"SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements contained in Bancorp's public reports, including this report, and in particular in "Management's Discussion and Analysis of Financial Condition and Results of Operations," may be forward looking and subject to a variety of risks and uncertainties. These factors include, but are not limited to; (1) changes in prevailing interest rates which would affect the interest earned on Bancorp's interest earning assets and the interest paid on its interest bearing liabilities; (2) the timing of repricing of Bancorp's interest earning assets and interest bearing liabilities; (3) the effect of changes in governmental monetary policy; (4) the effect of changes in regulations applicable to Bancorp and the Bank and the conduct of its business; (5) changes in competition among financial service companies, including possible further encroachment of non-banks on services traditionally provided by banks; (6) the ability of competitors that are larger than Bancorp to provide products and services which it is impracticable for Bancorp to provide; (7) the state of the economy and real estate values in Bancorp's market areas, and the consequent effect on the quality of Bancorp's loans, customers, vendors and communities;
(8) recent governmental initiatives that are expected to have a profound effect on the financial services industry and could dramatically change the competitive environment of Bancorp; (9) other legislative or regulatory changes, including those related to residential mortgages, changes in accounting standards, and Federal Deposit Insurance Corporation ("FDIC") premiums that may adversely affect Bancorp.

Although Bancorp believes that it offers the loan and deposit products and has the resources needed for continued success, future revenues and interest spreads and yields cannot be reliably predicted. These trends may cause Bancorp to adjust its operations in the future. Because of the foregoing and other factors, recent trends should not be considered reliable indicators of future financial results or stock prices.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates. Management has identified the accounting for the allowance for loan losses, the analysis of its investment securities and the valuation of deferred income tax assets, as Bancorp's most critical accounting policies and estimates in that they are important to the portrayal of Bancorp's financial condition and results. They require management's most subjective and complex judgment as a result of the need to make an estimate about the effect of matters that are inherently uncertain. These accounting policies, including the nature of the estimates and types of assumptions used, are described throughout this Management's Discussion and Analysis.

SUMMARY

Bancorp realized net income of $546,000 ($0.01 basic and diluted income per share) for the quarter ended March 31, 2012, compared to a net loss of $9.0 million ($0.23 basic and diluted loss per share) for the quarter ended March 31, 2011. The primary reason for the increase in the quarterly comparison is the $6.2 million loss on the bulk sale of non-performing assets recorded in the first quarter of 2011 and lower operating expenses of $1.3 million. In addition, during the quarter ended March 31, 2012, Bancorp recorded $264,000 in gains on sale of loans and $368,000 in restructuring charges. Bancorp's net interest income for the quarter ended March 31, 2012 was $5.2 million compared to $4.9 million for the quarter ended March 31, 2011. Interest income and interest expense decreased by 2% and 17%, respectively, for the quarter ended March 31, 2012 compared to the quarter ended March 31, 2011. The decline in interest income is due primarily to lower average outstanding loan balances, and a high level of elevated liquidity. The significant decline in interest expense is primarily due to the reduction of total deposits and substantially lower interest rates paid on existing deposits.

Total assets increased $5.3 million from $665.8 million at December 31, 2011 to $671.1 million at March 31, 2012. Cash and cash equivalents increased $48.5 million from $55.4 million at December 31, 2011 to $104.0 million at March 31, 2012. Securities decreased $8.1 million from $76.2 million at December 31, 2011 to $68.1 million March 31, 2012. The net loan portfolio decreased $35.0 million from $501.2 million at December 31, 2011 to $466.3 million at March 31, 2012. This decrease is primarily a result of a $65.8 million sale of residential loans, partially offset with new loan fundings of $17.1 million. As a result of weak loan demand and currently high levels of balance sheet liquidity, the Bank continued to offer lower rates on deposit products. The overall cost of deposits decreased from 1.28% at December 31, 2011 to 1.26% at March 31, 2012. Deposits decreased $5.3 million from $544.9 million at December 31, 2011 to $539.6 million at March 31, 2012. Borrowings increased $10.0 million from $57.0 million at December 31, 2011 and March 31, 2011 to $67.0 million at March 31, 2012, due to an additional borrowing from the FHLB.

FINANCIAL CONDITION

Cash and Cash Equivalents

Cash and cash equivalents increased $48.5 million, or 88%, to $104.0 million at March 31, 2012 compared to $55.4 million at December 31, 2011. This increase is primarily the result of the proceeds from the residential loan sale on March 29, 2012, that was included in short-term investments, and lower outstanding loan balances.

