,979              $   46            0.18%
Savings deposits                                              72,146                 742            1.03
Time deposits                                                 43,981               1,146            2.61
                                                            --------              ------
        Total interest-bearing deposits                      141,106               1,934            1.37

Securities sold under agreements to
  repurchase                                                   3,599                  54            1.50
Federal Home Loan Bank advances                                    -                   -               -
                                                            --------              ------
Total interest-bearing liabilities                          $144,705              $1,988            1.37%
                                                            ========              ======

        Net interest income                                                       $6,783
                                                                                  ======
        Net interest spread                                                                         3.75%
                                                                                                    ====
        Net interest margin                                                                         3.96%
                                                                                                    ====
</TABLE>

(1)  On a fully taxable equivalent basis based on a tax rate of 38.95%. Interest
     income on  investments  includes a fully taxable  equivalent  adjustment of
     $103,000 in 2005, $103,000 in 2004 and $103,000 in 2003.


Provision for Loan Losses

     Provisions  for loan  losses  are  charged to  earnings  to bring the total
allowance for loan losses to a level deemed appropriate by the Bank's management
("Management")  based on such factors as historical  experience,  the volume and
type of  lending  conducted  by the Bank,  the amount of  non-performing  loans,
regulatory policies, generally accepted accounting principles,  general economic
conditions,  and other  factors  related to the  collectability  of loans in the
Bank's portfolio.

     Each  month  the Bank  reviews  the  allowance  for loan  losses  and makes
additional  provisions to the allowance,  as needed. For the year ended December
31, 2005,  the  allowance  was  increased  by $18,000,  net of  charge-offs  and
recoveries.  The total  allowance  for loan  losses  at  December  31,  2005 was
$1,720,000 or 1.16% of outstanding  loans.  This compares with a total allowance
for loan losses of  $1,702,000  at year-end  2004,  which  represented  1.19% of
outstanding  loans. With the exclusion of loans to financial  institutions (term
federal funds sold), this ratio was 1.18% at year-end 2005 and 1.23% at year-end
2004.  During 2005, the Bank charged-off four loans for a total of $12,500.  The
Bank recovered one loan for $94 during 2005.  During 2004, the Bank  charged-off
six loans for a total of  $14,000.  The Bank  recovered  four loans for  $21,000
during 2004. Management believes the allowance for loan losses is adequate.


                                       19
<PAGE>

Noninterest Income and Noninterest Expense

     The  following  table  sets  forth the  various  components  of the  Bank's
noninterest  income and  noninterest  expense for the years ended  December  31,
2005, 2004 and 2003.
<TABLE>
<CAPTION>
<S>                                   <C>               <C>      <C>            <C>         <C>            <C>
                                                   NONINTEREST INCOME

                                    For Year                  For Year                  For Year
                                     Ended          % of       Ended           % of      Ended            % of
                                    12/31/05        Total     12/31/04        Total     12/31/03         Total
                                   -------------------------------------------------------------------------------
 Service charges on deposit        $ 313,746         32.3%   $ 331,374         37.4%    $ 310,536         34.6%
  accounts
 Safe deposit fees                    64,819          6.7       61,475          6.9        61,542          6.8
 Business manager income             127,157         13.1      118,768         13.4       113,158         12.6
 Gain on loans sold, net              61,222          6.3       44,726          5.0        67,293          7.5
 Other income                        404,168         41.6      330,085         37.3       345,770         38.5
                                   ----------- ------------ ------------ ------------ ------------- --------------
          Total                     $971,112        100.0%    $886,428        100.0%     $898,299        100.0%
                                   =========== ============ ============ ============ ============= ==============


                                                NONINTEREST EXPENSE

                                    For Year                  For Year                  For Year
                                     Ended          % of       Ended           % of      Ended            % of
                                    12/31/05        Total     12/31/04        Total     12/31/03         Total
                                   -------------------------------------------------------------------------------

 Salaries and employee benefits    $3,054,881         50.5%   $2,716,535       52.4%    $2,388,588      50.0%
 Occupancy expense                    753,452         12.4       682,675       13.1        653,284      13.7
 Equipment expense                    210,475          3.5       222,383        4.3        254,434       5.3
 Forms and supplies                   160,599          2.6       133,127        2.6        168,497       3.5
 Advertising and promotions           350,157          5.8       215,689        4.2        178,967       3.8
 Professional fees                    328,850          5.4       164,031        3.2        152,410       3.2
 Insurance                             78,753          1.3        74,591        1.4         77,491       1.6
 Loan expenses                         85,141          1.4       109,795        2.1        129,647       2.7
 Telephone and postage                138,458          2.3       118,787        2.3        164,278       3.4
 Other expenses                       894,335         14.8       748,814       14.4        608,609      12.8
                                   ----------- ------------ ------------ ------------ ------------- --------------
            Total                  $6,055,101        100.0%   $5,186,427      100.0%    $4,776,205     100.0%
                                   =========== ============ ============ ============ ============= ==============
</TABLE>



     Noninterest  income for the  twelve  months  ended  December  31,  2005 was
$971,112,  an increase of almost  $85,000 from the twelve months ended  December
31, 2004. The 2005 increase was due primarily to the increases in gains on loans
sold and other  income  offset by a decrease  in service  charges  collected  on
deposit  accounts.  The Bank continued to sell  residential  mortgage loans with
thirty year maturities during 2005 resulting in gains of $61,222.  The Bank sold
loans resulting in gains of $44,726 during 2004. The decrease in service charges
on deposit  accounts was due to decreases in  transaction  volumes.  The largest
decrease was in other service  charges for such  transactions  as wire transfers
and foreign item collections.  The Bank collected approximately $23,000 in these
charges during 2005 compared to approximately  $37,500 collected during 2004. At
December 31, 2005, the Bank had over 19,000 deposit accounts,  1,900 or 11% more
than the  approximately  17,100  accounts at year-end 2003 and 2,300 or 14% more
than the  approximately  16,700 accounts at year-end 2003. The increase in other
income  during  2005 is  primarily  due to an  increase  in other fees  received
related to ATM and point of sales  transactions  and an  increase in income from
bank-owned  life  insurance.  The Bank did not  sell any  investment  securities
during 2005 or 2004.

     Noninterest expense for the year ended December 31, 2005 was $6,055,101, an
increase of $868,674 or 17%, over 2004.  Noninterest  expense for the year ended


                                       20
<PAGE>


December 31, 2004 was  $5,186,427.  This compares to an increase of 9% from 2003
to 2004 in noninterest  expense.  The largest increases occurred in salaries and
benefits, occupancy expense, professional fees and advertising. The increases in
2005 were  primarily  related  to a fourth  full-service  branch  and the Bank's
continued  efforts  to  promote  itself as the bank of choice in the  Farmington
Valley of  Connecticut.  Other factors in this increase are expenses  related to
compliance with new regulatory  requirements and the formation of a bank holding
company.  The Bank's  operating  expense ratios remain very favorable versus its
peers.

     Salaries and employee benefits  comprised 51% of total noninterest  expense
during  2005,  as compared to 52% in 2004.  Other major  categories  during 2005
included  occupancy  expense and equipment  expense at approximately 12% and 4%,
respectively,  advertising and promotions at approximately  6%, and professional
fees at approximately 5%. Other major categories in 2004 also included occupancy
and equipment  expenses at approximately 13% and 4%,  respectively.  The largest
components of other  expenses,  totaling  $894,335 in 2005 and $748,814 in 2004,
consisted of correspondent banking charges and software costs.

Financial Condition at Years Ended December 31, 2005, 2004 and 2003

     The  following  table sets forth the  average  balances  of each  principal
category of the Bank's assets,  liabilities  and capital  accounts for the years
ended December 31, 2005, 2004 and 2003.

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                            Distribution of Assets, Liabilities and Stockholders' Equity
                                               (Dollars in thousands)

                                                For the Year Ended     For the Year Ended       For the Year Ended
                                                     12/31/05              12/31/04                 12/31/03
                                               ---------------------------------------------------------------------
                                                           Percent of              Percent of             Percent of
                                                 Average     Total       Average    Total      Average     Total
                                                 Balance    Assets       Balance    Assets      Balance    Assets
                                               ---------------------------------------------------------------------
Assets
Cash and due from banks                         $  6,195    3.1%        $  5,516     2.9%     $  4,993        2.8%
Investment securities                             40,636   20.2           39,603    20.5        30,483       17.0
Federal funds sold and overnight
  deposits                                         5,267    2.6           11,191     5.8        16,638        9.2
Loans, net                                       143,385   71.4          132,008    68.3       122,726       68.3
Premises and equipment                               570    0.3              508     0.2           572        0.3
Accrued interest and other assets                  4,872    2.4            4,479     2.3         4,249        2.4
                                                --------  -----         --------   -----      --------      -----
        Total assets                            $200,925  100.0%        $193,305   100.0%     $179,661      100.0%
                                                ========  =====         ========   =====      ========      =====

Liabilities and Stockholders' Equity
Deposits
Demand and NOW deposits                         $ 56,639   28.2%        $ 53,762    27.8%     $ 46,993       26.2%
Savings deposits                                  73,994   36.8           78,462    40.6        72,146       40.1
Time deposits                                     51,684   25.7           44,070    22.8        43,981       24.5
                                                --------  -----         --------   -----      --------      -----
Total deposits                                   182,317   90.7          176,294    91.2       163,120       90.8
Accrued interest and other liabilities             3,648    1.8            3,507     1.8         4,459        2.5
                                                --------  -----         --------   -----      --------      -----
        Total liabilities                        185,965   92.5          179,801    93.0       167,579       93.3
                                                --------  -----         --------   -----      --------      -----

Stockholders' equity:
  Common stock                                     8,397    4.2            8,197     4.3         7,877        4.4
  Retained earnings and other
   comprehensive income                            6,563    3.3            5,307     2.7         4,205        2.3
                                                --------  -----         --------   -----      --------      -----
        Total stockholders' equity                14,960    7.5           13,504     7.0        12,082        6.7
                                                --------  -----         --------   -----      --------      -----

        Total liabilities and
         stockholders'equity                    $200,925  100.0%        $193,305   100.0%     $179,661      100.0%
                                                ========  =====         ========   =====      ========      =====
</TABLE>


                                       21
<PAGE>

Investment Portfolio

     In order to  maintain a reserve of  readily  marketable  assets to meet the
Bank's  liquidity  and loan  requirements,  the  Bank  purchases  United  States
Treasury securities and other investments.  Sales of "federal funds" (short-term
loans to other banks) are regularly utilized. Placement of funds in certificates
of  deposit  with  other  financial  institutions  may be  made  as  alternative
investments pending utilization of funds for loans or other purposes.

     Securities  may be  pledged  to meet  security  requirements  imposed  as a
condition for receipt of deposits of public funds and repurchase agreements.  At
December 31, 2005, the Bank had fourteen  securities  with a book value totaling
$5,704,711 pledged for such purposes.

     As of December 31, 2005, the Bank's investment  portfolio consisted of U.S.
government  and  agency   securities  and  preferred   stocks,   mortgage-backed
securities,  corporate  bonds,  municipal  securities,  and money market  mutual
funds. The Bank's policy is to stagger the maturities of its investments to meet
overall  liquidity  requirements  of the Bank.  The Bank's  current policy is to
invest only in securities with average maturities of less than ten years.

     The following table  summarizes the amounts and  distribution of the Bank's
investment securities held as of December 31, 2005, 2004, and 2003.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                              INVESTMENT PORTFOLIO
                             (Dollars in thousands)
                                                                          December 31, 2005
                                                  -----------------------------------------------------------------
                                                       Amortized Cost             Fair                Yield
                                                                                  Value
                                                  -----------------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES
-------------------------------------
U.S. Government and Agency securities
     Due within one year                                   $ 4,500              $ 4,431                2.65%
     Due after one to five years                            13,326               13,048                3.62
     Due after five to ten years                                 -                    -                   -
                                                           -------              -------
        Total U.S. Government and Agency securities         17,826               17,479                3.38
State and Municipal securities
     Due within one year                                     1,000                  998                2.80
     Due after one to five years                             1,937                1,950                4.14
     Due after five to ten years                             1,821                1,949                5.38
     Due after ten years                                       232                  250                5.60
                                                           -------              -------
        Total State and Municipal securities                 4,990                5,147                4.39
Corporate debt securities
     Due after one to five years                               475                  459                3.30
                                                           -------              -------
        Total Corporate debt securities                        475                  459                3.30
Mortgage-backed securities
     WARM* within one year                                   3,977                3,944                4.96
     WARM* after one to five years                          11,846               11,522                4.46
     WARM* after five to ten years                              26                   25                6.30
                                                           -------              -------
        Total Mortgage-backed securities                    15,849               15,491                4.59
Preferred stocks                                             2,000                1,655                2.84
                                                           -------              -------
        Total Available-for-sale securities                $41,140              $40,231                4.22%
                                                           =======              =======

* - Weighted-Average Remaining Maturity
                                                                          December 31, 2004
                                                  -----------------------------------------------------------------
                                                         Amortized                Fair                Yield
                                                            Cost                  Value
                                                  -----------------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES
--------------------------------------
U.S. Government and Agency securities
     Due within one year                                   $ 2,300            $   2,308                4.00%
     Due after one to five years                            12,495               12,379                3.00
                                                           -------              -------
        Total U.S. Government and Agency securities         14,795               14,687                3.15
State and Municipal securities
     Due after one to five years                             2,278                2,369                4.28
     Due after five to ten years                             1,820                2,013                5.38
     Due after ten years                                       232                  253                5.60
                                                           -------              -------
        Total State and Municipal securities                 4,330                4,635                4.81
Corporate debt securities
     Due within one year                                       500                  500                3.85
     Due after one to five years                               475                  467                3.30
                                                           -------              -------
        Total Corporate debt securities                        975                  967                3.58
Mortgage-backed securities
     WARM* within one year                                   1,605                1,642                5.99
     WARM* after one to five years                          15,063               14,989                4.50
     WARM* after five to ten years                              41                   40                6.30
                                                           -------              -------
        Total Mortgage-backed securities                    16,709               16,671                4.65
Preferred stocks                                             2,000                1,523                1.53
                                                           -------              -------
Total Available-for-sale securities                        $38,809              $38,483                3.91%
                                                           =======              =======
</TABLE>


                                       22
<PAGE>

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                 INVESTMENT PORTFOLIO
                                                (Dollars in thousands)

