FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company include, but are not limited to, changes in interest rates, national and regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Bank's market area, changes in real estate market values in the Bank's market area, and changes in relevant accounting principles and guidelines. Additional factors that may affect the Company's results are discussed in the Company's Annual Report on Form 10-K under "Item 1A. Risk Factors." These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

CRITICAL ACCOUNTING POLICIES

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. We consider the following to be our critical accounting policies: allowance for loan losses and deferred income taxes.

Allowance for Loan Losses. The allowance for loan losses is the amount estimated by management as necessary to cover probable credit losses in the loan portfolio at the statement of financial condition date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: loss exposure at default; the amount and timing of future cash flows on impacted loans; value of collateral; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance on a quarterly basis and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectibility of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Office of Thrift Supervision, as an integral part of its examination process, periodically reviews our allowance for loan losses. The Office of Thrift Supervision could require us to recognize adjustments to the allowance based on its judgments about information available to it at the time of its examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would negatively affect earnings. For additional discussion, see note 1 of the notes to the consolidated financial statements included in the Company's annual report on Form 10-K for 2008.

Deferred Income Taxes. We use the asset and liability method of accounting for income taxes as prescribed in Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance would result in additional income tax expense in the period, which would negatively affect earnings.

Comparison of Financial Condition at March 31, 2009 and December 31, 2008

Total assets increased by $33.9 million, or 8.0%, to $458.1 million at March 31, 2009 from $424.2 million at December 31, 2008. The increase in total assets was due to an increase of $20.9 million in loans receivable, net, an increase of $7.6 million in cash and cash equivalents, an increase of $3.2 million in premises and equipment, an increase of $1.3 million in bank owned life insurance, and an increase of $450,000 in Federal Home Loan Bank of New York stock.

Cash and cash equivalents increased by $7.6 million, or 20.9%, to $44.2 million at March 31, 2009, from $36.5 million at December 31, 2008. The increase in short-term liquidity was primarily the result of an increase of $27.4 million in deposits, an increase of $10.0 million from advances with FHLB of New York, offset by the $20.9 million increase in loans receivable, the $3.2 million increase in premises and equipment, the $1.3 million increase in bank owned life insurance and a decrease of $2.0 million in advance payments by borrowers for taxes and insurance.

Loans receivable, net increased by $20.9 million, or 5.8%, to $384.5 million at March 31, 2009 from $363.6 million at December 31, 2008, due to loan originations of $20.8 million and increases in commercial business loans of $766,000 that exceeded loan repayments of $637,000.

Bank owned life insurance increased by $1.3 million, or 14.4%, to $10.2 million at March 31, 2009 from $8.9 million at December 31, 2008 due primarily to the purchase of $1.2 million in additional bank owned life insurance.

Premises and equipment increased by $3.2 million, or 74.3%, to $7.6 million at March 31, 2009 from $4.4 million at December 31, 2008 due to the purchases of the premises and equipment for, and renovation of, the two new branch offices located in Massachusetts, both of which opened after March 31, 2009.

Real estate owned decreased by $305,000, or 36.7%, to $527,000 at March 31, 2009 from $832,000 at December 31, 2008 due to the sale of a foreclosed multi-family property located in Hampton, New Hampshire that resulted in net proceeds of $283,000 and a loss of $86,000, offset by capitalized costs of $64,000, to renovate a foreclosed multi-family building located in Newark, New Jersey.

Federal Home Loan Bank ("FHLB") of New York stock increased by $450,000, or 19.1%, to $2.8 million at March 31, 2009, from $2.4 million at December 31, 2008. The increase was due to increased borrowings from the FHLB in the first quarter of 2009, which required additional purchases of FHLB New York stock.

Advances from the FHLB increased by $10.0 million or 25.0% to $50.0 million at March 31, 2009 from $40.0 million at December 31, 2008. The increase in borrowings was used to fund loan originations. During the quarter ended March 31, 2009, the Bank borrowed $10.0 million in fixed rate term advances from the FHLB. These advances mature during 2011 through 2014 and have an average interest rate of 2.97%.

Deposits increased by $27.4 million, or 10.5%, to $288.8 million at March 31, 2009 from $261.4 million at December 31, 2008. The increase in deposits was primarily attributable to an effort by the Bank to increase deposits through the offering of competitive interest rates in our retail branches and less reliance on two nationwide certificate of deposit listing services. As a result, our retail branches attracted $30.9 million in additional deposits that were offset by a decrease of $3.3 million in certificates of deposits obtained through the deposit listing services.

Advance payments by borrowers for taxes and insurance decreased by $2.0 million, or 29.9%, to $4.6 million at March 31, 2009 from $6.6 million at December 31, 2008 due primarily to the semi-annual timing of remittances to municipalities,
(typically in June and December.)