Investments

The following table is a summary of Bancorp's available-for-sale securities
portfolio, at fair value, at the dates shown:



                                                       March 31,       December 31
                                                          2012             2011
  U.S. Government agency mortgage-backed securities   $ 42,011,721     $ 50,049,429
  U.S. Government bonds                                  5,025,780        5,037,085
  Corporate bonds                                       11,554,353       11,383,458

  Total Available-for-Sale Securities                 $ 58,591,854     $ 66,469,972

Available-for-sale securities decreased $7.9 million, or 12%, from $66.5 million at December 31, 2011 to $58.6 million at March 31, 2012. This decrease is primarily due to the sale of $5.2 million of government agency mortgage-backed securities and principal pay downs of $2.7 million on mortgage backed securities.

Loans

The following table is a summary of Bancorp's loan portfolio at the dates shown:



                                           March 31,        December 31,
                                             2012               2011
           Real Estate
           Commercial                    $ 230,629,333      $ 215,659,837
           Residential                     140,538,413        188,108,855
           Construction                     11,461,824         12,306,922
           Construction to permanent         8,298,423         10,012,022
           Commercial                       32,252,224         31,810,735
           Consumer home equity             48,945,029         49,694,546
           Consumer installment              2,063,935          2,164,972

           Total Loans                     474,189,181        509,757,889
           Premiums on purchased loans         228,792            231,125
           Net deferred costs                  308,192            622,955
           Allowance for loan losses        (8,460,943 )       (9,384,672 )

           Loans receivable, net         $ 466,265,222      $ 501,227,297

Bancorp's net loan portfolio decreased $35.0 million, or 7%, from $501.2 million at December 31, 2011 to $466.3 million at March 31, 2012. The decrease is primarily a result of the $66.4 million residential loan sale, partially offset by new loan growth. Residential mortgages decreased by $47.6 million; and construction-to-permanent and construction loans decreased $1.7 million and $845,000 respectively. Consumer home equity and consumer installment loans decreased $750,000 and $101,000 respectively. These were partially offset by an increase in commercial real estate loans of $15.0 million. Commercial loans increased by $441,000.

At March 31, 2012, the net loan to deposit ratio was 86% and the net loan to total assets ratio was 69%. At December 31, 2011, these ratios were 92% and 76%, respectively.

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 quarterly basis by management and is based upon management's periodic review of the collectability 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. The allowance for loan losses decreased $924,000 from December 31, 2011 to March 31, 2012 primarily due to the significant reduction in loan balances and the improved quality of the loan portfolio which resulted in a release of excess reserves of $845,000 after net charge-offs of $78,000.

The accrual of interest on loans is discontinued at the time the loan is 90 days past due for payment unless the loan is well-secured and in process of collection. Consumer installment loans are typically charged off no later than 180 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on nonaccrual status or charged off is reversed against interest income. Any interest paid on these loans is accounted for on the cash-basis method until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Management considers all non-accrual loans, troubled debt restructurings and loans that were previously classified as TDRs that have been upgraded, to be impaired. In most cases, loan payments that are past due less than 90 days, based on contractual terms, are considered collection delays and the related loans are not considered to be impaired. The Bank considers consumer installment loans to be pools of smaller balance homogeneous loans, which are collectively evaluated for impairment.

The changes in the allowance for loan losses for the periods shown are as follows:

                                                                 Three months ended
                                                           March 31,            March 31,
(Thousands of dollars)                                        2012                2011
Balance at beginning of period                            $      9,385         $    15,374
Charge-offs                                                       (102 )            (4,154 )
Recoveries                                                          24                  21

Net Charge-offs                                                    (78 )            (4,133 )

Transferred to loans held-for-sale                                  -               (6,014 )
Provision charged to operations                                   (846 )             6,981

Balance at end of period                                  $      8,461         $    12,208

Ratio of net charge-offs during the period to
average loans outstanding during the period                       0.01 %              0.78 %

Ratio of ALLL / Gross Loans                                       1.78 %              2.55 %

Based upon the overall assessment and evaluation of the loan portfolio, management believes the allowance for loan losses of $8.5 million, at March 31, 2012, which represents 1.78% of gross loans outstanding, is adequate under prevailing economic conditions, to absorb existing losses in the loan portfolio. Bancorp has had ten consecutive quarters of decreases in non-accrual loans.

