The following discussion and analysis is intended to assist you in understanding the financial condition and results of operations of the Company. This discussion should be read in conjunction with the accompanying unaudited financial statements as of and for the three months ended March 31, 2012 and 2011 together with the audited financial statements as of and for the year ended December 31, 2011, included in the Company's Form 10-K filed with the Securities and Exchange Commission on March 30, 2012.

Summary

As of March 31, 2012 , the Company had $134.4 million of total assets, $109.1 million of gross loans receivable, and $121.1 million of total deposits. Total equity capital at March 31, 2012 was $11.6 million, and the Company's Tier I Leverage Capital Ratio was 8.22%.

The Company had a net loss for the quarter ended March 31, 2012 of $58,000 (or basic and diluted loss per share of $0.02) as compared to a net loss of $637,000 (or basic and diluted loss per share of $0.24) for the first quarter of 2011. The decline in the Company's net loss was largely attributable to a decrease in the provision for loan losses from $743,000 for the three months ended March 31, 2011 compared to a provision for loan losses of $30,000 for the same period in 2012. The decrease in the provision for loan losses during the first quarter of 2012 compared to the same period in 2011 was primarily related to one commercial loan secured by real estate that was severely impacted by prevailing economic conditions in the first quarter of 2011.

In addition to the impact of the decrease in the provision for loan losses, the Company's operating results for the first quarter of 2012, when compared to the same period of 2011, were influenced by the following factors:

? Net interest income decreased by $102,000 due to the combined effects of decreases in loan volume and lower yields on interest earning assets (primarily attributable to a decline in yields in the loan portfolio) which were partially offset by decreases in liability volumes and lower rates paid on interest bearing liabilities; ? Noninterest income increased by $54,000 because of loan prepayment fees received during the first three months of 2012 with no similar income recognized in the first three months of 2011, as well as an increase in other noninterest income, which were partially offset by a decrease in service charges and fees resulting from changes in the business practices of customers of the Bank; and ? Noninterest expenses increased by $85,000 during the first three months of 2012 compared to the same period in 2011 primarily due to increases in salaries and benefits expense, professional services fees expense, and insurance expense, which were partially offset by decreases in directors' fees and data processing fees. The increase in salaries and benefits expense during the first quarter of 2012 when compared to the first quarter of 2011 was primarily attributable to restricted stock compensation expense recorded by the Company for 37,457 shares of restricted stock which vested during the first quarter as a result of the Chief Executive Officer's employment agreement and restricted stock agreement being executed on February 28, 2012. The increase in professional services fees was due to loan review and consulting services performed during the quarter ended March 31, 2012 with no such expenses incurred in 2011. Insurance expense increased due to increased costs in 2012 associated with insurance policies that the Company had entered into during a more favorable environment in July 2008. These unfavorable changes were partially offset by the impact of reductions in directors' fees that were approved by the Company's compensation committee effective January 1, 2012 as well as benefits the Company continued to realize during the first quarter of 2012 related to the renewal of certain data processing service contracts during the fourth quarter of 2011.

Critical Accounting Policy

In the ordinary course of business, the Company has made a number of estimates and assumptions relating to reporting the results of operations and financial condition in preparing its financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company believes the following discussion addresses the Company's only critical accounting policy, which is the policy that is most important to the portrayal of the Company's financial condition and results of operations, and requires management's most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company has reviewed this critical accounting policy and estimates with its audit committee. Refer to the discussion below under "Allowance for Loan Losses" and Note 1 to the audited financial statements as of and for the year ended December 31, 2011 included in the Company's Form 10-K filed with the Securities and Exchange Commission on March 30, 2012.

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 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 consists of allocated and general components. The allocated component relates to loans that are considered impaired. For such impaired loans, an allowance is established when the discounted cash flows (or observable market price or collateral value if the loan is collateral dependent) of the impaired loan is lower than the carrying value of that loan. The general component covers all other loans, segregated generally by loan type (and further segregated by risk rating), and is based on historical loss experience with adjustments for qualitative factors which are made after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss data.