Stockholders' equity increased by $397,000, or 0.4%, to $110.9 million at March 31, 2009, from $110.5 million at December 31, 2008. This increase was primarily the result of net income of $506,000 and the amortization of $47,000 for the ESOP for the period, partially offset by a cash dividend declared of $165,000.

Comparison of Operating Results for the Three Months Ended March 31, 2009 and 2008

General. Net income decreased by $22,000, or 4.2%, to $506,000 for the quarter ended March 31, 2009, from $528,000 for the quarter ended March 31, 2008. The decrease was primarily the result of an increase of $255,000 in non-interest expense, an increase of $50,000 in provision for loan losses and a decrease of $95,000 in non-interest income. These were offset by an increase of $362,000 in net interest income and a decrease of $16,000 in the provision for income taxes.

Net Interest Income. Net interest income increased by $362,000, or 11.2%, to $3.6 million for the three months ended March 31, 2009 from $3.2 million for the three months ended March 31, 2008. The increase in net interest income resulted primarily from the increased average balance of net interest-earning assets of $3.7 million due primarily to increased loan originations, offset by a 5 basis point decrease in our net interest rate spread to 2.71% for the three months ended March 31, 2009 from 2.76% for the three months ended March 31, 2008. The decrease in the interest rate spread in the first quarter of 2009 compared to the same period in 2008 was due to the yield on our interest-earning assets decreasing to a greater degree that the decrease in the cost of our interest-bearing liabilities. The yield on our interest-earning assets decreased by 46 basis points to 5.69% for the three months ended March 31, 2009 from 6.15% for the three months ended March 31, 2008. The cost of our interest-bearing liabilities decreased by 40 basis points to 2.99% for the three months ended March 31, 2009 from 3.39% for the three months ended March 31, 2008. The decrease in both the yield on our interest-earning assets and the cost of our interest-bearing liabilities was due to the decreasing rate environment.

The net interest margin decreased by 30 basis points between these periods from 3.76% for the quarter ended March 31, 2008 to 3.46% for the quarter ended March 31, 2009. The increase in the net interest income, despite the declines in net interest spread and net interest margin, was due to the increase in net interest-earning assets.

The following table summarizes average balances and average yields and costs of interest-earning assets and interest-bearing liabilities for the three months ended March 31, 2009 and 2008.

                                                        Three Months Ended March 31,
                                               2009                                       2008
                                             Interest                                   Interest
                               Average          and          Yield/       Average          and          Yield/
                               Balance       Dividends        Cost        Balance       Dividends        Cost
                                                           (Dollars in thousands)
Assets:
Interest-earning assets:
  Loans                       $ 373,776     $     5,832         6.24 %   $ 301,469     $     4,928         6.54 %
  Securities (including
FHLB stock)                       4,768              42         3.52         3,846              55         5.72
  Other interest-earning
assets                           36,283              31         0.34        38,107             299         3.14
   Total interest-earning
assets                          414,827           5,905         5.69       343,422           5,282         6.15
Allowance for loan losses        (1,866 )                                   (1,489 )
Non-interest-earning assets      24,229                                     19,172
   Total assets               $ 437,190                                  $ 361,105

Liabilities and equity:
Interest-bearing
liabilities:
  Interest-bearing demand     $  25,005              43         0.69     $  21,053              39         0.74
  Savings and club accounts      57,545             118         0.82        57,294             104         0.73
  Certificates of deposit       182,662           1,819         3.98       156,103           1,840         4.71
   Total interest-bearing
deposits                        265,212           1,980         2.99       234,450           1,983         3.38

Borrowings                       44,539             334         3.00         7,638              70         3.67
   Total interest-bearing
liabilities                     309,751           2,314         2.99       242,088           2,053         3.39

Noninterest-bearing demand        6,269                                      2,557
Other liabilities                10,387                                      7,414
   Total liabilities            326,407                                    252,059

Stockholders' equity            110,783                                    109,046
   Total liabilities and
Stockholders' equity          $ 437,190                                  $ 361,105
Net interest income                         $     3,591                                $     3,229
Interest rate spread                                            2.71                                       2.76
Net interest margin                                             3.46                                       3.76
Net interest-earning assets   $ 105,076                                  $ 101,334
Interest-earning assets to
interest-bearing
liabilities                      133.92 %                                   141.86 %

Total interest income increased by $623,000, or 11.8%, to $5.9 million for the three months ended March 31, 2009, from $5.3 million for the three months ended March 31, 2008. Interest income on loans increased by $904,000, or 18.3%, to $5.8 million for the three months ended March 31, 2009 from $4.9 million for the three months ended March 31, 2008. The average balance of the loan portfolio increased by $72.3 million to $373.8 million for the three months ended March 31, 2009 from $301.5 million for the three months ended March 31, 2008 as originations outpaced repayments. The average yield on loans decreased by 30 basis points to 6.24% for the three months ended March 31, 2009 from 6.54% for the three months ended March 31, 2008.