                                                                          December 31, 2003
                                                  -----------------------------------------------------------------
                                                         Amortized                Fair                Yield
                                                            Cost                  Value
                                                  -----------------------------------------------------------------
AVAILABLE-FOR-SALE SECURITIES
--------------------------------------
U.S. Government and Agency securities
     Due within one year                                   $ 1,405              $ 1,447                7.05%
     Due after one to five years                            16,548               16,574                3.12
     Due after five to ten years                               507                  508                6.00
                                                           -------              -------
        Total U.S. Government and Agency securities         18,460               18,529                3.50
State and Municipal securities
     Due within one year                                         -                    -                   -
     Due after one to five years                               835                  906                5.10
     Due after five to ten years                             2,840                3,115                4.79
     Due after ten years                                       233                  255                5.60
                                                           -------              -------
        Total State and Municipal securities                 3,908                4,276                4.90
Corporate debt securities
     Due within one year                                       498                  505                5.88
     Due after one to five years                               500                  503                3.85
                                                           -------              -------
        Total Corporate debt securities                        998                1,008                4.86
Mortgage-backed securities
     WARM* within one year                                   1,312                1,384                7.16
     WARM* after one to five years                           9,062                9,027                4.39
     WARM* after five to ten years                           1,044                1,009                6.30
                                                           -------              -------
        Total Mortgage-backed securities                    11,418               11,420                4.69
Preferred stocks                                             2,000                1,767                1.99
                                                           -------              -------
        Total Available-for-sale securities                $36,784              $37,000                3.97%
                                                           =======              =======

* - Weighted-Average Remaining Maturity
</TABLE>


                                       23
<PAGE>

Loan Portfolio

     General  The  following  table  presents  the Bank's loan  portfolio  as of
December 31, 2005, 2004 and 2003.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                 LOAN PORTFOLIO
                             (Dollars in thousands)

                                              December 31, 2005         December 31, 2004       December 31, 2003
                                            ------------------------------------------------------------------------
                                                         % Total                  % Total                  % Total
                                              Balance     Loans         Balance    Loans        Balance      Loans
                                            ------------------------------------------------------------------------

Commercial, financial and agricultural *     $ 11,386       7.7%        $ 14,089    9.9%      $ 12,506       9.4%
Real estate - construction and land
 development                                    9,037       6.1            6,954    4.9          3,466       2.6
Real estate - residential                      96,459      65.5           97,646   68.4         94,375      71.2
Real estate - commercial                       16,101      10.9           11,197    7.8         11,417       8.6
Municipal                                         987       0.7            1,015    0.7            906       0.7
Consumer                                       13,381       9.1           11,850    8.3          9,991       7.5
                                             --------      ----         --------   ----       --------      ----
Total loans                                   147,351      100.0%        142,751  100.0%       132,661     100.0%
                                                           =====                  =====                    =====

Allowance for loan losses                      (1,720)                    (1,702)               (1,670)
Deferred costs, net                               175                        180                   133
                                             --------                   --------              --------
Net Loans                                    $145,806                   $141,229              $131,124
                                             ========                   ========              ========
</TABLE>

* - Includes Term federal funds sold  $2,000,000  at  12/31/2005,  $4,000,000 at
12/31/2004 and $4,000,000 at 12/31/2003.


     The Bank's  commercial loans are made for the purpose of providing  working
capital,  financing  the purchase of equipment or for other  business  purposes.
Such loans  include loans with  maturities  ranging from thirty days to one year
and "term loans" which are loans with  maturities  normally  ranging from one to
twenty-five years.  Short-term  business loans are generally intended to finance
current transactions and typically provide for periodic principal payments, with


                                       24
<PAGE>

interest  payable  monthly.  Term loans  normally  provide for fixed or floating
interest rates, with monthly payments of both principal and interest.

     The Bank's  construction  loans are primarily interim loans made to finance
the  construction of commercial and single family  residential  property.  These
loans are typically short-term.  The Bank generally  pre-qualifies  construction
loan borrowers for permanent  "take-out"  financing as a condition to making the
construction loan. The Bank occasionally will make loans for speculative housing
construction or for acquisition and development of raw land.

     The Bank's other real estate loans consist primarily of loans made based on
the  borrower's  cash flow and which are secured by deeds of trust on commercial
and residential  property to provide another source of repayment in the event of
default.  It is the Bank's policy to restrict  real estate loans without  credit
enhancement  to no more  than  80% of the  lower of the  appraised  value or the
purchase  price  of the  property  depending  on the  type of  property  and its
utilization.  The Bank offers both fixed and floating rate loans.  Maturities on
such loans  typically range from five to twenty years.  However,  Small Business
Administration  ("SBA") and certain  other real estate  loans easily sold in the
secondary market are made for longer maturities. The Bank has been designated an
approved SBA lender.  The Bank's SBA loans are categorized as commercial or real
estate - commercial depending on the underlying  collateral.  Also, the Bank has
been  approved as an  originator  of loans that can be sold to the Federal  Home
Loan Mortgage Corporation.

     The Bank has entered into an agreement with Resource Mortgage Solutions,  a
division of NetBank  ("RMS") to sell  mortgage  loans  originated by the Bank to
RMS.  During the year ended December 31, 2005, the Bank sold  twenty-five  loans
with total principal  balances of $6,495,650 to RMS resulting in total net gains
of approximately  $61,200 for the Bank. During the year ended December 31, 2004,
the Bank sold twenty-four  loans with total principal  balances of $4,692,460 to
RMS resulting in total net gains of approximately $44,700 for the Bank.

     Consumer loans are made for the purpose of financing  automobiles,  various
types of consumer goods, and other personal  purposes.  Consumer loans generally
provide for the monthly  payment of principal and  interest.  Most of the Bank's
consumer loans are secured by the personal property being purchased.

     With certain exceptions, the Bank is permitted under applicable law to make
related extensions of credit to any one borrowing entity up to 15% of the Bank's
capital and  reserves.  An  additional  10% is  allowable if the credit is fully
secured by qualified collateral. The Bank sells participations in its loans when
necessary to stay within lending limits.  As of December 31, 2005, these lending
limits for the Bank were $2,564,270 and $4,273,783, respectively.

     Loan  Concentrations The Bank does not have any significant  concentrations
in its loan  portfolio  by industry or group of  industries.  As of December 31,
2005, approximately 72% of the Bank's loans were secured by residential property
located in  Connecticut.  As of December 31, 2004,  74% of the Bank's loans were
secured by such property.

     Loan Portfolio Maturities and Interest Rate Sensitivity The following table
summarizes  the  maturities  and interest  rate  sensitivity  of the Bank's loan
portfolio.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                    MATURITIES AND RATE SENSITIVITY OF LOANS
                             As of December 31, 2005
                                 (In thousands)

                                                            Over One
                                                           but less
                                             One Year        than               Over
                                             Or Less       Five Years        Five Years       Total
                                            ----------    -------------     ------------    -----------
Commercial, financial and agricultural        $ 6,613           $4,773                -        $11,386
Real Estate - construction and land             9,037                -                -          9,037
development
Real Estate - residential                      21,818           16,368         $ 58,273         96,459
Real Estate - commercial                       15,414              458              229         16,101
Municipal                                          61              926                -            987
Consumer                                        5,155            8,226                          13,381
                                            ----------    -------------     ------------    -----------
              Total loans                    $ 58,098         $ 30,751         $ 58,502       $147,351
                                            ==========    =============     ============    ===========

Loans with fixed interest rates                $8,169         $ 28,998         $ 47,673        $84,840

Loans with variable interest rates             49,929            1,753           10,829         62,511
                                            ----------    -------------     ------------    -----------
            Total loans                      $ 58,098         $ 30,751         $ 58,502       $147,351
                                            ==========    =============     ============    ===========
</TABLE>


                                       25
<PAGE>

     The  following  table sets forth at December  31,  2005,  2004 and 2003 the
Bank's loan  commitments,  standby letters of credit and unadvanced  portions of
loans.


                 LOAN COMMITMENTS AND STANDBY LETTERS OF CREDIT
                                 (In thousands)

                                                12/31/05    12/31/04    12/31/03
                                                --------    --------    --------

      Commitments to originate loans             $ 1,545     $ 4,566     $ 2,023
      Standby letters of credit                      358           -           -
      Unadvanced portion of loans
         Commercial real estate                    5,270       4,432       2,398
         Commercial lines of credit                6,654       4,655       4,395
         Residential real estate                       -         266         899
         Consumer                                    877         773         784
         Home equity lines of credit              20,116      15,711      14,165
                                                --------    --------    --------
         Total                                  $ 34,820    $ 30,403    $ 24,664
                                                ========    ========    ========


     Non-Performing  Assets  Interest on  performing  loans is accrued and taken
into income daily. Loans over 90 days past due are deemed  "non-performing"  and
are placed on a nonaccrual status, unless the loan is well collateralized and in
the process of collection.  Interest received on nonaccrual loans is credited to
income  only  upon  receipt  and in  certain  circumstances  may be  applied  to
principal  until the loan has been  repaid in full,  at which time the  interest
received is credited to income.  The Bank had one nonaccrual loan with a balance
of  approximately  $32,500 as of December 31, 2005.  The Bank had no  nonaccrual
loans as of December 31, 2004. The Bank had two  nonaccrual  loans with balances
of  approximately  $10,000 as of December 31,  2003.  The Bank had no loans more
than 90 days past due and still accruing  interest as of December 31, 2005, 2004
or 2003.

     When appropriate or necessary to protect the Bank's interests,  real estate
taken as collateral on a loan may be taken by the Bank through  foreclosure or a
deed in lieu of foreclosure.  Real property  acquired in this manner by the Bank
will be known as "other real estate owned" ("OREO"),  and will be carried on the
books of the Bank as an asset, at the lesser of the Bank's  recorded  investment
or the fair value less  estimated  costs to sell. As of December 31, 2005,  2004
and 2003, there was no OREO held by the Bank.

     The risk of  nonpayment  of loans is an  inherent  feature  of the  banking
business. That risk varies with the type and purpose of the loan, the collateral
which is utilized to secure payment,  and ultimately,  the credit  worthiness of
the borrower. In order to minimize this credit risk, the Bank requires that most
loans be approved  by at least two  officers,  one of whom must be an  executive
officer.  Commercial  loans  greater  than  $100,000  as well as other  loans in
certain  circumstances  must  be  approved  by  the  Board  of  Directors'  Loan
Committee.

     The Bank also  maintains  a program  of annual  review of  certain  new and
renewed loans by an outside loan review consultant. Loans are graded from "pass"
to "loss",  depending on credit quality, with "pass" representing loans that are
fully  satisfactory as additions to the Bank's portfolio.  These are loans which
involve a degree of risk that is not unwarranted  given the favorable aspects of
the credit and which  exhibit both primary and  secondary  sources of repayment.
Classified  loans  identified  in the  review  process  are added to the  Bank's
Internal  Watchlist and an additional  allowance for loan losses is  established
for such loans if appropriate.  Additionally,  the Bank is examined regularly by
the  Federal  Deposit  Insurance   Corporation  and  the  State  of  Connecticut
Department  of Banking at which time a further  review of the loan  portfolio is
conducted.

     There were eighteen classified loans with a combined outstanding balance of
$2,711,270 as of December 31, 2005 and fifteen  classified loans with a combined
outstanding balance of $2,086,700 as of December 31, 2004.


                                       26
<PAGE>

Allowance for Loan Losses

     The Bank  maintains an allowance  for loan losses to provide for  potential
losses in the loan portfolio.  Additions to the allowance are made by charges to
operating  expenses in the form of a provision  for loan losses.  All loans that
are judged to be  uncollectible  are  charged  against the  allowance  while any
recoveries  are  credited  to the  allowance.  Management  conducts  a  critical
evaluation of the loan portfolio monthly. This evaluation includes an assessment
of the following  factors:  the results of the Bank's internal loan review,  any
external  loan  review,  any  regulatory  examination,   loan  loss  experience,
estimated  potential  loss  exposure on each credit,  concentrations  of credit,
value of collateral,  any known  impairment in the borrower's  ability to repay,
and present and prospective economic conditions.

     The  following   table   summarizes   the  Bank's  loan  loss   experience,
transactions in the allowance for loan losses and certain prominent ratios at or
for the years ended December 31, 2005, 2004 and 2003.


                      ALLOWANCE FOR LOAN LOSSES
                        (Dollars in thousands)

                                                At or For  At or For  At or For
                                                 the Year   the Year   the Year
                                                   Ended      Ended      Ended
                                                12/31/05   12/31/04   12/31/03
                                              ---------- ---------- ----------
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period                 $  1,702   $  1,670   $  1,486
                                              ---------- ---------- ----------
Total charge-offs                                   (12)       (14)        (5)
Total recoveries                                      -         21          9
                                              ---------- ---------- ----------
Net loans (charged-off) recovered                   (12)         7          4
                                              ---------- ---------- ----------
Provisions for loan losses                           30         25        180
                                              ---------- ---------- ----------
Balance at end of period                       $  1,720   $  1,702   $  1,670
                                              ========== ========== ==========
BALANCES
Average total loans                            $144,749   $133,719   $124,328
Total loans at end of period                    147,351    142,751    132,661

RATIOS
Allowance for loan losses to
 average loans                                     1.19%      1.28%      1.34%
Allowance for loan losses to
 loans at end of period                            1.17       1.19       1.26


     The following  table  summarizes  the  allocation of the allowance for loan
losses by loan type and the percent of loans in each category  compared to total
loans at December 31, 2005, 2004 and 2003.


                     ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
                             (Dollars in thousands)
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                               December 31, 2005               December 31, 2004              December 31, 2003
                                            --------------------------    --------------------------     --------------------------
                                                             % of                          % of                           % of
                                              Allocation    Loans by        Allocation    Loans by         Allocation    Loans by
                                             of Allowance   Category       of Allowance   Category        of Allowance   Category
                                            --------------------------    --------------------------     --------------------------
Real estate - residential                       $  418        65.5%            $  513       68.4%            $  500        71.2%
Real estate -  commercial                          455        10.9                264        7.8                396         8.6
Real estate - construction and land
  development                                      208         6.1                116        4.9                 36         2.6
Commercial, financial and agricultural             370         7.7                525        9.9                473         9.4
Municipal                                            9         0.7                 26        0.7                 28         0.7
Consumer                                           260         9.1                258        8.3                237         7.5
                                                ------       -----             ------      -----             ------       -----
        Total                                   $1,720       100.0%            $1,702      100.0%            $1,670       100.0%
                                                ======       =====             ======      =====             ======       =====
</TABLE>


                                       27
<PAGE>

Deposits

     Deposits are the Bank's primary source of funds.  At December 31, 2005, the
Bank had a  deposit  mix of 32%  checking,  35%  savings  and 33%  certificates.
Nineteen  percent of the total  deposits  of $191.1  million  were  non-interest
bearing at December 31, 2005.  At December 31, 2004,  the Bank had a deposit mix
of 32%  checking,  43% savings and 25%  certificates.  Seventeen  percent of the
total deposits of $183.1 million were non-interest bearing at December 31, 2004.
At  December  31,  2005,  $6,461,000  of the Bank's  deposits  were from  public
sources.  At December 31, 2004,  $10,178,000  of the Bank's  deposits  were from
public sources.  The Bank's net interest income is enhanced by its percentage of
non-interest bearing deposits.