A loan is considered impaired when, based on current information and events, it is probable that the Company 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 real estate loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable 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 Company does not separately identify individual consumer loans for impairment disclosures, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Impaired loans also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

A modified loan is considered a troubled debt restructuring ("TDR") when two conditions are met: (1) the borrower is experiencing documented financial difficulty and (2) concessions are made by the Company that would not otherwise be considered for a borrower with similar credit characteristics. The most common types of modifications include interest rate reductions and/or maturity extensions. Modified terms are dependent upon the financial position and needs of the individual borrower, as the Bank does not employ modification programs for temporary or trial periods. All modifications are permanent. The modified loan does not revert back to its original terms, even if the modified loan agreement is violated. The Company's workout committee continues to monitor the modified loan and if a re-default occurs, the loan is classified as a re-defaulted TDR and collection is pursued through liquidation of collateral, from guarantors, if any, or through other legal action.

Most TDRs are placed on nonaccrual status at the time of restructuring, and continue on nonaccrual status until they have performed under the revised terms of the modified loan agreement for a minimum of six months. In certain instances, for TDRs that are on accrual status at the time the loans are restructured, the Bank may continue to classify the loans as accruing loans based upon the terms and conditions of the restructuring.

Impairment analysis is performed on a loan by loan basis for all modified commercial loans, residential mortgages and consumer loans that are deemed to be TDRs, and related charge-offs are recorded or specific reserves are established as appropriate. Commercial loans include loans categorized as commercial loans secured by real estate, commercial loans, and construction and land loans. Impairment is measured by the present value of expected future cash flows discounted at the loan's effective interest rate. The original contractual interest rate for the loan is used as the discount rate for fixed rate loan modifications. The current rate is used as the discount rate when the loan's interest rate floats with a specified index. A change in terms or payments would be included in the impairment calculation.

The allowances established for losses on specific loans are based on a regular analysis and evaluation of problem loans. Loans are classified based on an internal credit risk grading process that evaluates, among other things: (i) the borrower's ability to repay; (ii) the underlying collateral, if any; and
(iii) the economic environment and industry in which the borrower operates. This analysis is performed by the credit department, in consultation with the loan officers, for all commercial loans. Specific valuation allowances are determined by analyzing the borrower's ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower's industry, among other things.

General valuation allowances are calculated based on the historical loss experience of specific types of loans. A historical valuation allowance is established for each pool of similar loans based upon the product of the historical loss ratio and the total dollar amount of the loans in the pool. The Company's pools of similar loans include analogous risk-graded groups of commercial and industrial loans, commercial real estate loans, consumer real estate loans and consumer and other loans.

Due to the relatively small asset size and loans outstanding of the Company, the Company uses readily available data from the FDIC regarding the loss experience of national banks with assets between $100 million and $300 million and combines this data with the Company's actual loss experience to develop average loss factors by weighting the national banks' loss experience and the Company's loss experience. As both the Company's asset size and outstanding loan balance increased significantly during 2010, beginning with the quarter ended March 31, 2011, the Company determined to place greater emphasis on the Company's loss experience and to utilize the average loss experience for the prior four years instead of the prior three years used in the Company's calculations through December 31, 2010. The Company increased the weighting of its loss experience from 25% to 50%. The Company intends to weight the Company's loss experience more heavily in determining the allowance for loan loss provision as the size of the Company's loan portfolio becomes more significant. The historical loss period was extended by an additional year from the loss period utilized through December 31, 2010, which is considered more representative of average annual losses inherent in the loan portfolio. For the quarter ended March 31, 2011, the provision for loan losses was $131,000 lower as a result of the combined effect of these changes.

General valuation allowances are based on general economic conditions and other qualitative risk factors, both internal and external, to the Company. In general, such valuation allowances are determined by evaluating, among other things: (i) the experience, ability and effectiveness of the Bank's lending management and staff; (ii) the effectiveness of the Company's loan policies, procedures and internal controls; (iii) changes in asset quality; (iv) changes in loan portfolio volume; (v) the composition and concentrations of credit; and
(vi) the impact of national and local economic trends and conditions. Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis. Each component is determined to have either a high, moderate or low degree of risk. The results are then entered into a general allocation matrix to determine an appropriate general valuation allowance.

Based upon this evaluation, management believes the allowance for loan losses of $2,400,000 or 2.20% of gross loans outstanding at March 31, 2012 is adequate, under prevailing economic conditions, to absorb losses on existing loans. At December 31, 2011, the allowance for loan losses was $2,300,000 or 2.02% of gross loans outstanding. The increase in the allowance was attributable to an $188,000 increase in the specific component of the allowance, which was partially offset by an $89,000 decrease in the general component of the allowance. The increase in the specific component of the allowance was due to an increase in specific reserves totaling $188,000 for three loans identified as impaired during the three months ended March 31, 2012. The decrease in the general component of the reserve was due to a decline in loan volume.