Non-Accrual, Past Due and Restructured Loans

The following table presents non-accruing loans and loans past due 90 days or
more and still accruing:



                                                  March 31,        December 31,
    (Thousands of dollars)                          2012               2011
    Loans past due over 90 days still accruing   $     6,574      $        9,461
    Non accruing loans                                15,546              20,683

    Total                                        $    22,120      $       30,144

    % of Total Loans                                    4.66 %              5.91 %
    % of Total Assets                                   3.30 %              4.53 %

Loans delinquent over 90 days and still accruing aggregating $6.6 million are comprised of ten loans, all of which have matured and the borrowers continue to make payments. These loans are currently in the process of being renewed or paid off. Impaired loans, which are comprised of non-accruing loans, troubled debt restructured loans, and loans previously classified as TDRs that have been upgraded, decreased by $4.0 million to $32.8 million for the quarter ended March 31, 2012. Impaired loans are attributable to the lingering effects of the downturn in the economy, which has severely impacted the real estate market and placed unprecedented stress on credit markets. Residents of Fairfield County, Connecticut, many of whom are associated with the financial services industry, have been affected by the impact of the poor economy on employment and real estate values.

The $15.5 million of non-accrual loans at March 31, 2012 is comprised of exposure to 21 borrowers, for which a specific reserve of $426,000 has been established. In all cases, the Bank has obtained appraisal reports from independent licensed appraisal firms and discounted those values for estimated selling costs to determine estimated impairment. Of the $15.5 million of non-accrual loans at March 31, 2012 borrowers of three loans with aggregate balances of $4.7 million continue to make loan payments and these loans are current within one month as to payments.

Potential Problem Loans

In addition to the above, there are $44.4 million of substandard accruing loans comprised of 37 loans and $42.6 million of special mention loans comprised of 43 loans for which management has a concern as to the ability of the borrowers to comply with the present repayment terms. All but $3.6 million of the substandard accruing loans and all of the special mention loans continue to make timely payments and are within 30 days at March 31, 2012.

Other Real Estate Owned

The following table is a summary of Bancorp's other real estate owned at the
dates shown:



                                          March 31,       December 31,
                                            2012              2011
              Residential construction   $ 1,173,503     $    1,140,560
              Commercial                          -           1,622,080
              Residential                    288,144                 -

              Other real estate owned    $ 1,461,647     $    2,762,640

The balance of other real estate owned at March 31, 2012 is comprised of two properties with an aggregate carrying value of $1.5 million that were obtained through loan foreclosure proceedings. During the quarter, two OREO properties were sold with an aggregate carrying value of $1.6 million.

Deferred Taxes

The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings, which are subject to uncertainty and estimates that may change given economic conditions and other factors. A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefit related to such assets will not be realized. Management has reviewed the deferred tax position of Bancorp at March 31, 2012. The deferred tax position has been affected by several significant transactions in the past several years. These transactions include the change in ownership, in addition to, the increased provision for loan losses, the levels of non-accrual loans and other-than-temporary impairment write-offs of certain investments. As a result, the Company is in a cumulative net loss position at March 31, 2012, and under the applicable accounting guidance, has concluded that it is not more-likely-than-not that the Company will be able to realize its deferred tax assets and accordingly has established a full valuation allowance totaling $14.1 million against its deferred tax asset at March 31, 2012. The valuation allowance is analyzed quarterly for changes affecting the deferred tax asset. If, in the future, the Company generates taxable income on a sustained basis, management's conclusion regarding the need for a deferred tax asset valuation allowance could change, resulting in the reversal of all or a portion of the deferred tax asset valuation allowance.

Deposits

The following table is a summary of Bancorp's deposits at the dates shown:



                                                 March 31,       December 31,
                                                   2012              2011
       Non-interest bearing                    $  59,049,656     $  65,613,374

       Interest bearing
       NOW                                        28,823,777        24,396,210
       Savings                                    61,518,552        59,396,310
       Money market                               48,557,712        52,889,642
       Time certificates, less than $100,000     196,536,154       198,207,998
       Time certificates, $100,000 or more       145,104,469       144,405,859

       Total interest bearing                    480,540,664       479,296,019

       Total Deposits                          $ 539,590,320     $ 544,909,393

Total deposits decreased $5.3 million, or 1%, from $544.9 million at December 31, 2011 to $539.6 million at March 31, 2012. Demand deposits decreased $6.6 million primarily as a result of decreases in commercial checking accounts of $8.4 million and $100,000 in official checks, partially offset by an increase in personal checking accounts and certified checks of $1.4 million and $556,000 respectively. Interest bearing accounts increased $1.2 million. This was primarily due to increases in NOW accounts of $4.4 million and savings accounts of $2.1 million. These were partially offset by decreases in money market accounts of $4.3 million due to improved economic conditions in the overall financial markets. Certificates of deposit ("CD's") decreased by $1.0 million.