Interest income on securities decreased by $13,000, or 23.6%, to $42,000 for the three months ended March 31, 2009 from $55,000 for the three months ended March 31, 2008. The decrease was primarily due to a decrease of 220 basis points in the average yield on securities to 3.52% for the three months ended March 31, 2009 from 5.72% for the three months ended March 31, 2008. The decline in the yield was due to the decline in interest rates from March 31, 2008 to March 31, 2009. The decrease in yield was partially offset by an increase of $922,000, or 24.0%, in the average balance of securities to $4.8 million for the three months ended March 31, 2009 from $3.8 million for the three months ended March 31, 2008. The increase in the average balance was due to an increase in FHLB New York stock.

Interest income on other interest-earning assets (consisting solely of interest-earning deposits) decreased by $268,000, or 89.6%, to $31,000 for the three months ended March 31, 2009 from $299,000 for the three months ended March 31, 2008. The decrease was primarily the result of a decrease of 280 basis points in the yield to 0.34% for the three months ended March 31, 2009 from 3.14% for the three months ended March 31, 2008 and a decrease of $1.8 million in the average balance of other interest-earning assets to $36.3 million for the three months ended March 31, 2009 from $38.1 million for the three months ended March 31, 2008. The decline in the yield was due to the decline in interest rates from March 31, 2008 to March 31, 2009. The decrease in the average balance of other interest-earning assets was due to the redeployment of funds into mortgage loans and commercial loans.

Total interest expense increased by $261,000, or 12.7%, to $2.3 million for the three months ended March 31, 2009 from $2.1 million for the three months ended March 31, 2008. Interest expense on deposits decreased by $3,000, or 0.2%, to $2.0 million for the three months ended March 31, 2009 from $2.0 million for the three months ended March 31, 2008. During this same period, the average interest cost of deposits decreased by 40 basis points to 2.99% for the three months ended March 31, 2009 from 3.39% for the three months ended March 31, 2008.

Due to an effort by the Bank to increase deposits through the posting of competitive rates in our retail network, the average balance of certificates of deposits increased by $26.6 million, or 17.0%, to $182.7 million for the three months ended March 31, 2009 from $156.1 million for the three months ended March 31, 2008. Despite the increase in the average balance of certificates of deposits, interest expense on our certificates of deposits decreased by $21,000, or 1.1%, to $1.82 million for the three months ended March 31, 2009 from $1.84 million for the three months ended March 31, 2008. This decrease was the result of a decrease in the interest cost of our certificates of deposits of 73 basis points to 3.98% for the three months ended March 31, 2009 from 4.71% for the three months ended March 31, 2008.

Interest expense on our other deposit products increased by $18,000, or 12.6%, to $161,000 for the three months ended March 31, 2009 from $143,000 for the three months ended March 31, 2008. The increase was due to an increase of 9 basis points in the cost of our savings and holiday club deposits to 0.82% for the three months ended March 31, 2009 from 0.73% for the three months ended March 31, 2008, partially offset by a decrease of 5 basis points in the cost of our interest-bearing demand deposits to 0.69% for the three months ended March 31, 2009 from 0.74% for the three months ended March 31, 2008. The increase was also due to an increase of $4.0 million, or 18.8%, in the average balance of interest-bearing demand deposits to $25.0 million for the three months ended March 31, 2009 from $21.1 million for the three months ended March 31, 2008 and an increase of $251,000, 0.4%, in the average balance of our savings and holiday club deposits to $57.5 million for the three months ended March 31, 2009 from $57.3 million for the three months ended March 31, 2008.

Interest expense on borrowings increased by $264,000, or 377.1%, to $334,000 for the three months ended March 31, 2009 from $70,000 for the three months ended March 31, 2008. The increase was primarily due to an increase of $36.9 million, or 483.1%, in the average balance of borrowed money to $44.5 million for the three months ended March 31, 2009 from $7.6 million for the three months ended March 31, 2008. Interest expense on borrowed money for the three months ended March 31, 2009 comprised of $328,000 in interest expense on an average balance of $44.1 million in FHLB advances and $6,000 in interest expense on an average balance of $483,000 on a note payable incurred in connection with the acquisition of the operating assets of Hayden Financial Group LLC (now operating as Hayden Wealth Management Group, the Bank's investment advisory and financial planning service division) in the fourth quarter of 2007. This compared to interest expense from FHLB advances of $63,000 in interest expense on an average balance of $7.0 million in FHLB advances and $7,000 in interest expense on an average balance of $634,000 on the note incurred in connection with the acquisition of Hayden Financial Group LLC for the three months ended March 31, 2008.

Provision for Loan Losses. The following table summarizes the activity in the allowance for loan losses and provision for loan losses for the three months ended March 31, 2009 and 2008.