The accrual of interest on loans is discontinued at the time the loan is 90 days past due 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. The interest 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 and troubled-debt restructured loans to be impaired. In most cases, loan payments that are past due less than 90 days and the related loans are not considered to be impaired.

Allowance for Loan Losses and Non-Accrual, Past Due and Restructured Loans

The changes in the allowance for loan losses for the three months ended March
31, 2012 and 2011 are as follows:

                                                   2012             2011
Balance at beginning of year                    $ 2,299,625     $  2,786,641
Provision for loan losses                            30,000          743,104
Recoveries of loans previously charged-off:
Commercial                                           70,275            9,557
Consumer                                                  -            1,406
Total recoveries                                     70,275           10,963
Loans charged-off:
Commercial                                                -         (166,185 )
Commercial loans secured by real estate                   -         (866,760 )
Residential mortgages                                     -                -
Consumer                                                  -           (9,115 )
Total charge-offs                                         -       (1,042,060 )
Balance at end of period                        $ 2,399,900     $  2,498,648

Net recoveries (charge-offs) to average loans          0.06 %          (2.90 %)

Non-Performing Assets and Potential Problem Loans

The following table represents nonperforming assets and potential problem loans
at March 31, 2012 and December 31, 2011:

Non-accrual loans:                                         2012              2011
 Commercial loans secured by real estate               $    948,750      $    787,311
 Commercial                                               2,242,404         1,707,720
 Construction and land                                    1,400,365         1,420,156
 Residential mortgages                                      759,087           554,678
 Consumer                                                         -             1,460
 Total non-accrual loans                                  5,350,606         4,471,325

Troubled debt restructured loans:
 Commercial Loans Secured by Real Estate (represents
non-accrual loans not included in Total non-accrual
loans above)                                              1,283,512         1,314,030
 Commercial                                               1,691,227         1,899,342
Foreclosed assets:
 Commercial                                                 195,463           374,211
Total non-performing assets                            $  8,520,808      $  8,058,908

Ratio of non-performing assets to:
 Total loans and foreclosed assets                             7.79 %            7.05 %
 Total assets                                                  6.34 %            5.52 %
Accruing past due loans:
 30 to 89 days past due                                $    168,208      $  1,392,936
 Total accruing past due loans                         $    168,208      $  1,392,936

Ratio of accruing past due loans to total net loans:
 30 to 89 days past due                                        0.15 %            1.22 %
 Total accruing past due loans                                 0.15 %            1.21 %

Recent Accounting Changes

In April 2011, the FASB amended its guidance relating to repurchase agreements. The amendments change the effective control assessment by removing the criterion that required the transferor to have the ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. Instead, the amendments focus the assessment of effective control on the transferor's rights and obligations with respect to the transferred financial assets and not whether the transferor has the practical ability to perform in accordance with those rights or obligations. The amended guidance became effective for the Company as it relates to transactions or modifications of existing transactions that occur in interim and annual periods beginning with the quarter ended March 31, 2012. These amendments did not have an impact on the Company's consolidated financial statements.

In May 2011, the FASB issued Accounting Standards Update (ASU) 2011-04, Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRs, (ASU 2011-04). ASU 2011-04 converges the fair value measurement guidance in U.S. GAAP and International Financial Reporting Standards (IFRSs). Some of the amendments clarify the application of existing fair value measurement requirements, while other amendments change a particular principle in existing guidance. In addition, ASU 2011-04 requires additional fair value disclosures. The amendments are to be applied prospectively and are effective for interim and annual periods beginning after December 15, 2011. The Company adopted the methodologies prescribed by this ASU during the quarter ended March 31, 2012. Adoption of this guidance did not have a material effect on the Company's financial statements.

In June 2011, the FASB issued new accounting guidance related to the presentation of comprehensive income that eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments require that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company adopted this guidance effective for the quarter ended March 31, 2012.

The adoption of this guidance did not impact the Company's financial position, results of operations or cash flows and only impacted the presentation of other comprehensive income in the financial statements.