     The Bank's deposits are obtained from a cross-section of the communities it
serves.  No material portion of the Bank's deposits has been obtained from or is
dependent upon any one person or industry.  The Bank's  business is not seasonal
in nature. The Bank accepts deposits in excess of $100,000 from customers. Those
deposits are priced to remain competitive. As of December 31, 2005 and 2004, the
Bank had no brokered funds on deposit.

     The Bank is not dependent upon funds from sources outside the United States
and has not made loans to any foreign entities.

     The following table summarizes the distribution of average deposits and the
average  annualized  rates paid for the years ended December 31, 2005,  2004 and
2003.

                                              AVERAGE DEPOSITS
                                           (Dollars in thousands)
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                             For the Year Ended           For the Year Ended            For the Year Ended
                             December 31, 2005             December 31, 2004            December 31, 2003
                           -----------------------     --------------------------    -------------------------
                            Average      Average        Average        Average        Average       Average
                            Balance      Rate           Balance        Rate           Balance        Rate
                           ---------- ------------     ----------- --------------    ----------- -------------
Demand deposits              $29,918      0.00%           $26,248       0.00%           $22,014       0.00%
NOW deposits                  26,721      0.10             27,514       0.10             24,979       0.18
Savings deposits              73,994      0.81             78,462       0.81             72,146       1.03
Time deposits                 51,684      2.76             44,070       2.19             43,981       2.61
                           ---------- ------------     ----------- --------------    ----------- -------------
   Total average deposits   $182,317      1.12%          $176,294       0.92%          $163,120       1.19%
                           ========== ============     =========== ==============    =========== =============
</TABLE>

     The following  table  indicates  the maturity  schedule for the Bank's time
deposits of $100,000 or more as of December 31, 2005, 2004 and 2003.


             SCHEDULED MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
                             (Dollars in thousands)
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                    December 31, 2005           December 31, 2004         December 31, 2003
                                 ------------------------     ----------------------    ----------------------
                                                 % of                       % of                    % of
                                   Balance       Total         Balance      Total        Balance      Total
                                 ------------ -----------     ---------- -----------    ----------- ----------

Three months or less                 $ 7,521      35.0%        $ 5,656       39.4%        $ 2,405      19.5%
Over three through six months          5,498       25.6          4,864       33.9           4,325      35.1
Over six through twelve months         5,236       24.4          1,024        7.2           2,778      22.6
Over twelve months                     3,228       15.0          2,799       19.5           2,808      22.8
                                 ------------ -----------     ---------- -----------    ----------- ----------
        Total Time Deposits          $21,483      100.0%       $14,343      100.0%        $12,316     100.0%
                                 ============ ===========     ========== ===========    ============ =========
</TABLE>


                                       28
<PAGE>

Liquidity and Asset-Liability Management

     Liquidity  management  for banks requires that funds always be available to
pay anticipated deposit withdrawals and maturing financial  obligations promptly
and fully in accordance  with their terms.  The balance of the funds required is
generally  provided by payments on loans,  sale of loans,  liquidation of assets
and the acquisition of additional deposit liabilities.  One method banks utilize
for  acquiring  additional  liabilities  is through the  acceptance of "brokered
deposits"  (defined  to  include  not only  deposits  received  through  deposit
brokers,  but also deposits  bearing  interest in excess of 75 basis points over
market  rates),  typically  attracting  large  certificates  of  deposit at high
interest  rates.  The Bank,  however,  has not accepted and does not  anticipate
accepting "brokered deposits" in the future.

     To meet liquidity  needs, the Bank maintains a portion of its funds in cash
deposits in other banks, federal funds sold, and available-for-sale  securities.
As of December 31, 2005, the Bank's  liquidity ratio was 29%, defined as the sum
of $6.767 million in federal funds sold,  $40.231 million in  available-for-sale
securities  at fair  value,  and  $9.357  million in cash and due from banks and
interest  bearing  deposits at the Federal Home Loan Bank,  as a  percentage  of
deposits.  As of December 31, 2004, the Bank's  liquidity ratio was 29%, defined
as the  sum of  $7.976  million  in  federal  funds  sold,  $38.483  million  in
available-for-sale  securities at fair value, and $7.132 million in cash and due
from banks and interest  bearing  deposits at the Federal  Home Loan Bank,  as a
percentage of deposits.

     The careful planning of asset and liability  maturities and the matching of
interest rates to correspond with this maturity  matching is an integral part of
the active management of an institution's net yield. To the extent maturities of
assets and liabilities do not match in a changing interest rate environment, net
yields may be  affected.  Even with  perfectly  matched  repricing of assets and
liabilities,  risks remain in the form of prepayment  of assets,  timing lags in
adjusting  certain assets and  liabilities  that have varying  sensitivities  to
market interest rates and basis risk. In its overall attempt to match assets and
liabilities, Management takes into account rates and maturities to be offered in
connection with its time deposits and by offering  variable rate loans. The Bank
has generally  been able to control its exposure to changing  interest  rates by
maintaining  shorter-term  investments and offering floating interest rate loans
and a majority of its time deposits at relatively short maturities.

     The table  below sets forth the  interest  rate  sensitivity  of the Bank's
interest-sensitive assets and interest-sensitive  liabilities as of December 31,
2005,  2004 and 2003,  using the interest rate  sensitivity  gap ratio.  For the
purposes  of  the  following   table,   an  asset  or  liability  is  considered
rate-sensitive  within a  specified  period  when it can be  repriced or matures
within its contractual terms.


                            INTEREST RATE SENSITIVITY
                             (Dollars in thousands)
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                            December 31, 2005
                                                    -------------------------------------------------------------------------
                                                      Due Within      Due in       Due After One    Due After
                                                        Three         Three to     Year  to Five      Five
                                                        Months     Twelve Months       Years          Years         Total
                                                    -------------  -------------   -------------  ------------- -------------
Rate sensitive assets
     Federal funds sold and overnight
       deposits                                        $ 6,767              -               -             -       $  6,767
     Investment securities                               1,656       $  9,372         $26,979       $ 2,224         40,231
     Total loans                                        52,274          6,208          30,367        58,502        147,351
                                                    -------------  -------------   -------------  ------------- -------------
        Total                                          $60,697       $ 15,580         $57,346       $60,726       $194,349
                                                    =============  =============   =============  ============= =============

Rate sensitive liabilities
     NOW deposits                                      $ 1,277              -               -       $24,266       $ 25,543
     Savings deposits                                   40,692              -               -        26,243         66,935
     Time deposits                                      15,539       $ 31,803         $15,221             -         62,563
     Securities sold under agreements to
       repurchase                                        2,313              -               -             -          2,313
                                                    -------------  -------------   -------------  ------------- -------------
        Total                                          $59,822       $ 31,803         $15,221       $50,509       $157,354
                                                    =============  =============   =============  ============= =============
Interest rate sensitivity gap                          $   876       $(16,223)        $42,125       $10,217       $ 36,995
                                                    =============  =============   =============  ============= =============
Cumulative gap                                         $   876       $(15,347)        $26,778       $36,995
                                                    =============  =============   =============  ============= =============

Cumulative gap ratio to total assets                         0%            (7)%            13%           18%
</TABLE>


                                       29
<PAGE>

                            INTEREST RATE SENSITIVITY
                             (Dollars in thousands)
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                      December 31, 2004
                                          -------------------------------------------------------------------------
                                            Due Within      Due in        Due After One   Due After
                                              Three      Three to Twelve   Year to Five     Five
                                              Months         Months          Years         Years         Total
                                          -------------  -------------   -------------  ------------- -------------
Rate sensitive assets
    Federal funds sold and overnight
      deposits                                 $  9,976              -             -             -     $  9,976
    Investment securities                         2,023       $  3,950       $30,203       $ 2,306       38,482
    Total loans                                  43,324          6,761        32,603        60,063      142,751
                                          -------------  -------------   -------------  ------------- -------------
        Total                                  $ 55,323       $ 10,711       $62,806       $62,369     $191,209
                                          =============  =============   =============  ============= =============

Rate sensitive liabilities
    NOW deposits                               $  1,426              -             -       $27,092     $ 28,518
    Savings deposits                             50,447              -             -        28,341       78,788
    Time deposits                                12,913       $ 18,100       $14,327             -       45,340
    Securities sold under agreements to
     repurchase                                   2,188              -             -             -        2,188
    Federal Home Loan Bank advances               2,000              -             -             -        2,000
                                          -------------  -------------   -------------  ------------- -------------
        Total                                  $ 68,974       $ 18,100       $14,327       $55,433     $156,834
                                          =============  =============   =============  ============= =============

Interest rate sensitivity gap                  $(13,651)      $ (7,389)      $48,479       $ 6,936     $ 34,375
                                          =============  =============   =============  ============= =============
Cumulative gap                                 $(13,651)      $(21,040)      $27,439       $34,375
                                          =============  =============   =============  =============

Cumulative gap ratio to total assets                 (7)%          (10)%          14%           17%


                                                                      December 31, 2003
                                          -------------------------------------------------------------------------
                                            Due Within      Due in        Due After One   Due After
                                              Three      Three to Twelve   Year to Five     Five
                                              Months         Months          Years         Years         Total
                                          -------------  -------------   -------------  ------------- -------------

Rate sensitive assets
    Federal funds sold and overnight
      deposits                                 $  8,866              -             -             -     $  8,866
    Investment securities                         3,150       $ 11,100       $14,514       $ 8,235       36,999
    Total Loans                                  36,618          5,986        29,093        60,964      132,661
                                          -------------  -------------   -------------  ------------- -------------
        Total                                  $ 48,634       $ 17,086       $43,607       $69,199     $178,526
                                          =============  =============   =============  ============= =============

Rate sensitive liabilities
    NOW deposits                               $  1,380              -             -       $26,211     $ 27,591
    Savings deposits                             48,555              -             -        27,023       75,578
    Time deposits                                10,558       $ 21,181       $12,614             -       44,353
    Securities sold under agreements to
      repurchase                                  2,994              -             -             -        2,994
    Federal Home Loan Bank advances                   -             -             -              -            -
                                          -------------  -------------   -------------  ------------- -------------
        Total                                  $ 63,487       $ 21,181       $12,614       $53,234     $150,516
                                          =============  =============   =============  ============= =============

Interest rate sensitivity gap                  $(14,853)      $ (4,095)      $30,993       $15,965     $ 28,010
                                          =============  =============   =============  ============= =============
Cumulative gap                                 $(14,853)      $(18,948)      $12,045       $28,010
                                          =============  =============   =============  =============

Cumulative gap ratio to total assets                 (8)%         (11)%            6%           15%
</TABLE>


     Since  interest  rate  changes do not affect all  categories  of assets and
liabilities equally or simultaneously, a cumulative gap analysis alone cannot be
used to evaluate the Bank's interest rate  sensitivity  position.  To supplement
traditional gap analysis,  the Bank performs simulation modeling to estimate the
potential  effects of changing  interest rates.  This process allows the Bank to
explore complex  relationships  among repricing assets and liabilities over time
in various interest rate environments.


                                       30
<PAGE>

     The Bank's  Executive  Committee  meets at least  quarterly  to monitor the
Bank's investments,  liquidity needs and oversee its asset-liability management.
Between  meetings of the  Executive  Committee,  Management  oversees the Bank's
liquidity.


Capital Reserve

     The  Federal  Deposit  Insurance   Corporation   Improvement  Act  of  1991
("FDICIA")  defines  specific  capital  categories  based upon an  institution's
capital  ratios.  The capital  categories,  in  declining  order,  are: (i) well
capitalized;   (ii)  adequately  capitalized;   (iii)   undercapitalized;   (iv)
significantly  undercapitalized;  and  (v)  critically  undercapitalized.  Under
FDICIA and the FDIC's prompt  corrective action rules, the FDIC may take any one
or more of the following  actions  against an  undercapitalized  bank:  restrict
dividends  and  management   fees,   restrict  asset  growth  and  prohibit  new
acquisitions, new branches or new lines of business without prior FDIC approval.
If a bank is significantly undercapitalized,  the FDIC may also require the bank
to raise capital, restrict interest rates a bank may pay on deposits,  require a
reduction in assets,  restrict any activities that might cause risk to the bank,
require   improved   management,   prohibit  the  acceptance  of  deposits  from
correspondent  banks and restrict  compensation to any senior executive officer.
When a bank becomes  critically  undercapitalized,  (i.e., the ratio of tangible
equity to total  assets is equal to or less than 2%),  the FDIC must,  within 90
days thereafter, appoint a receiver for the bank or take such action as the FDIC
determines  would better  achieve the purposes of the law. Even where such other
action is taken,  the FDIC  generally  must appoint a receiver for a bank if the
bank remains critically  undercapitalized  during the calendar quarter beginning
270 days after the date on which the bank became critically undercapitalized.

     To be considered  "adequately  capitalized,"  an institution must generally
have a leverage ratio of at least 4%, a Tier 1 capital to  risk-weighted  assets
ratio of at least 4% and total Tier 1 and Tier 2 capital to risk-weighted assets
ratio of at least 8%. As of December 31, 2005, the most recent notification from
the  Federal  Deposit  Insurance  Corporation   categorized  the  Bank  as  well
capitalized under the regulatory  framework for prompt corrective  action. To be
categorized  as  well   capitalized,   the  Bank  must  maintain  minimum  total
risk-based,  Tier 1  risk-based  and Tier 1 leverage  ratios as set forth in the
table below.  There are no conditions that Management  believes have changed the
Bank's category.

     At December  31,  2005,  2004 and 2003,  the Bank's  capital  exceeded  all
minimum  regulatory  requirements  and  the  Bank  was  considered  to be  "well
capitalized" as defined in the regulations issued by the FDIC.


                                 CAPITAL RATIOS
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                                      Minimum
                                                Actual       Actual     Actual       Regulatory       Well-
                                               12/31/05    12/31/04     12/31/03   Requirements   Capitalized
                                               --------    --------     --------   ------------   ------------

Total capital (to risk weighted assets)           13.66%       13.27%      13.28%          8.00%       10.00%
Tier 1 capital (to risk weighted assets)          12.41%       12.02%      12.03%          4.00%        6.00%
Tier 1 capital (to average assets)                 7.61%        7.11%       6.72%          4.00%        5.00%
</TABLE>

Inflation

     The impact of inflation on a financial institution can differ significantly
from that exerted on other companies.  Banks, as financial intermediaries,  have
many assets and  liabilities  that may move in concert with inflation both as to
interest rates and value.  This is especially  true for  companies,  such as the
Bank, with a high percentage of interest rate sensitive  assets and liabilities.
A bank can reduce the impact of  inflation  if it can manage its  interest  rate
sensitivity  position.  The Bank  attempts  to  structure  its mix of  financial
instruments  and manage  its  interest  rate  sensitivity  position  in order to
minimize the  potential  adverse  effects of inflation or other market forces on
its net interest income and therefore its earnings and capital.