                                                              Three Months
                                                             Ended March 31,
                                                           2009             2008
                                                         (Dollars in thousands)
    Allowance at beginning of period                   $      1,865       $  1,489
    Provision for loan losses                                    50              -
    Charge-offs                                                   -              -
    Recoveries                                                    -              -
    Net charge-offs                                               -              -
    Allowance at end of period                         $      1,915       $  1,489

    Allowance to nonperforming loans                          51.84 %        47.77 %
    Allowance to total loans outstanding at the end
    of the period                                              0.50 %         0.48 %
    Net charge-offs (recoveries) to average loans
    outstanding during the period                              0.00 %         0.00 %

The allowance for loan losses was $1.92 million at March 31, 2009, $1.87 million at December 31, 2008, and $1.49 million at March 31, 2008. We recorded a provision for loan losses of $50,000 for the three month period ended March 31, 2009. The primary reason for the provision in the 2009 period was the growth of the Bank's loan portfolio, and a general weakening in the economy throughout our lending territory. In this regard, the Bank's gross loan portfolio grew by $21.0 million, or 5.7%, to $386.5 million at March 31, 2009 from $365.5 million at December 31, 2008.

We did not record any provision for loan losses during the three months ended March 31, 2008. We did not have any loan charge-offs or recoveries during the three months ended March 31, 2009 and March 31, 2008.

Non-interest Income. Non-interest income decreased by $95,000, or 22.2%, to $333,000 for the three months ended March 31, 2009 from $428,000 for the three months ended March 31, 2008. The decrease was due to a $33,000 decrease in fee income generated by Hayden Wealth Management Group, the Bank's investment advisory and financial planning services division, a $35,000 decrease in other non-interest income, a $15,000 decrease in earnings on bank owned life insurance, a $8,000 decrease in other loan fees and service charges, and a $4,000 impairment loss on securities.

Non-interest Expense. Non-interest expense increased by $255,000, or 9.2%, to $3.0 million for the three months ended March 31, 2009 from $2.8 million for the three months ended March 31, 2008. The increase resulted primarily from increases of $110,000 in real estate owned expenses, $66,000 in salaries and employee benefits, $31,000 in outside data processing expense, $23,000 in other non-interest expense, $11,000 in equipment expense, $9,000 in occupancy expense, and $5,000 in advertising expense.

The real estate owned expense of $110,000 was due to the Bank's recognition of an $86,000 loss in 2009 on the disposition of a foreclosed multi-family property located in Hampton, New Hampshire and operating expenses of $24,000 in connection with the maintenance and operation of the real estate owned. The Bank did not have any real estate owned expense during the three months ended March 31, 2008.

Salaries and employee benefits, which represent more than 50% of the Company's non-interest expense, increased by $66,000, or 4.5%, to $1.53 million in 2009 from $1.47 million in 2008 due to an increase in the number of full time equivalent employees from 85 at March 31, 2008 to 88 at March 31, 2009. The increase was due to the addition of two employees at Hayden Wealth Management Group and one employee in branch operations.

Outside data processing expense increased by $31,000, or 18.6%, to $198,000 in 2009 from $167,000 in 2008 due to additional services provided in 2009 by the Company's core data processing vendor. Equipment expense increased by $11,000, or 7.6%, to $155,000 in 2009 from $144,000 in 2008 due to the upgrade of equipment. Occupancy expense increased by $9,000, or 3.3%, to $285,000 in 2009 from $276,000 in 2008 due to increases in utility expense and real estate tax expense. Advertising expense increased by $5,000, or 8.2%, to $66,000 in 2009 from $61,000 in 2008 due to an increased effort to market the Bank's loan, deposit, and investment products and services.

Other non-interest expense increased by $23,000, or 3.5%, to $679,000 in 2009 from $656,000 in 2008 due mainly to increases of $46,000 in miscellaneous non-interest expenses, $18,000 in audit and accounting fees, and$16,000 in directors, officers and employees expenses. These increases were partially offset by a decrease of $57,000 in legal fees.

Income Taxes. Income tax expense decreased by $16,000, or 4.5%, to $341,000 for the three months ended March 31, 2009 from $357,000 for the three months ended March 31, 2008. The decrease resulted primarily from a $38,000 decrease in pre-tax income in 2009 compared to 2008. The effective tax rate was 40.3% for the three months ended March 31, 2009 as well as for the three months ended March 31, 2008.

NON PERFORMING ASSETS

The following table provides information with respect to our non-performing
assets at the dates indicated. We had no troubled debt restructurings at the
dates presented.

                                                          At                    At
                                                    March 31, 2009       December 31, 2008
                                                            (Dollars in thousands)

Non-accrual loans                                  $          3,694     $             1,875
Loans past due 90 days or more and accruing                       -                       -
     Total nonaccrual and 90 days or more past
. . .