Comparison of Financial Condition as of March 31, 2012 versus December 31, 2011

General
The Company's total assets were $134.4 million at March 31, 2012, a decrease of $11.6 million over total assets of $146.0 million at December 31, 2011. The Bank's net loans receivable decreased to $106.7 million at March 31, 2012 from $111.6 million at December 31, 2011, and cash and cash equivalents, including short term investments, decreased to $18.2 million as of March 31, 2012 from $24.9 million as of December 31, 2011. Total deposits decreased to $121.1 million as of March 31, 2012 from $132.6 million as of December 31, 2011. The decreases in net loans receivable and cash and cash equivalents corresponded with the decrease in deposit liabilities during the three months ended March 31, 2012.

Short-term investments
Short-term investments, consisting of money market investments, decreased to $6.3 million at March 31, 2012 compared to $6.8 million at December 31, 2011.

Investments
Available for sale securities, which consisted of U.S. Treasury Bills of $3.8 million and equity securities of $100,000 (acquired during the first quarter of 2012), increased $100,000 to $3.9 million at March 31, 2012 from $3.8 million at December 31, 2011. The Company uses the U.S. Treasury Bills included in its available for sale securities portfolio to meet pledge requirements for public deposits and repurchase agreements. The Company classifies its securities as "available for sale" to provide greater flexibility to respond to changes in interest rates as well as future liquidity needs. The Company's investment in equity securities relates to the exercise of a warrant, classified as a derivative financial instrument to acquire common stock of a non-affiliated publicly traded company in the technology sector which the Company purchased from the Bank in the first quarter of 2012 and subsequently exercised and converted into 5,013 shares of common stock of the non-affiliated publicly traded company. These 5,013 shares of common stock of the non-affiliated publicly traded company were subsequently sold in April 2012 by the Company, resulting in a loss of $435.

Loans
Interest income on loans is the most important component of the Company's net interest income. The loan portfolio is the largest component of earning assets, and it, therefore, generates the largest portion of revenues. The Company's net loan portfolio was $106.7 million at March 31, 2012 versus $111.6 million at December 31, 2011, a decrease of $4.9 million. The Company attributes the decline in loan balances during the first three months of 2012 to a decline in loan demand. The Bank's loans have been made to small to medium-sized businesses, primarily in the Greater New Haven Market. There are no other significant loan concentrations in the loan portfolio.

Deposits
Total deposits were $121.1 million at March 31, 2012, a decrease of $11.5 million or 8.7% from total deposits of $132.6 million at December 31, 2011. Non-interest bearing deposits were $30.6 million at March 31, 2012, a decrease of $400,000 or 1.4% from $31.0 million at December 31, 2011. Total interest bearing checking, money market and savings deposits decreased $3.3 million or 5.9% to $52.4 million at March 31, 2012 from $55.7 million at December 31, 2011. Time deposits decreased $7.8 million or 17.0% to $38.1 million at March 31, 2012 from $45.9 million at December 31, 2011. Included in time deposits at March 31, 2012 and December 31, 2011 were $7.2 million and $9.1 million, respectively, of brokered deposits. This included the Company's placement of $4.2 million in customer deposits during the three months ended March 31, 2012 and the year ended December 31, 2011; and the purchase of $2.8 million in brokered certificates of deposit through the CDARS program during the three months ended March 31, 2012 and the year ended December 31, 2011. The CDARS program offers the Bank both reciprocal and one way swap programs which allow customers to enjoy additional FDIC insurance for deposits that might not otherwise be eligible for FDIC insurance and gives the Bank additional access to funding.

The Bank maintains relationships with several deposit brokers and could utilize the services of one or more of these brokers if management determines that issuing brokered certificates of deposit would be in the best interest of the Bank and the Company.

The Greater New Haven Market is highly competitive. The Bank faces competition from a large number of banks (ranging from small community banks to large international banks), credit unions, and other providers of financial services. The level of rates offered by the Bank reflects the high level of competition in the Bank's market.

Other
Repurchase agreement balances totaled $122,000 at March 31, 2012 as compared to less than $100 at December 31, 2011. The increase was due to normal customer activity.

Results of Operations: Comparison of Results for the three months ended March 31, 2012 and 2011

General
The Company had a net loss for the quarter ended March 31, 2012 of $58,000 (or basic and diluted loss per share of $0.02) as compared to a net loss of $637,000 (or basic and diluted loss per share of $0.24) for the first quarter of 2011. . . .