     Financial   institutions  are  also  affected  by  inflation's   impact  on
non-interest  expenses,  such as salaries  and  occupancy  expenses.  During the


                                       31
<PAGE>

period 1992 through 2005 inflation has remained relatively stable, due primarily
to continuous management of the money supplied by the Federal Reserve.  Based on
the Bank's  interest  rate  sensitivity  position  at  year-end  2005,  the Bank
benefits in the short term from rising interest rates and is adversely  impacted
by falling  interest  rates.  As such,  indirectly,  the management of the money
supply by the  Federal  Reserve to  control  the rate of  inflation  may have an
impact on the earnings of the Bank. Also, the changes in interest rates may have
a corresponding impact on the ability of borrowers to repay loans with the Bank.


Sarbanes-Oxley Act of 2002

     The  Bank  has   initiatives  in  place  to  ensure   compliance  with  the
Sarbanes-Oxley act of 2002. The Bank has an Internal  Compliance  Committee that
is  responsible   for  the  monitoring  of  and  compliance   with  all  federal
regulations. This committee reports to the Audit and Compliance Committee of the
Board of Directors.

Evaluation of Disclosure Control Procedures

     The  Bank's  Chief  Executive  Officer  and Chief  Financial  Officer  have
evaluated the effectiveness of the Bank's disclosure  controls and procedures as
of  December  31,  2005 and have  concluded  that,  as of that date,  the Bank's
disclosure  controls and  procedures  were  effective at ensuring  that required
information will be disclosed on a timely basis. This conclusion is based on the
above-referenced  officers' evaluation of such controls and procedures within 90
days of the date of this Form 10-KSB.

Changes in Internal Controls

     There were no  significant  changes in the Bank's  internal  controls  over
financial  reporting  or in other  factors that could  significantly  affect the
Bank's internal controls during the fiscal year ended December 31, 2005.


Options Outstanding

     The following table sets forth the securities authorized for issuance under
equity compensation plans.
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                                            Number of
                                                                                            securities
                                                                                       remaining available
                                                                                       for future issuance
                                               Number of                                   under equity
                                            securities to be                            compensation plans
                                              issued upon         Weighted-average          (excluding
                                              exercise of         exercise price of         securities
                                          outstanding options    outstanding options   reflected in column(a))
                                                  (a)                    (b)                    (c)
                                          ------------------------------------------------------------------
Equity compensation plans
      approved by security
      holders                                     63,204                 $24.34                25,303
Equity compensation plans not
      approved by security
      holders                                          0                      0                     0
                                          ------------------------------------------------------------------
                 Total                            63,204                 $24.34                25,303
                                          ==================================================================
</TABLE>


                                       32
<PAGE>

                                [GRAPHIC OMITTED]

The Board of Directors and Stockholders
The Simsbury Bank & Trust Company, Inc.
Simsbury, Connecticut

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------

We have audited the  accompanying  consolidated  balance  sheets of The Simsbury
Bank & Trust  Company,  Inc. and Subsidiary as of December 31, 2005 and 2004 and
the related consolidated  statements of income,  changes in stockholders' equity
and cash flows for the years then ended. These consolidated financial statements
are the  responsibility  of the  Bank's  management.  Our  responsibility  is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated financial statements are free of material misstatement. The Bank is
not required to have,  nor were we engaged to perform,  an audit of its internal
control over financial reporting.  Our audit included  consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion on the  effectiveness  of the Bank's  internal  control  over  financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in the
consolidated  financial  statements.   An  audit  also  includes  assessing  the
accounting principles used and significant estimates made by management, as well
as evaluating the overall  consolidated  financial  statement  presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of The
Simsbury Bank & Trust  Company,  Inc. and Subsidiary as of December 31, 2005 and
2004 and the  consolidated  results of their operations and their cash flows for
the years  then  ended,  in  conformity  with  accounting  principles  generally
accepted in the United States of America.


                                                       [GRAPHIC OMITTED]
                                              SHATSWELL, MacLEOD & COMPANY, P.C.

West Peabody, Massachusetts
January 27, 2006, except for Note 18,
    as to which the date is March 2, 2006


                                       33
<PAGE>


             THE SIMSBURY BANK & TRUST COMPANY, INC. AND SUBSIDIARY
             ------------------------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------

                           December 31, 2005 and 2004
                           --------------------------
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
ASSETS                                                                                  2005              2004
------                                                                           ----------------   ---------------
Cash and due from banks                                                            $    9,349,045    $    5,117,340
Interest-bearing deposits with the Federal Home Loan Bank                                   8,234         2,014,476
Money market mutual funds                                                                  58,464            20,092
Federal funds sold                                                                      6,767,272         7,976,404
                                                                                 ----------------   ---------------
           Cash and cash equivalents                                                   16,183,015        15,128,312
Interest-bearing time deposit with other bank                                                               500,000
Investments in available-for-sale securities (at fair value)                           40,231,140        38,482,849
Federal Home Loan Bank stock, at cost                                                     965,600           965,600
Loans held-for-sale                                                                                         740,000
Loans, net of the allowance for loan losses of $1,719,533 in 2005
  and $1,701,915 in 2004                                                              145,805,738       141,229,419
Premises and equipment                                                                  1,006,357           563,558
Accrued interest receivable                                                               793,488           724,807
Bank owned life insurance                                                               2,681,367         2,538,176
Other assets                                                                            1,877,949         1,281,715
                                                                                 ----------------   ---------------
           Total assets                                                              $209,544,654      $202,154,436
                                                                                 ================   ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
   Noninterest-bearing                                                              $  36,074,640     $  30,486,932
   Interest-bearing                                                                   155,041,040       152,645,351
                                                                                 ----------------   ---------------
           Total deposits                                                             191,115,680       183,132,283
Federal Home Loan Bank advance                                                                            2,000,000
Securities sold under agreements to repurchase                                          2,312,832         2,187,824
Other liabilities                                                                         740,544           579,072
                                                                                 ----------------   ---------------
           Total liabilities                                                          194,169,056       187,899,179
                                                                                 ----------------   ---------------
Stockholders' equity:
   Common stock, no par value; authorized 2,000,000 shares; issued and
     outstanding 838,528 shares in 2005 and 829,833 shares in 2004                      8,456,690         8,320,286
   Retained earnings                                                                    7,473,542         6,134,028
   Accumulated other comprehensive loss                                                  (554,634)         (199,057)
                                                                                 ----------------   ---------------
           Total stockholders' equity                                                  15,375,598        14,255,257
                                                                                 ----------------   ---------------
           Total liabilities and stockholders' equity                                $209,544,654      $202,154,436
                                                                                 ================   ===============
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.



                                       34
<PAGE>


             THE SIMSBURY BANK & TRUST COMPANY, INC. AND SUBSIDIARY
             ------------------------------------------------------

                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------

                     Years Ended December 31, 2005 and 2004
                     --------------------------------------
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                                        2005              2004
                                                                                   --------------    --------------
Interest and dividend income:
   Interest and fees on loans                                                          $8,065,276        $7,156,149
   Interest on debt securities:
     Taxable                                                                            1,273,044         1,151,792
     Tax-exempt                                                                           195,112           192,472
   Dividends                                                                               56,765            30,660
   Other interest                                                                         169,286           139,190
                                                                                   --------------    --------------
           Total interest and dividend income                                           9,759,483         8,670,263
                                                                                   --------------    --------------
Interest expense:
   Interest on deposits                                                                 2,050,630         1,624,811
   Interest on Federal Home Loan Bank advances                                             43,770
   Interest on securities sold under agreements to repurchase                              31,999            38,171
                                                                                   --------------    --------------
           Total interest expense                                                       2,126,399         1,662,982
                                                                                   --------------    --------------
           Net interest and dividend income                                             7,633,084         7,007,281
Provision for loan losses                                                                  30,000            25,000
                                                                                   --------------    --------------
           Net interest and dividend income after provision for loan losses             7,603,084         6,982,281
                                                                                   --------------    --------------
Noninterest income:
   Service charges on deposit accounts                                                    313,746           331,374
   Other service charges and fees                                                         427,339           313,520
   Increase in cash surrender value of life insurance policies                            127,754           120,022
   Gain on loans sold, net                                                                 61,222            44,726
   Other income                                                                            41,051            76,786
                                                                                   --------------    --------------
           Total noninterest income                                                       971,112           886,428
                                                                                   --------------    --------------
Noninterest expense:
   Salaries and employee benefits                                                       3,054,881         2,716,535
   Occupancy expense                                                                      753,452           682,675
   Equipment expense                                                                      210,475           222,383
   Professional fees                                                                      328,850           164,031
   Advertising and promotions                                                             350,157           215,689
   Forms and supplies                                                                     160,599           133,127
   Correspondent charges                                                                  195,458           157,582
   Postage                                                                                104,070            85,506
   Directors fees                                                                         130,000           125,366
   Other expense                                                                          767,159           683,533
                                                                                   --------------    --------------
           Total noninterest expense                                                    6,055,101         5,186,427
                                                                                   --------------    --------------
           Income before income tax expense                                             2,519,095         2,682,282
Income tax expense                                                                        845,418           904,032
                                                                                   --------------    --------------
           Net income                                                                  $1,673,677        $1,778,250
                                                                                   ==============    ==============

Earnings per common share                                                              $     2.00        $     2.17
                                                                                   ==============   ===============

Earnings per common share, assuming dilution                                           $     1.96        $     2.10
                                                                                   ==============   ===============
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.



                                       35
<PAGE>

             THE SIMSBURY BANK & TRUST COMPANY, INC. AND SUBSIDIARY
             ------------------------------------------------------

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           ----------------------------------------------------------

                     Years Ended December 31, 2005 and 2004
                     --------------------------------------
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                                                    Accumulated
                                                                                                      Other
                                                              Common            Retained          Comprehensive
                                                              Stock             Earnings           Income (Loss)         Total
                                                          -----------------  -----------------    -----------------  --------------
Balance, December 31, 2003                                   $8,078,908         $4,652,906           $  40,309        $12,772,123
Comprehensive income:
   Net income                                                                    1,778,250
   Net change in unrealized holding gain on
     available-for-sale securities, net of tax effect                                                 (239,366)
       Comprehensive income                                                                                             1,538,884
17,164 shares issued on stock options exercised                 241,378                                                   241,378
Dividends declared ($.36 per share)                                               (297,128)                              (297,128)
                                                          -----------------  -----------------    -----------------  --------------
Balance, December 31, 2004                                    8,320,286          6,134,028            (199,057)        14,255,257
Comprehensive income:
   Net income                                                                    1,673,677
   Net change in unrealized holding loss on
     available-for-sale securities, net of tax effect                                                 (355,577)
       Comprehensive income                                                                                             1,318,100
8,695 shares issued on stock options exercised                  129,481                                                   129,481
Tax benefit for stock options                                     6,923                                                     6,923
Dividends declared ($.40 per share)                                               (334,163)                              (334,163)
                                                          -----------------  -----------------    -----------------  --------------
Balance, December 31, 2005                                   $8,456,690         $7,473,542           $(554,634)       $15,375,598
                                                          =================  =================    =================  ==============


Reclassification disclosure for the years ended December 31:

                                                                                                        2005              2004
                                                                                                   ----------------- --------------
Net unrealized holding losses on available-for-sale securities                                       $(582,436)         $(540,736)
                                                                                                   ----------------- --------------
 Other comprehensive loss before income tax effect                                                    (582,436)          (540,736)
Income tax benefit                                                                                     226,859            301,370
                                                                                                   ----------------- --------------
     Other comprehensive loss, net of tax                                                            $(355,577)         $(239,366)
                                                                                                   ================= ==============
</TABLE>

Accumulated other comprehensive loss as of December 31, 2005 and 2004 consists
of net unrealized holding losses on available-for-sale securities, net of taxes.




The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       36
<PAGE>

             THE SIMSBURY BANK & TRUST COMPANY, INC. AND SUBSIDIARY
             ------------------------------------------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

                     Years Ended December 31, 2005 and 2004
                     --------------------------------------
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                                                2005              2004
                                                                        ----------------  ----------------
Cash flows from operating activities:
   Net income                                                               $  1,673,677      $  1,778,250
   Adjustments to reconcile net income to net cash
    provided by operating activities:
     Amortization of securities, net                                              71,416            93,762
     Change in deferred loan costs, net                                            5,572           (47,643)
     Provision for loan losses                                                    30,000            25,000
     Decrease (increase) in loans held-for-sale                                  740,000          (405,240)
     Depreciation and amortization                                               179,904           174,919
     (Increase) decrease in other assets                                        (140,027)           47,893
     Increase in prepaid expenses                                               (217,964)          (87,226)
     Increase in interest receivable                                             (68,681)           (7,515)
     Decrease in taxes receivable                                                 20,353            17,314
     Increase in cash surrender value of bank
      owned life insurance                                                      (127,754)         (120,022)
     Increase in other liabilities                                                25,845             2,694
     Increase in accrued expenses                                                122,165            24,086
     Increase (decrease) in interest payable                                      13,462           (12,515)
     Deferred tax benefit                                                        (30,908)          (20,282)
                                                                        ----------------  ----------------
   Net cash provided by operating activities                                   2,297,060         1,463,475
                                                                        ----------------  ----------------
Cash flows from investing activities:
   Proceeds from maturities of interest-bearing time
    deposit with other bank                                                      500,000
   Increase in interest-bearing time deposit with other bank                                      (500,000)
   Purchases of available-for-sale securities                                (10,210,385)      (19,133,244)
   Proceeds from maturities of available-for-sale securities                   7,808,242        17,015,176
   Loan originations and principal collections, net                            3,115,689        (1,195,826)
   Loan purchases                                                             (7,727,674)       (8,908,037)
   Recoveries of previously charged off loans                                         94            21,181
   Capital expenditures                                                         (616,609)         (202,933)
   Premiums paid on life insurance policy                                        (15,437)          (15,437)
                                                                        ----------------  ----------------
   Net cash used in investing activities                                      (7,146,080)      (12,919,120)
                                                                        ----------------  ----------------
Cash flows from financing activities:
   Net (decrease) increase in demand deposits, NOW
    and savings accounts                                                      (9,239,185)       10,069,070
   Net increase in time deposits                                              17,222,582           987,192
   Net change in short term advances from
    Federal Home Loan Bank                                                    (2,000,000)        2,000,000
   Net increase (decrease) in securities sold under
    agreements to repurchase                                                     125,008          (806,396)
   Proceeds from exercise of stock options                                       129,481           241,378
   Dividends paid                                                               (334,163)         (297,128)
                                                                        ----------------  ----------------
   Net cash provided by financing activities                                   5,903,723        12,194,116
                                                                        ----------------  ----------------

Net increase in cash and cash equivalents                                      1,054,703           738,471
Cash and cash equivalents at beginning of year                                15,128,312        14,389,841
                                                                        ----------------  ----------------
Cash and cash equivalents at end of year                                     $16,183,015       $15,128,312
                                                                        ================  ================
Supplemental disclosures:
   Interest paid                                                             $ 2,112,937        $1,675,497
   Income taxes paid                                                             855,973           907,000

</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       37
<PAGE>

             THE SIMSBURY BANK & TRUST COMPANY, INC. AND SUBSIDIARY
             ------------------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

                     Years Ended December 31, 2005 and 2004
                     --------------------------------------

NOTE 1 - NATURE OF OPERATIONS
-----------------------------

The Simsbury Bank & Trust Company,  Inc.  (Bank) is a state chartered bank which
was   incorporated  on  April  28,  1992  and  is   headquartered  in  Simsbury,
Connecticut.   The  Bank  commenced   operations  on  March  31,  1995  engaging
principally  in the business of attracting  deposits from the general public and
investing those deposits in securities,  residential and commercial real estate,
consumer and small business loans.