Borrowings

At March 31, 2012, total borrowings increased $10.0 million to $75.2 million, due to a short-term advance from the Federal Home Loan Bank of Boston, compared to $65.2 million at December 31, 2011. In addition to the outstanding borrowings disclosed in the consolidated balance sheet, the Bank has the ability to borrow approximately $66.2 million in additional advances from the Federal Home Loan Bank of Boston, including a $2.0 million overnight line of credit. The Bank has also established a line of credit at the Federal Reserve Bank.

The subordinated debentures of $8,248,000 are unsecured obligations of the Company and are subordinate and junior in right of payment to all present and future senior indebtedness of the Company. The Company has entered into a guarantee, which together with its obligations under the subordinated debentures and the declaration of trust governing the Trust, provides a full and unconditional guarantee of amounts on the capital securities. The subordinated debentures, which bear interest at three-month LIBOR plus 3.15% (3.62365% at March 31, 2012), matures on March 26, 2033. Beginning in the second quarter of 2009, the Company began deferring interest payments on the subordinated debentures as permitted under the terms of the debentures. The deferral in the first quarter of 2012 represented the twelfth consecutive quarter of deferral. The Company continues to accrue and charge interest to operations. The Company may defer the payment of interest until March 2014, and all accrued interest must be paid prior to or at completion of the deferral period.

Capital

Capital increased $688,000 compared to December 31, 2011 primarily as a result of the net income earned of $546,000 on continuing operations for the three months ended March 31, 2012.

Off-Balance Sheet Arrangements

Bancorp's off-balance sheet arrangements, which primarily consist of commitments to lend, decreased by $35.7 million from $140.4 million at December 31, 2011 to $104.7 million at March 31, 2012, due to decreases of $53.6 million in future loan commitments, partially offset by increases of $15.0 million in unused lines of credit and $1.8 million in undisbursed construction loans.

RESULTS OF OPERATIONS

Interest and dividend income and expense

The following tables present average balance sheets (daily averages), interest
income, interest expense and the corresponding yields earned and rates paid for
major balance sheet components:



                                                                     Three months ended March 31,
                                                          2012                                          2011
                                                         Interest                                     Interest
                                          Average        Income/        Average        Average        Income/        Average
                                          Balance        Expense         Rate          Balance        Expense         Rate
                                                                        (dollars in thousands)
Interest earning assets:
Loans                                    $ 522,476      $    6,665          5.10 %    $ 532,985      $    6,957          5.22 %
Investments                                 75,378             510          2.71 %       49,005             344          2.81 %
Interest bearing deposits in banks          38,816              11          0.11 %       99,270              62          0.25 %
Federal funds sold                              -               -           0.00 %       10,000               4          0.16 %

Total interest earning assets              636,670           7,186          4.51 %      691,260           7,367          4.26 %

Cash and due from banks                      4,993                                       20,101
Premises and equipment, net                  3,929                                        4,968
Allowance for loan losses                   (9,381 )                                    (15,504 )
Other assets                                28,376                                       45,888

Total Assets                             $ 664,587                                    $ 746,713

Interest bearing liabilities:
Deposits                                 $ 479,761      $    1,517          1.26 %    $ 557,135      $    1,865          1.34 %
FHLB advances                               55,176             357          2.59 %       50,000             419          3.35 %
Subordinated debt                            8,248              76          3.69 %        8,248              70          3.39 %
Other borrowings                             7,000              77          4.40 %        7,000              77          4.42 %

Total interest bearing liabilities         550,185           2,027          1.47 %      622,383           2,431          1.56 %

Demand deposits                             58,373                                       52,898
Accrued expenses and other liabilities       5,371                                        5,995
Shareholders' equity                        50,658                                       65,437

Total liabilities and equity             $ 664,587                                    $ 746,713

Net interest income                                     $    5,159                                   $    4,936

Interest margin                                                             3.24 %                                       2.86 %

Interest spread                                                             3.04 %                                       2.70 %

The following rate volume analysis reflects the impact that changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities had on net interest income during the periods indicated. Information is provided in each category with respect to changes attributable to changes in volume (changes in volume multiplied by prior rate), changes attributable to changes in rates (changes in rates multiplied by prior volume) and the total net change. The change resulting from the combined impact of volume and rate is allocated proportionately to the change due to volume and the change due to rate.

                                                 Three months ended March 31,
                                                         2012 vs 2011
                                               Increase (decrease) in Interest
                                                        Income/Expense
                                                      Due to change in:
                                             Volume             Rate         Total
                                                    (dollars in thousands)
. . .