NOTE 2 - ACCOUNTING POLICIES
----------------------------

The accounting and reporting  policies of the Bank and its subsidiary conform to
accounting  principles  generally  accepted in the United  States of America and
predominant  practices within the banking industry.  The consolidated  financial
statements of the Bank were prepared using the accrual basis of accounting.  The
significant  accounting  policies of the Bank are summarized below to assist the
reader in better  understanding the consolidated  financial statements and other
data contained herein.

         USE OF ESTIMATES:

         The preparation of consolidated financial statements in conformity with
         accounting  principles  generally  accepted  in the  United  States  of
         America  requires  management to make  estimates and  assumptions  that
         affect the reported amounts of assets and liabilities and disclosure of
         contingent  assets  and  liabilities  at the  date of the  consolidated
         financial  statements and the reported amounts of revenues and expenses
         during the  reporting  period.  Actual  results could differ from those
         estimates.

         BASIS OF PRESENTATION:

         The consolidated  financial statements include the accounts of the Bank
         and its  wholly-owned  subsidiary,  SBT Investment  Services,  Inc. SBT
         Investment  Services,  Inc. was  established  solely for the purpose of
         providing  investment  products,  financial  advice and services to its
         clients and the community.  All significant  intercompany  accounts and
         transactions have been eliminated in the consolidation.

         CASH AND CASH EQUIVALENTS:

         For purposes of reporting cash flows, cash and cash equivalents include
         cash on hand,  cash  items,  due from  banks,  Federal  Home  Loan Bank
         interest-bearing  demand and  overnight  deposits,  money market mutual
         funds and federal funds sold.

         Cash  and due from  banks as of  December  31,  2005 and 2004  includes
         $1,812,000   and   $1,904,000,   respectively,   which  is  subject  to
         withdrawals and usage restrictions to satisfy the reserve  requirements
         of the Federal Reserve Bank.

         SECURITIES:

         Investments  in  debt  securities  are  adjusted  for  amortization  of
         premiums and accretion of discounts  computed so as to approximate  the
         interest method. Gains or losses on sales of investment  securities are
         computed on a specific identification basis.


                                       38
<PAGE>


         The  Bank  classifies  debt  and  equity  securities  into one of three
         categories:  held-to-maturity,  available-for-sale,  or trading.  These
         security  classifications  may be modified after acquisition only under
         certain specified conditions. In general,  securities may be classified
         as  held-to-maturity  only if the  Bank  has the  positive  intent  and
         ability to hold them to  maturity.  Trading  securities  are defined as
         those  bought and held  principally  for the purpose of selling them in
         the  near  term.   All  other   securities   must  be   classified   as
         available-for-sale.

               --   Held-to-maturity  securities  are measured at amortized cost
                    in the consolidated balance sheets. Unrealized holding gains
                    and losses are not  included in  earnings,  or in a separate
                    component of capital. They are merely disclosed in the notes
                    to the consolidated financial statements.

               --   Available-for-sale  securities  are carried at fair value on
                    the consolidated  balance sheets.  Unrealized  holding gains
                    and losses are not  included in earnings but are reported as
                    a net amount (less expected tax) in a separate  component of
                    capital until realized.

               --   Trading   securities  are  carried  at  fair  value  on  the
                    consolidated  balance sheets.  Unrealized  holding gains and
                    losses for trading securities are included in earnings.

         Declines in the fair value of held-to-maturity  and  available-for-sale
         securities  below their cost that are deemed to be other than temporary
         are reflected in earnings as realized losses.

         LOANS HELD-FOR-SALE:

         Loans held-for-sale in the secondary market are carried at the lower of
         cost or estimated  fair value in the aggregate.  Net unrealized  losses
         are  provided for in a valuation  allowance  by charges to  operations.
         Interest  income on mortgages  held-for-sale  is accrued  currently and
         classified as interest on loans.

         LOANS:

         Loans  receivable  that  management  has the intent and ability to hold
         until maturity or payoff,  are reported at their outstanding  principal
         balances adjusted for amounts due to borrowers on unadvanced loans, any
         charge-offs,  the  allowance  for loan losses and any deferred  fees or
         costs on  originated  loans,  or  unamortized  premiums or discounts on
         purchased loans.

         Interest on loans is recognized on a simple interest basis.

         Loan  origination  and commitment  fees and certain direct  origination
         costs are  deferred,  and the net amount  amortized as an adjustment of
         the related loan's yield. The Bank is amortizing these amounts over the
         contractual life of the related loans.

         Residential  real estate loans are generally  placed on nonaccrual when
         reaching 90 days past due or in process of foreclosure.  All closed-end
         consumer  loans  90 days or more  past due and any  equity  line in the
         process  of  foreclosure  are  placed  on  nonaccrual  status.  Secured
         consumer  loans are  written  down to  realizable  value and  unsecured
         consumer loans are  charged-off  upon reaching 120 or 180 days past due
         depending  on the  type of  loan.  Commercial  real  estate  loans  and
         commercial business loans and leases which are 90 days or more past due
         are generally placed on nonaccrual status, unless secured by sufficient
         cash or other assets  immediately  convertible to cash. When a loan has
         been placed on nonaccrual  status,  previously  accrued and uncollected
         interest is reversed  against interest on loans. A loan can be returned
         to accrual  status  when  collectibility  of  principal  is  reasonably
         assured and the loan has performed for a period of time,  generally six
         months.


                                       39
<PAGE>


         Cash  receipts of interest  income on  impaired  loans are  credited to
         principal  to  the  extent  necessary  to  eliminate  doubt  as to  the
         collectibility  of the net carrying  amount of the loan. Some or all of
         the cash receipts of interest income on impaired loans is recognized as
         interest  income if the  remaining  net carrying  amount of the loan is
         deemed to be fully collectible.  When recognition of interest income on
         an impaired loan on a cash basis is  appropriate,  the amount of income
         that is  recognized is limited to that which would have been accrued on
         the net carrying amount of the loan at the  contractual  interest rate.
         Any cash  interest  payments  received  in  excess of the limit and not
         applied to reduce the net  carrying  amount of the loan are recorded as
         recoveries of charge-offs until the charge-offs are fully recovered.

         ALLOWANCE FOR LOAN LOSSES:

         The allowance for loan losses is established as losses are estimated to
         have occurred  through a provision for loan losses charged to earnings.
         Loan losses are charged against the allowance when management  believes
         the  uncollectibility  of  a  loan  balance  is  confirmed.  Subsequent
         recoveries, if any, are credited to the allowance.

         The  allowance  for loan  losses is  evaluated  on a  regular  basis by
         management  and is  based  upon  management's  periodic  review  of the
         collectibility  of the  loans in light of  historical  experience,  the
         nature and volume of the loan  portfolio,  adverse  situations that may
         affect  the  borrower's  ability  to  repay,  estimated  value  of  any
         underlying   collateral  and  prevailing  economic   conditions.   This
         evaluation is inherently  subjective as it requires  estimates that are
         susceptible  to  significant   revision  as  more  information  becomes
         available.

         A loan is considered  impaired when,  based on current  information and
         events,  it is  probable  that the Bank will be unable to  collect  the
         scheduled  payments of principal or interest  when due according to the
         contractual  terms  of  the  loan  agreement.   Factors  considered  by
         management in determining impairment include payment status, collateral
         value,  and the  probability  of  collecting  scheduled  principal  and
         interest payments when due. Loans that experience insignificant payment
         delays and payment shortfalls generally are not classified as impaired.
         Management  determines the  significance  of payment delays and payment
         shortfalls on a case-by-case  basis,  taking into  consideration all of
         the circumstances surrounding the loan and the borrower,  including the
         length of the delay,  the reasons for the delay,  the borrower's  prior
         payment  record,  and the amount of the  shortfall  in  relation to the
         principal and interest  owed.  Impairment is measured on a loan by loan
         basis for commercial and construction loans by either the present value
         of  expected  future  cash flows  discounted  at the  loan's  effective
         interest rate, the loan's obtainable market price, or the fair value of
         the collateral if the loan is collateral dependent.

         Large  groups of smaller  balance  homogeneous  loans are  collectively
         evaluated for  impairment.  Accordingly,  the Bank does not  separately
         identify  individual  consumer  and  residential  loans for  impairment
         disclosures.

         PREMISES AND EQUIPMENT:

         Premises  and   equipment   are  stated  at  cost,   less   accumulated
         depreciation  and  amortization.   Cost  and  related   allowances  for
         depreciation  and  amortization  of premises and  equipment  retired or
         otherwise disposed of are removed from the respective accounts with any
         gain  or  loss  included  in  income  or  expense.   Depreciation   and
         amortization  are calculated  principally on the  straight-line  method
         over the estimated useful lives of the assets. Estimated lives are 3 to
         20 years  for  furniture  and  equipment.  Leasehold  improvements  are
         amortized  over the  lesser of the life of the  lease or the  estimated
         life of the improvements.

         FAIR VALUES OF FINANCIAL INSTRUMENTS:

         Statement   of   Financial   Accounting   Standards   (SFAS)  No.  107,
         "Disclosures about Fair Value of Financial  Instruments," requires that
         the Bank disclose estimated fair values for its financial  instruments.
         Fair value methods and  assumptions  used by the Bank in estimating its
         fair value disclosures are as follows:

         Cash and cash equivalents: The carrying amounts reported in the balance
         sheets for cash and cash  equivalents  approximate  those  assets' fair
         values.


                                       40
<PAGE>


         Interest-bearing  time  deposit  with  bank:  The  fair  value  of  the
         interest-bearing  time deposit with bank is estimated using  discounted
         cash flow analyses  using interest  rates  currently  being offered for
         deposits with similar terms to investors.

         Securities:  Fair  values  for  securities  are based on quoted  market
         prices,  where  available.  If quoted market prices are not  available,
         fair  values  are  based  on  quoted   market   prices  of   comparable
         instruments.

         Loans held-for-sale:  Fair values for loans held-for-sale are estimated
         based on outstanding  investor  commitments,  or in the absence of such
         commitments, are based on current investor yield requirements.

         Loans receivable:  For variable-rate  loans that reprice frequently and
         with no  significant  change in credit  risk,  fair values are based on
         carrying  values.  The fair  values for other  loans are  estimated  by
         discounting the future cash flows, using interest rates currently being
         offered for loans with similar  terms to  borrowers  of similar  credit
         quality.

         Accrued  interest  receivable:  The carrying amount of accrued interest
         receivable approximates its fair value.

         Deposit  liabilities:  The fair values  disclosed for demand  deposits,
         regular savings,  NOW accounts,  and money market accounts are equal to
         the  amount  payable  on  demand at the  reporting  date  (i.e.,  their
         carrying  amounts).   Fair  values  for  certificates  of  deposit  are
         estimated  using  a  discounted  cash  flow  calculation  that  applies
         interest rates currently being offered on certificates to a schedule of
         aggregated expected monthly maturities on time deposits.

         Federal Home Loan Bank Advances: Fair values for Federal Home Loan Bank
         advances are  estimated  using a discounted  cash flow  technique  that
         applies  interest  rates  currently  being  offered  on  advances  to a
         schedule of aggregated expected monthly maturities on Federal Home Loan
         Bank advances.

         Securities sold under agreements to repurchase: The carrying amounts of
         securities sold under agreements to repurchase  approximate  their fair
         values.

         Off-balance  sheet  instruments:  The  fair  value  of  commitments  to
         originate loans is estimated using the fees currently  charged to enter
         similar  agreements,  taking into  account the  remaining  terms of the
         agreements and the present creditworthiness of the counterparties.  For
         fixed-rate loan commitments and the unadvanced  portion of loans,  fair
         value also considers the difference  between current levels of interest
         rates and the committed  rates.  The fair value of letters of credit is
         based  on fees  currently  charged  for  similar  agreements  or on the
         estimated  cost to terminate  them or otherwise  settle the  obligation
         with the counterparties at the reporting date.

         ADVERTISING:

         The Bank directly  expenses costs  associated with  advertising as they
         are incurred.

         INCOME TAXES:

         The Bank recognizes  income taxes under the asset and liability method.
         Under this method,  deferred tax assets and liabilities are established
         for the temporary  differences between the accounting basis and the tax
         basis of the  Bank's  assets  and  liabilities  at  enacted  tax  rates
         expected  to be in effect when the  amounts  related to such  temporary
         differences are realized or settled.


                                       41
<PAGE>

         STOCK BASED COMPENSATION:

         At December 31, 2005, the Bank has a stock-based employee  compensation
         plan which is  described  more fully in Note 15. The Bank  accounts for
         the plan  under  the  recognition  and  measurement  principles  of APB
         Opinion No. 25, "Accounting for Stock Issued to Employees," and related
         Interpretations. No stock-based employee compensation cost is reflected
         in net income,  as all options  granted under this plan had an exercise
         price equal to the market value of the  underlying  common stock on the
         date of grant. The following table illustrates the effect on net income
         and  earnings  per  share  if the  Bank  had  applied  the  fair  value
         recognition  provisions  of SFAS No. 123 (revised  2004),  "Share Based
         Payment" to stock-based employee compensation.

<TABLE>
<CAPTION>
<S>                                                                        <C>               <C>

                                                                                For the years ended
                                                                                  December 31,
                                                                           ----------------------------
                                                                              2005              2004
                                                                           ----------        ----------
         Net income, as reported                                           $1,673,677        $1,778,250
         Deduct:  Total stock-based employee compensation expense
           determined under fair value based method for all awards,
           net of related tax effects                                          60,589            50,967
                                                                           ----------        ----------
         Pro forma net income                                              $1,613,088        $1,727,283
                                                                           ==========        ==========
         Earnings per share:
           Basic - as reported                                                  $2.00            $2.17
           Basic - pro forma                                                    $1.93            $2.10
           Diluted - as reported                                                $1.96            $2.10
           Diluted - pro forma                                                  $1.89            $2.04
</TABLE>

         EARNINGS PER SHARE:

         Basic  earnings  per share (EPS)  excludes  dilution and is computed by
         dividing   income    available   to   common    stockholders   by   the
         weighted-average  number of common shares  outstanding  for the period.
         Diluted  EPS  reflects  the  potential  dilution  that  could  occur if
         securities or other  contracts to issue common stock were  exercised or
         converted into common stock or resulted in the issuance of common stock
         that then shared in the earnings of the entity.

         RECENT ACCOUNTING PRONOUNCEMENTS:

         In January 2003, the Financial Accounting Standards Board (FASB) issued
         Interpretation  No. 46,  "Consolidation of Variable Interest  Entities"
         ("FIN  46"),  in an  effort  to  expand  upon and  strengthen  existing
         accounting guidance that addresses when a company should include in its
         financial statements the assets,  liabilities and activities of another
         entity. In December 2003, the FASB revised  Interpretation No. 46, also
         referred to as  Interpretation  46 (R) ("FIN 46(R)").  The objective of
         this  interpretation  is not to restrict  the use of variable  interest
         entities but to improve financial  reporting by companies involved with
         variable  interest  entities.  Until now,  one  company  generally  has
         included another entity in its consolidated  financial  statements only
         if  it  controlled   the  entity   through   voting   interests.   This
         interpretation changes that, by requiring a variable interest entity to
         be  consolidated  by a company  only if that  company  is  subject to a
         majority  of the  risk of loss  from  the  variable  interest  entity's
         activities  or entitled to receive a majority of the entity's  residual
         returns or both.  The Bank is required to apply FIN 46, as revised,  to
         all entities subject to it no later than the end of the first reporting
         period ending after December 15, 2004.  However,  prior to the required
         application  of FIN 46, as revised,  the Bank shall apply FIN 46 or FIN
         46 (R) to those  entities  that are  considered  to be  special-purpose
         entities  as of the end of the  first  fiscal  year or  interim  period
         ending after December 15, 2003. The adoption of this interpretation did
         not  have a  material  effect  on  the  Bank's  consolidated  financial
         statements.


                                       42
<PAGE>


         In  December   2003,  the  American   Institute  of  Certified   Public
         Accountants  ("AICPA")  issued  Statement of Position 03-3 ("SOP 03-3")
         "Accounting  for  Certain  Loans  or  Debt  Securities  Acquired  in  a
         Transfer." SOP 03-3 requires loans acquired through a transfer, such as
         a business  combination,  where there are  differences in expected cash
         flows and  contractual  cash  flows due in part to  credit  quality  be
         recognized at their fair value.  The excess of  contractual  cash flows
         over  expected  cash flows is not to be  recognized as an adjustment of
         yield,  loss  accrual,  or valuation  allowance.  Valuation  allowances
         cannot be created  nor  "carried  over" in the initial  accounting  for
         loans acquired in a transfer on loans subject to SFAS 114,  "Accounting
         by Creditors for Impairment of a Loan." This SOP is effective for loans
         acquired in fiscal years  beginning after December 15, 2004, with early
         adoption  encouraged.  The adoption of SOP 03-3 did not have a material
         impact on the Bank's financial position or results of operations.

         In  December  2004,  the FASB  issued  SFAS  No.  123  (revised  2004),
         "Share-Based  Payment"  ("SFAS  123R").  This  Statement  revises  FASB
         Statement  No.  123,  "Accounting  for Stock  Based  Compensation"  and
         supersedes  APB  Opinion  No.  25,  "Accounting  for  Stock  Issued  to
         Employees," and its related implementation guidance. SFAS 123R requires
         that the cost resulting from all  share-based  payment  transactions be
         recognized in the  consolidated  financial  statements.  It establishes
         fair value as the  measurement  objective in accounting for share-based
         payment  arrangements  and  requires all entities to apply a fair-value
         based  measurement   method  in  accounting  for  share-based   payment
         transactions  with  employees  except  for equity  instruments  held by
         employee  share  ownership  plans.  This Statement is effective for the
         Bank as of the  beginning  of the first  annual  reporting  period that
         begins  after  December  15,  2005.  The Bank  expects  2006 results to
         include  approximately  $108,455  of  additional  pre-tax  compensation
         expense as a result of the adoption of SFAS 123R.  Future  compensation
         expense will be impacted by various  factors,  including  the number of
         awards granted and their related fair value at the date of grant.

NOTE 3 - INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES
-----------------------------------------------------

Debt and equity  securities  have been  classified in the  consolidated  balance
sheets  according to management's  intent.  The amortized cost of securities and
their approximate fair values are as follows as of December 31:


<TABLE>
<CAPTION>
<S>                                                     <C>             <C>            <C>          <C>
                                                                          Gross         Gross
                                                        Amortized       Unrealized     Unrealized      Fair
                                                           Cost            Gains         Losses        Value
                                                       -----------     ----------     ----------   -----------
December 31, 2005:
   Debt securities issued by the U.S. Treasury
     and other U.S. government corporations
     and agencies                                       $17,826,063     $              $  346,668    $17,479,395
   Obligations of states and municipalities               4,989,994        189,025         31,955      5,147,064
   Corporate debt securities                                475,000                        16,097        458,903
   Mortgage-backed securities                            15,848,575         20,856        378,903     15,490,528
   U.S. government agencies perpetual/callable
     preferred stocks                                     2,000,000                       344,750      1,655,250
   Marketable equity securities                              58,464                                       58,464
                                                        -----------     ----------     ----------    -----------
                                                         41,198,096        209,881      1,118,373     40,289,604
   Money market mutual funds included in cash
     and cash equivalents                                   (58,464)                                     (58,464)
                                                        -----------     ----------     ----------    -----------
               Total available-for-sale securities      $41,139,632     $  209,881     $1,118,373    $40,231,140
                                                        ===========     ==========     ==========    ===========
</TABLE>


                                       43
<PAGE>



<TABLE>
<CAPTION>
<S>                                                       <C>              <C>          <C>            <C>
                                                                          Gross          Gross
                                                         Amortized      Unrealized     Unrealized       Fair
                                                           Cost           Gains          Losses         Value
                                                        -----------     ----------     ----------    -----------
December 31, 2004:
   Debt securities issued by the U.S. Treasury
     and other U.S. government corporations
     and agencies                                       $14,794,733       $ 18,925    $   126,852    $14,686,806
   Obligations of states and municipalities               4,329,767        308,981          3,317      4,635,431
   Corporate debt securities                                975,000            181          8,612        966,569
   Mortgage-backed securities                            16,709,405         79,279        117,641     16,671,043
   U.S. government agencies perpetual/callable
     preferred stocks                                     2,000,000                       477,000      1,523,000
   Marketable equity securities                              20,092                                       20,092
                                                        -----------     ----------    -----------    -----------
                                                         38,828,997        407,366        733,422     38,502,941
   Money market mutual funds included in cash
     and cash equivalents                                   (20,092)                                     (20,092)
                                                        -----------     ----------    -----------    -----------
               Total available-for-sale securities      $38,808,905       $407,366    $   733,422    $38,482,849
                                                        ===========     ==========    ===========    ===========

</TABLE>

The scheduled  maturities of debt  securities were as follows as of December 31,
2005:

                                                                       Fair
                                                                      Value
                                                                   ------------
Due within one year                                                 $ 5,428,285
Due after one year through five years                                15,457,232
Due after five years through ten years                                1,949,437
Due in more than ten years                                              250,408
Mortgage-backed securities                                           15,490,528
                                                                   ------------
                                                                    $38,575,890
                                                                   ============

There were no sales of available-for-sale securities during 2005 and 2004.

There were no securities of issuers whose aggregate carrying amount exceeded 10%
of stockholders' equity as of December 31, 2005.

As of  December  31, 2005 and 2004,  the total  carrying  amounts of  securities
pledged for securities  sold under  agreements to repurchase and public deposits
was $5,704,711 and $6,650,794, respectively.

The aggregate fair value and unrealized losses of securities that have been in a
continuous  unrealized  loss position for less than twelve months and for twelve
months or more, and are not other than temporarily  impaired,  are as follows as
of December 31, 2005:

<TABLE>
<CAPTION>

                                                 Less than 12 Months        12 Months or Longer              Total
                                               -----------------------   ------------------------    -------------------------
                                                  Fair     Unrealized       Fair       Unrealized       Fair       Unrealized
                                                  Value      Losses         Value        Losses         Value        Losses
                                               ----------- -----------   ------------ -----------    -----------   -----------
<S>                                            <C>            <C>        <C>             <C>         <C>            <C>
Debt securities issued by the U.S.
   Treasury and other U.S. government
   corporations and agencies                   $ 7,708,787    $121,480   $  8,770,608    $225,188    $16,479,395    $  346,668
Obligations of states and municipalities         1,404,594      11,257        500,136      20,698      1,904,730        31,955
Corporate debt securities                                                     458,903      16,097        458,903        16,097
Mortgage-backed securities                       7,145,427     124,668      7,729,095     254,235     14,874,522       378,903
U.S. government agencies
   perpetual/callable preferred stocks                                      1,655,250     344,750      1,655,250       344,750
                                               -----------    --------    -----------    --------    -----------    ----------
       Total temporarily impaired securities   $16,258,808    $257,405    $19,113,992    $860,968    $35,372,800    $1,118,373
                                               ===========    ========    ===========    ========    ===========    ==========
</TABLE>

Bank management  considers  investments  with an unrealized loss at December 31,
2005  to be only  temporarily  impaired  because  the  impairment  is due to the
current interest rate environment,  not other credit factors.  As management has
the  ability to hold debt  securities  until  maturity,  or for the  foreseeable
future if classified as  available-for-sale,  no declines are deemed to be other
than temporary.


                                       44
<PAGE>

NOTE 4 - LOANS
--------------

Loans consisted of the following as of December 31:


<TABLE>
<CAPTION>
                                                                                          2005              2004
                                                                                     ------------      ------------
<S>                                                                                  <C>               <C>
Commercial, financial and agricultural                                               $ 11,385,701      $ 14,088,724
Real estate - construction and land development                                         9,037,438         6,954,394
Real estate - residential                                                              96,458,618        97,645,846
Real estate - commercial                                                               16,101,173        11,196,882
Municipal                                                                                 987,153         1,014,703
Consumer                                                                               13,380,572        11,850,597
                                                                                     ------------      ------------
                                                                                      147,350,655       142,751,146
Allowance for loan losses                                                              (1,719,533)       (1,701,915)
Deferred costs, net                                                                       174,616           180,188
                                                                                     ------------      ------------
           Net loans                                                                 $145,805,738      $141,229,419
                                                                                     ============      ============
</TABLE>

Changes in the  allowance  for loan  losses  were as follows for the years ended
December 31:

<TABLE>
<CAPTION>
                                                                                           2005             2004
                                                                                       ----------      ------------
<S>                                                                                    <C>             <C>
Balance at beginning of year                                                           $1,701,915      $  1,669,873
Recoveries of loans previously charged off                                                     94            21,181
Charge offs                                                                               (12,476)          (14,139)
Provision for loan losses                                                                  30,000            25,000
                                                                                       ----------      ------------
Balance at end of year                                                                 $1,719,533      $  1,701,915
                                                                                       ==========      ============
</TABLE>

The  following  table  sets forth  information  regarding  nonaccrual  loans and
accruing loans 90 days or more overdue as of December 31:


<TABLE>
<CAPTION>
                                                                                           2005             2004
                                                                                       ----------      ------------
<S>                                                                                    <C>             <C>
Total nonaccrual loans                                                                 $   32,443      $          0
                                                                                       ==========      ============
Accruing loans which are 90 days or more overdue                                       $        0      $          0
                                                                                       ==========      ============
</TABLE>

Information about loans that meet the definition of an impaired loan in SFAS No.
114 is as follows as of December 31:


<TABLE>
<CAPTION>
                                                                       2005                           2004
                                                              -------------------------      -------------------------
                                                              Recorded       Related         Recorded       Related
                                                              Investment     Allowance       Investment     Allowance
                                                              In Impaired    For Credit      In Impaired    For Credit
                                                              Loans          Losses          Loans          Losses
                                                              -----------    ----------      -----------    -----------
<S>                                                           <C>            <C>             <C>            <C>
Loans for which there is a related allowance
   for credit losses                                          $   32,443     $    3,244      $        0     $        0

Loans for which there is no related allowance
   for credit losses                                                   0              0               0              0
                                                              ----------     ----------      ----------     ----------
           Totals                                             $   32,443     $    3,244      $        0     $        0

Average recorded investment in impaired loans during the
   year ended December 31                                     $    6,489                     $        0
                                                              ==========                     ==========
Related amount of interest income  recognized
 during the time, in the year ended
   December 31, that the loans were impaired

           Total recognized                                   $        0                     $        0
                                                              ==========                     ==========
           Amount recognized using a cash-basis method of
              accounting                                      $        0                     $        0
                                                              ==========                     ==========
</TABLE>


                                       45
<PAGE>

NOTE 5 - PREMISES AND EQUIPMENT
-------------------------------

The following is a summary of premises and equipment as of December 31:

                                                    2005              2004
                                                -----------       -----------
Leasehold improvements                          $   666,102       $   377,676
Furniture and equipment                           1,869,479         1,545,431
                                                -----------       -----------
                                                  2,535,581         1,923,107
Accumulated depreciation and amortization        (1,529,224)       (1,359,549)
                                                -----------       -----------
                                                $ 1,006,357       $   563,558
                                                ===========       ===========

NOTE 6 - DEPOSITS
-----------------

The aggregate  amount of time deposit  accounts in  denominations of $100,000 or
more  as of  December  31,  2005  and  2004  was  $21,483,496  and  $14,343,161,
respectively.

For time deposits as of December 31, 2005,  the scheduled  maturities  for years
ended December 31 are:


                  2006                                      $47,342,908
                  2007                                       10,226,370
                  2008                                        2,115,518
                  2009                                        1,539,116
                  2010                                        1,339,216
                                                            -----------
                           Total                            $62,563,128
                                                            ===========

NOTE 7 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
-------------------------------------------------------

Securities  sold under  agreements to repurchase  consist of funds borrowed from
customers on a  short-term  basis  secured by portions of the Bank's  investment
portfolio.  The securities  which were sold have been accounted for not as sales
but as borrowings.  The securities  consisted of debt  securities  issued by the
U.S.  Treasury  and  other  U.S.  government   corporations  and  agencies.  The
securities  were held in safekeeping by the Federal Home Loan Bank of Boston and
Morgan  Stanley,  under the control of the Bank. The  purchasers  have agreed to
sell to the Bank  substantially  identical  securities  at the  maturity  of the
agreements.  The agreements  mature  generally  within three months from date of
issue.

NOTE 8 - INCOME TAX EXPENSE
---------------------------

The components of income tax expense are as follows for the years ended December
31:

                                                    2005              2004
                                                  --------          --------
Current:
   Federal                                        $708,211          $728,284
   State                                           168,115           196,030
                                                  --------          --------
                                                   876,326           924,314
                                                  --------          --------
Deferred:
   Federal                                         (26,718)          (14,782)
   State                                            (4,190)           (5,500)
                                                  --------          --------
                                                   (30,908)          (20,282)
                                                  --------          --------
           Total income tax expense               $845,418          $904,032
                                                  ========          ========


                                       46
<PAGE>

The reasons for the  differences  between the statutory  federal income tax rate
and the  effective  tax rates are  summarized  as  follows  for the years  ended
December 31:

<TABLE>
<CAPTION>
<S>                                                                                          <C>              <C>
                                                                                             2005             2004
                                                                                            ------           ------
                                                                                              % of            % of
                                                                                            Income           Income
                                                                                            ------           ------
Federal income tax at statutory rate                                                         34.0%            34.0%
Increase (decrease) in tax resulting from:
   Tax-exempt income                                                                         (5.1)            (4.7)
   Other                                                                                       .2               .1
   State tax, net of federal tax benefit                                                      4.5              4.3
                                                                                            ------           ------
       Effective tax rates                                                                   33.6%            33.7%
                                                                                            ======           ======
</TABLE>

The Bank had gross  deferred tax assets and gross  deferred tax  liabilities  as
follows as of December 31:

<TABLE>
<CAPTION>
<S>                                                                                   <C>                  <C>
                                                                                           2005              2004
                                                                                      -----------          ---------
Deferred tax assets:

   Allowance for loan losses                                                          $   528,352          $516,667
   Deferred compensation                                                                  179,658           153,039
   Other                                                                                   17,370
   Net unrealized holding loss on available-for-sale securities                           353,858           126,999
                                                                                      -----------          --------
           Gross deferred tax assets                                                    1,079,238           796,705
                                                                                      -----------          --------
Deferred tax liabilities:
   Depreciation(208,503)                                                                 (181,568)
   Deferred loan costs/fees                                                               (68,014)          (70,183)
                                                                                      -----------          --------
           Gross deferred tax liabilities                                                (276,517)         (251,751)
                                                                                      -----------          --------
Net deferred tax asset                                                                $   802,721          $544,954
                                                                                      ===========          ========
</TABLE>


As of December 31, 2005,  the Bank had no operating  loss  carryovers for income
tax purposes.

NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES
-----------------------------------------------

As of December 31, 2005 the Bank was obligated  under  non-cancelable  operating
leases for bank  premises and  equipment  expiring  between  April 2006 and June
2016.  The total  minimum  rental due in future  periods  under  these  existing
agreements is as follows as of December 31, 2005:


       2006                                                       $   434,038
       2007                                                           405,014
       2008                                                           402,014
       2009                                                           404,516
       2010                                                           405,257
       Thereafter                                                   1,337,056
                                                                 ------------
            Total                                                 $ 3,387,895
                                                                 ============

Total  rental  expense  amounted to $408,361  and  $386,016  for the years ended
December 31, 2005 and 2004, respectively.

NOTE 10 - FINANCIAL INSTRUMENTS
-------------------------------

The Bank is party to financial  instruments with  off-balance  sheet risk in the
normal course of business to meet the financing  needs of its  customers.  These
financial  instruments include commitments to originate loans,  unadvanced funds
on loans and standby  letters of credit.  The  instruments  involve,  to varying
degrees,  elements  of credit  risk in excess of the  amount  recognized  in the
balance sheets. The contract amounts of those instruments  reflect the extent of
involvement the Bank has in particular classes of financial instruments.


                                       47
<PAGE>

The Bank's exposure to credit loss in the event of  nonperformance  by the other
party to the financial  instrument  for loan  commitments  is represented by the
contractual amounts of those instruments. The Bank uses the same credit policies
in making  commitments  and  conditional  obligations  as it does for on-balance
sheet instruments.

Commitments  to originate  loans are  agreements to lend to a customer  provided
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since many of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent  future  cash   requirements.   The  Bank  evaluates  each  customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,  if
deemed necessary by the Bank upon extension of credit,  is based on management's
credit  evaluation  of the  borrower.  Collateral  held varies,  but may include
secured interests in mortgages, accounts receivable,  inventory, property, plant
and equipment and income-producing properties.

Standby  letters of credit  are  conditional  commitments  issued by the Bank to
guarantee  the  performance  by a customer  to a third  party.  The credit  risk
involved in issuing  letters of credit is essentially  the same as that involved
in extending loan  facilities to customers.  As of December 31, 2005 the maximum
potential amount of the Bank's obligation was $358,262 for financial and standby
letters of credit.  There were no letters of credit as of December 31, 2004. The
Bank's  outstanding  letters  of credit  generally  have a term of less than one
year. If a letter of credit is drawn upon,  the Bank may seek  recourse  through
the customer's  underlying  line of credit.  If the customer's line of credit is
also in  default,  the Bank  may  take  possession  of the  collateral,  if any,
securing the line of credit.

The estimated fair values of the Bank's financial instruments,  all of which are
held or issued for purposes  other than  trading,  are as follows as of December
31:

<TABLE>
<CAPTION>
<S>                                              <C>                <C>              <C>               <C>
                                                                2005                               2004
                                                 --------------------------------    --------------------------------
                                                   Carrying             Fair           Carrying            Fair
                                                    Amount              Value            Amount            Value
                                                 -------------      -------------    -------------     --------------
Financial assets:

   Cash and cash equivalents                     $  16,183,015      $  16,183,015    $  15,128,312     $  15,128,312
   Interest-bearing time deposit with other bank                                           500,000           500,000
   Available-for-sale securities                    40,231,140         40,231,140       38,482,849        38,482,849
   Federal Home Loan Bank stock                        965,600            965,600          965,600           965,600
   Loans held-for-sale                                                                     740,000           746,687
   Loans, net                                      145,805,738        143,769,000      141,229,419       142,340,000
   Accrued interest receivable                         793,488            793,488          724,807           724,807

Financial liabilities:
   Deposits                                        191,115,680        191,117,000      183,132,283       183,134,000
   Federal Home Loan Bank advance                                                        2,000,000         2,000,000
   Securities sold under agreements to
     repurchase                                      2,312,832          2,312,832        2,187,824         2,187,824
</TABLE>

The  carrying  amounts of  financial  instruments  shown in the above  table are
included  in the  consolidated  balance  sheets  under the  indicated  captions.
Accounting policies related to financial instruments are described in Note 2.


                                       48
<PAGE>


Notional  amounts of financial  instrument  liabilities  with  off-balance-sheet
credit risk are as follows as of December 31:

                                                  2005              2004
                                              ------------      ------------
Commitments to originate loans                $  1,544,500      $  4,565,600
Standby letters of credit                          358,262
Unadvanced portions of loans:
   Commercial real estate                        5,270,221         4,432,023
   Commercial lines of credit                    6,654,353         4,655,299
   Residential real estate                                           266,265
   Consumer                                        876,891           772,988
   Home equity                                  20,115,648        15,711,178
                                              ------------      ------------
                                              $ 34,819,875      $ 30,403,353
                                              ============      ============


There is no material  difference  between the notional amounts and the estimated
fair values of the above off-balance sheet liabilities.

NOTE 11 - RELATED PARTY TRANSACTIONS
------------------------------------

Certain directors and executive officers of the Bank and companies in which they
have  significant  ownership  interest  were  customers of the Bank during 2005.
Total loans to such persons and their  companies  amounted to  $2,647,196  as of
December 31, 2005.  During the year ended December 31, 2005  principal  payments
totaled $1,116,666 and advances amounted to $1,867,926.

Deposits from related  parties held by the Bank as of December 31, 2005 and 2004
amounted to $1,761,463 and $1,695,257, respectively.

During 2005 and 2004, the Bank paid $65,089 and $59,970,  respectively, for rent
and related  expense of the Bank's  Granby branch office to a company of which a
bank director is a principal. The rent expense for the Granby branch included in
Note 9 amounted to $45,385 in 2005 and $44,935 in 2004.

During 2005, the Bank paid $228,148 in  construction  costs and related fees for
the  Bank's  Canton  branch  office to a company of which a bank  director  is a
principal. This amount is included in 2005 capital expenditures.

During  2005  and  2004,  a  director  of the  Bank  was  paid  $5,288  and  $0,
respectively for legal services.

NOTE 12 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
---------------------------------------------------------

Most of the Bank's business activity is with customers located within the state.
There are no  concentrations  of credit to borrowers that have similar  economic
characteristics. The majority of the Bank's loan portfolio is comprised of loans
collateralized by real estate located in the State of Connecticut.

NOTE 13 - REGULATORY MATTERS
----------------------------

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate  certain  mandatory and possibly  additional  discretionary  actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Bank's consolidated financial statements.  Under capital adequacy guidelines and
the  regulatory  framework  for  prompt  corrective  action,  the Bank must meet
specific  capital  guidelines that involve  quantitative  measures of the Bank's
assets,  liabilities  and certain  off-balance-sheet  items as calculated  under
regulatory accounting  practices.  The Bank's capital amounts and classification
are also subject to qualitative  judgments by the regulators  about  components,
risk weightings and other factors.


                                       49
<PAGE>

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum amounts and ratios (set forth in the table
below) of total and Tier 1  capital  (as  defined  in the  regulations)  to risk
weighted  assets (as  defined),  and of Tier 1 capital  (as  defined) to average
assets (as defined). Management believes, as of December 31, 2005, that the Bank
meets all capital adequacy requirements to which it is subject.

As of December 31, 2005, the most recent  notification  from the Federal Deposit
Insurance  Corporation  categorized  the  Bank as  well  capitalized  under  the
regulatory  framework for prompt  corrective  action.  To be categorized as well
capitalized the Bank must maintain minimum total  risk-based,  Tier 1 risk-based
and Tier 1 leverage ratios as set forth in the table. There are no conditions or
events  since that  notification  that  management  believes  have  changed  the
institution's category.

The Bank's actual capital amounts and ratios are also presented in the table:


<TABLE>
<CAPTION>
<S>                                                <C>        <C>         <C>            <C>       <C>           <C>
                                                                                                  To Be Well
                                                                                                  Capitalized Under
                                                                          For Capital             Prompt Corrective
                                                          Actual         Adequacy Purposes        Action Provisions
                                                  -------------------  ----------------------    ---------------------
                                                   Amount      Ratio     Amount        Ratio      Amount       Ratio
                                                  ---------  --------  ----------    --------    --------     --------
                                                                  (Dollar amounts in thousands)
As of December 31, 2005:
   Total Capital (to Risk Weighted Assets)         $17,153    13.66%      $10,046       >8.0%     $12,558      >10.0%
   Tier 1 Capital (to Risk Weighted Assets)         15,579    12.41         5,023       >4.0        7,535       >6.0
   Tier 1 Capital (to Average Assets)               15,579     7.61         8,188       >4.0       10,235       >5.0

As of December 31, 2004:
   Total Capital (to Risk Weighted Assets)          15,433    13.27         9,301       >8.0       11,626      >10.0
   Tier 1 Capital (to Risk Weighted Assets)         13,977    12.02         4,650       >4.0        6,976       >6.0
   Tier 1 Capital (to Average Assets)               13,977     7.11         7,865       >4.0        9,832       >5.0
</TABLE>


NOTE 14 - EMPLOYEE BENEFITS
---------------------------

The Bank sponsors a 401(k)  savings and retirement  plan.  Employees who were 21
years of age and employed on the plan's effective date were immediately eligible
to  participate  in the  plan.  Other  employees  who have  attained  age 21 are
eligible for membership on the first day of the month following completion of 90
days of service.

The provisions of the 401(k) plan allow eligible employees to contribute subject
to IRS limitations. The Bank's matching contribution equaled 50 cents per dollar
contributed by the participant up to 6% of the participant's  annual salary. The
Bank's expense under this plan was $49,205 in 2005 and $44,220 in 2004.

The  Bank  entered  into  employment  agreements  (the  "Agreements")  with  the
Executive  Officers of the Bank. The Agreements  provide for severance  benefits
upon  termination  following a change in control as defined in the agreements in
amounts  equal to cash  compensation  as  defined in the  agreements  and fringe
benefits that the  Executive(s)  would have received if the  Executive(s)  would
have continued working for an additional five years.

NOTE 15 - STOCK OPTION PLAN

The Simsbury Bank & Trust  Company,  Inc. 1998 Stock Plan ("Plan")  provides for
the  granting of options to purchase  shares of common  stock or the granting of
shares of restricted stock up to an aggregate amount of 142,000 shares of common
stock of the Bank.  Options granted under the Plan may be either Incentive Stock
Options  ("ISOs") within the meaning of Section 422 of the Internal Revenue Code
or  non-qualified  options which do not qualify as ISOs ("NQOs").  No restricted
stock  awards or stock  options  may be granted  under the Plan after  March 17,
2008.


                                       50
<PAGE>


The exercise price for shares covered by an ISO may not be less than 100% of the
fair market value of common stock on the date of grant.  The exercise  price for
shares  covered by an NQO may not be less than 50% of the fair  market  value of
common  stock at the date of grant.  All  options  must expire no later than ten
years from the date of grant. The Plan also provides the Board with authority to
make  grants  that  will  provide  that  options  will  become  exercisable  and
restricted awards will become fully vested upon a change in control of the Bank.

In  accordance  with the Plan each  non-employee  director  is  granted a NQO to
purchase  1,000  shares of common  stock at the fair market  value of the common
stock on the grant date.  These  options  will become  exercisable  in two equal
installments beginning on the first anniversary of the date of grant.

The fair value of each option granted in 2005 and 2004 was estimated on the date
of grant  using  the  Black-Scholes  option-pricing  model  with  the  following
weighted-average assumptions: dividend yield of 1.50% in 2005 and 1.00% in 2004,
expected volatility of 14.6% in 2005 and 18.8% in 2004,  risk-free interest rate
of 4.49% in 2005 and 4.25% in 2004, and an expected life of 10 years in 2005 and
10 years in 2004.

A summary of the status of the Bank's  stock  option  plan as of December 31 and
changes during the years ending on that date is presented below:

<TABLE>
<CAPTION>
<S>                                              <C>                <C>             <C>               <C>
                                                              2005                            2004
                                                 ------------------------------  --------------------------------
                                                             Weighted-Average                   Weighted-Average
Fixed Options                                    Shares         Exercise Price      Shares         Exercise Price
-------------                                    ------      ------------------  -----------    -----------------
Outstanding at beginning of year                 50,899             $19.77          55,369            $14.33
Granted                                          21,000              31.50          13,131             35.11
Exercised                                        (8,695)             14.89         (17,164)            14.06
Forfeited                                                                             (437)            15.65
                                                 ------                            -------
Outstanding at end of year                       63,204              24.34          50,899             19.77
                                                 ======                            =======
Options exercisable at year-end                  34,764              17.76          35,582             15.09
Weighted-average fair value of
   options granted during the year                $8.60                             $11.65
</TABLE>

The following table summarizes information about fixed stock options outstanding
as of December 31, 2005:

<TABLE>
<CAPTION>
<S>                   <C>                    <C>                    <C>              <C>
                                         Options Outstanding and Exercisable
                                         Weighted-Average
                       Number                  Remaining            Number
Exercise Price      Outstanding            Contractual Life       Exercisable     Exercise Price
--------------      -----------          ------------------       -----------     --------------
   $13.625            21,016                 2.4 years              21,016           $13.625
    15.65              2,622                 6.2 years               2,622            15.65
    16.25              5,435                 5.9 years               5,435            16.25
    33.25              2,625                 8.5 years                 875            33.25
    34.90              1,314                 8.3 years                 438            34.90
    35.00              5,250                 8.8 years               1,750            35.00
    36.55              3,942                 8.3 years               2,628            36.55
    31.50             21,000                10.0 years
                    -----------                                   -----------
                       63,204                 6.7 years              34,764
                    -----------                                   ===========

</TABLE>


                                       51
<PAGE>


NOTE 16 - EARNINGS PER SHARE (EPS)
----------------------------------

Reconciliation  of the numerators and the  denominators of the basic and diluted
per share computations for net income are as follows:

<TABLE>
<CAPTION>
<S>                                                                     <C>                 <C>              <C>
                                                                         Income             Shares      Per-Share
                                                                       (Numerator)       (Denominator)    Amount

Year ended December 31, 2005
   Basic EPS
     Net income                                                         $1,673,677          835,079          $2.00
     Effect of dilutive securities, options                                                  18,276
                                                                       -----------          -------
   Diluted EPS
     Net income                                                         $1,673,677          853,355          $1.96
                                                                       ===========          -------
Year ended December 31, 2004
   Basic EPS
     Net income                                                         $1,778,250          821,013          $2.17
     Effect of dilutive securities, options                                                  27,760
                                                                       -----------          -------
   Diluted EPS
     Net income                                                         $1,778,250          848,773          $2.10
                                                                       ===========          =======
</TABLE>

NOTE 17 - RECLASSIFICATION
--------------------------

Certain  amounts in the prior year have been  reclassified to be consistent with
the current year's statement presentation.

NOTE 18 - HOLDING COMPANY REORGANIZATION
----------------------------------------

On March 2, 2006, the Bank  reorganized into a holding company  structure.  As a
result,  the Bank became a  wholly-owned  subsidiary  of SBT Bancorp,  Inc. (the
"Company") and each outstanding  share of common stock of the Bank was converted
into the right to receive one share of the common  stock,  no par value,  of the
Company. The Company will begin to file reports with the Securities and Exchange
Commission  and will be  supervised  by the Board of  Governors  of the  Federal
Reserve System.


                                       52
<PAGE>

Shareholder Data
--------------------------------------------------------------------------------



     The Bank completed its organization and began operations on March 31, 1995.
The Bank's common stock was issued at a price of $10.00 per share.  The stock of
the Bank's parent company, SBT Bancorp, Inc., which was formed on March 3, 2006,
is currently listed on the OTC Bulletin Board (Symbol:  "SBTB"). At December 31,
2005,  there were  838,528  shares of the Bank's  common stock  outstanding  and
approximately  1,100  shareholders of record.  At December 31, 2004,  there were
829,833 shares outstanding and approximately 1,223 shareholders of record. Since
completion of the Bank's  organization  there has been a limited  market for its
shares.  The following table sets forth the high and low bid information for the
period indicated.


                                   Year Ended                 Year Ended
                                December 31, 2005          December 31, 2004
                               -------------------       --------------------
                                High          Low         High          Low
         First Quarter         $34.50       $32.90       $38.00       $36.50
         Second Quarter        $34.00       $31.90       $38.00       $31.50
         Third Quarter         $33.00       $30.55       $34.50       $30.70
         Fourth Quarter        $33.50       $30.10       $37.25       $33.15


     The above quotations reflect inter-dealer  prices,  without retail mark-up,
mark-down or commission, and may not reflect actual transactions.

Dividends

    The Bank's  shareholders  are entitled to dividends  when and if declared by
the Board of Directors out of funds legally available therefore. Connecticut law
prohibits the Bank from paying cash dividends except from its net profits, which
are defined by state  statutes.  The Bank  declared  and paid cash  dividends of
$334,163  during 2005.  The Bank  declared  and paid cash  dividends of $297,128
during 2004.

    The Bank did not repurchase any of its securities  during the fourth quarter
of 2005.


                                       53
<PAGE>

Corporate Information
-------------------------------------------------------------------------------

                     The Simsbury Bank & Trust Company, Inc.
                              981 Hopmeadow Street
                                  P.O. Box 248
                        Simsbury, Connecticut 06070-0248
                                 (860) 658-BANK
                               Fax: (860) 651-5942
                              www.simsburybank.com



     Notice of Shareholders' Meeting
     -------------------------------
     The Annual Meeting of Shareholders  of SBT Bancorp,  Inc., the bank holding
     company for The Simsbury Bank & Trust Company,  Inc.,  will be held at 5:00
     p.m.  on  Tuesday,   May  9,  2006  at  981  Hopmeadow  Street,   Simsbury,
     Connecticut.


     Independent Auditors                       Legal Counsel
     --------------------                       -------------
     Shatswell, MacLeod & Company, P.C.         Day, Berry & Howard, LLP
     83 Pine Street                             Counselors at Law
     West Peabody, MA  01960-3635               CityPlace I
                                                Hartford, CT  06103-3499

     Transfer Agent                             Shareholder Contact
     --------------                             -------------------
     American Stock Transfer & Trust Company    Susan D. Presutti
     40 Wall Street                             The Simsbury Bank &
                                                   Trust Company, Inc.
     New York, NY 10005                         981 Hopmeadow Street
     Shareholder Relations:  (800) 937-5449     Simsbury, CT  06070
                                                (860) 408-5493
     Trading Symbol:     SBTB
     --------------

COPIES OF THE COMPANY'S  ANNUAL REPORT ON FORM 10-KSB WILL BE FORWARDED  WITHOUT
CHARGE UPON WRITTEN REQUEST TO:

                        Jane F. von Holzhausen, Secretary
                     The Simsbury Bank & Trust Company, Inc.
                              981 Hopmeadow Street
                                  P.O. Box 248
                             Simsbury, CT 06070-0248



                                       54
<PAGE>

Directors, Officers and Employees
--------------------------------------------------------------------------------

Board of Directors


*Chairman of Committee

Lincoln S. Young
Chairman of the Board
Retired Chief Executive Officer
Turbine Engine Services Corp.
   Corporate Governance Committee*
   Executive Committee
   Investment Services Committee
   Loan Committee
   Personnel Committee
   Marketing and Public Relations
         Committee

Robert J. Bogino
Vice Chairman
Retired President and Co-Owner
Bogino & DeMaria, Inc
   Audit and Compliance Committee
   Corporate Governance Committee
   Executive Committee
   Investment Services Committee
   Loan Committee*

James T. Fleming
Commissioner
   Department of Public Works
State of Connecticut
   Audit and Compliance Committee
   Corporate Governance Committee
   Marketing and Public Relations Committee

Martin J. Geitz
President and Chief Executive Officer
The Simsbury Bank and Trust Company
   Executive Committee
   Investment Services Committee
   Loan Committee
   Marketing and Public Relations Committee

Edward J. Guarco
Vice President
State Line Oil
   Audit and Compliance Committee
   Personnel Committee

Gary R. Kevorkian
Attorney at Law
   Loan Committee
   Personnel Committee

Barry R. Loucks
Retired President and CEO
The Simsbury Bank & Trust Company
   Executive Committee*
   Loan Committee
   Marketing and Public Relations Committee

George B. Odlum, Jr., DMD
General Dentistry
   Audit and Compliance Committee*
   Executive Committee
David W. Sessions
President and Treasurer
Casle Corporation
   Executive Committee
   Loan Committee
   Personnel Committee*

Jane F. von Holzhausen
Secretary
Retired Sales Manager
Prudential Connecticut Realty
   Corporate Governance Committee
   Executive Committee
   Marketing and Public Relations Committee*

Penny R. Woodford
Real Estate Agent
Coldwell Banker Residential Brokerage
   Audit and Compliance Committee
   Marketing and Public Relations Committee

OFFICERS

Martin J. Geitz
President and Chief Executive Officer

Anthony F. Bisceglio, Ph.D.
Executive Vice President, Treasurer and Chief Financial Officer

Charles D. Forgie
Executive Vice President and
Chief Lending Officer

Terry L. Boulton
Senior Vice President and Chief Retail Banking Officer

Jane F. von Holzhausen
Secretary

Vice Presidents
Richard A. Bahre
Robert A. Francolini
H. Holbrook Hyde, Jr. Janice L. Zdun

Assistant Vice Presidents
Brian D. Belyea
Gladden R. Keyes
Jeffrey J. Levitsky
Susan D. Presutti, Assistant Secretary
Sophie S. Stevens
Barbara J. Wallace

Assistant Treasurers
Christine A. Gates
Michelle T. Hagan
Barbara J. Hanifin
Karen G. Jepeal
Kim A. McDonald
Craig S. Porter
Directors Emeriti

Richard C. Anthony
Chairman
Weekapaug Foundation for Conservation

Robert B. August
Attorney at Law

Modesto F. Brunoli
Retired President
Fred Brunoli & Sons, Inc

Jackson F. Eno
Vice President
Morgan Stanley

Evan W. Woollacott
Retired Vice Chairman and Commissioner
Connecticut D.P.U.C.

EMPLOYEES

Dianna S. Anderson
Dana F. Boardman
Erin A. Bowe
Alexandra S. Bullard
Margot M. Byrne
Katherine P. Cain
Nicole A. Dietz
Samantha L. Dileo
S. Thomas Edge
Marilyn E. Ehrhardt
Lori L. Ethier
Deborah A. Fochesato
Pamela S. Ford
Beate E. Forst
Shirley T. Gentry
Juliana R. Gingerich
Barbara A. Holcomb
Jo-Ann Horton
Ulrike R. Johnson
Regina M. Keith
Tina M. Kuracz
Elizabeth C. Lenhart
Francine T. Love
Lauren S. McCoy
Catherine L. Miller
Lisa A. Morgan
Shawna L. Morin
Irene P. Najman
Alan G. Pollack
Patricia A. Pschirer
Margaret E. Rose
Susan L. Sawyer
Irene S. Smith
Karen E. Storms
Maria Theodoratos
Susan Truss
Debra K. Warren
Hilary M. Wilson


                                       55
<PAGE>



                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized, on March 24, 2006.

                                     SBT BANCORP, INC.+

                                     By:  /s/
                                         -----------------------------
                                           Martin J. Geitz
                                           President and Chief Executive Officer

     In  accordance  with the Exchange Act, this Report has been signed below by
the following  persons on behalf of the  Registrant and in the capacities and on
the dates indicated.

           Name                        Capacity                       Date
           ----                        --------                       ----

 /s/                                   President and              March 24, 2006
---------------------------       Chief Executive Officer
Martin J. Geitz

 /s/                             Executive Vice President,        March 24, 2006
---------------------------    Chief Financial Officer and
Anthony F. Bisceglio             Chief Accounting Officer


 /s/                                   Director                   March 24, 2006
---------------------------
Robert J. Bogino

 /s/                                   Director                   March 24, 2006
---------------------------
James T. Fleming

 /s/                                   Director                   March 24, 2006
---------------------------
Edward J. Guarco

 /s/                                   Director                   March 24, 2006
---------------------------
Gary R. Kevorkian

 /s/                                   Director                   March 24, 2006
---------------------------
Barry R. Loucks

 /s/                                   Director                   March 24, 2006
---------------------------
George B. Odlum, Jr., DMD

 /s/                                   Director                   March 24, 2006
---------------------------
David W. Sessions

 /s/                                   Director                   March 24, 2006
---------------------------
Jane F. von Holzhausen

 /s/                                   Director                   March 24, 2006
---------------------------
Penny R. Woodford

 /s/                                   Director                   March 24, 2006
---------------------------
Lincoln S. Young


----------
+ The Registrant,  SBT Bancorp,  Inc., became a holding company for The Simsbury
Bank & Trust Company, Inc. pursuant to a reorganization that became effective as
of March 2, 2006. On March 7, 2006, SBT Bancorp,  Inc. filed a Current Report on
Form  8-K12(g)(3)  succeeding to the  registration  of The Simsbury Bank & Trust
Company,  Inc.  pursuant to Rule 12g-3(a) under the  Securities  Exchange Act of
1934.


                                       56
<PAGE>

                                  EXHIBIT INDEX

Exhibit No.     Description
-----------     -----------
3(i)            Certificate of Incorporation (incorporated by reference to
                Exhibit (b)(1)(a) of the Bank's Form F-1 dated April 26, 1996)

3(ii)           Bylaws (incorporated by reference to Exhibit (b)(1)(b) of the
                Bank's Form F-1 dated April 26, 1996 except for Section 3.2 as
                amended on January 19, 2000 and incorporated by reference to the
                Bank's Form 10-KSB dated March 30, 2000 and Section 3.4 as
                amended October 22, 2003)

4               Specimen Common Stock Certificate (incorporated by reference to
                Exhibit (b)(3) of the Bank's Form F-1 dated April 26, 1996)

10.1            Employment Agreement, dated as of September 1, 2004, by and
                between the Bank and Martin J. Geitz (incorporated by reference
                to Exhibit 10.13 of the Bank's 10-QSB dated November 12, 2004)

10.2            Employment Agreement, dated as of February 6, 2004, by and
                between the Bank and Charles D. Forgie and amended as of
                November 15, 2005 filed herewith

10.3            Employment Agreement, dated as of February 6, 2004, by and
                between the Bank and Anthony F. Bisceglio (incorporated by
                reference to Exhibit 10.3 of the Bank's Form 10-KSB dated
                March 17, 2004)

10.4            Supplemental Executive Retirement Plan Agreement, dated as of
                April 23, 2001, by and between the Bank and Charles D. Forgie
                (incorporated by reference to Exhibit 10.5 of the Bank's 10-KSB
                dated March 17, 2004)

10.5            Supplemental Executive Retirement Plan Agreement, dated as of
                April 23, 2001, by and between the Bank and Anthony F. Bisceglio
                (incorporated by reference to Exhibit 10.6 of the Bank's 10-KSB
                dated March 17, 2004)

10.6            Change in Control Agreement, dated as of July 30, 1999, by and
                between the Bank and Charles D. Forgie (incorporated by
                reference to Exhibit 10.7 of the Bank's 10-KSB dated March 17,
                2004)

10.8            Change in Control Agreement, dated as of July 30, 1999, by and
                between the Bank and Anthony F. Bisceglio (incorporated by
                reference to Exhibit 10.8 of the Bank's 10-KSB dated March 17,
                2004)

13              2005 Annual Report (except for those portions expressly
                incorporated by reference, the 2005 Annual Report is furnished
                for informational purposes and is not to be deemed filed as part
                of this Form 10-KSB)

14              Code of Ethics (incorporated by reference to Exhibit 14 of the
                Bank's 10-KSB dated March 17, 2004)

21              Subsidiaries (incorporated by reference to Exhibit 21 of the
                Bank's 10-KSB dated March 19, 2003)

31.1            Section Rule 13(a)-14(a)/15(d)-14(a) Certification by Chief
                Executive Officer

31.2            Section Rule 13(a)-14(a)/15(d)-14(a) Certification by Chief
                Financial Officer

32.1            Section 1350 Certification by Chief Executive Officer

32.2            Section 1350 Certification by Chief Financial Officer

                                       57