According to a recent census report, during the past three years, the population of Hartford and Tolland Counties increased by 1.7% and 5.0%, respectively, while the population of the United States increased by 1.2%. During that period, the number of households in Hartford and Tolland Counties and in the United States increased 2.9%, 7.3% and 1.2%, respectively. In 2004, per capita income for Tolland and Hartford Counties was $33,500 and $38,600, and the median household income was $76,000 and $77,600, respectively. This compares to per capita income for the State of Connecticut and the United States of $42,500 and $30,900, respectively, and median household income of $76,100 and $57,500, respectively.

Rockville is approximately 15 miles from Hartford, Connecticut. Hartford and Tolland Counties have a mix of industry groups and employment sectors, including services, wholesale/retail trade and manufacturing as the basis of the local economy. These three sectors comprise approximately 79% of the employment base in Hartford County and approximately 71% of the employment base in Tolland County. Tolland County’s unemployment rate for the second quarter of 2004 of 3.8% was lower than the comparable Connecticut unemployment rate of 4.7% and lower than the national unemployment rate of 5.5%. Hartford County’s unemployment rate alone for the same period of 2004 was 5.4%, higher than the Connecticut unemployment rate, but lower than the national unemployment rate. Consistent with the national and Connecticut unemployment trends, Hartford and Tolland Counties second quarter 2004 unemployment rates were lower compared to the second quarter 2003 unemployment rates of 6.4% and 4.4%, respectively.

One of the Bank’s primary lending activities consists of the origination of one-to-four family residential mortgage loans that are primarily secured by properties located in Tolland and Hartford Counties. Generally, one-to-four family residential mortgage loans are originated in amounts up to 80% of the lesser of the appraised value or purchase price of the property, with private mortgage insurance required on loans with a loan-to-value ratio in excess of 80%. Fixed rate mortgage loans generally are originated for terms of 10, 15, 20, 25 and 30 years. Fixed rate residential mortgage loans are periodically sold in the secondary market. The Bank also offers adjustable-rate mortgage loans for one-to-four family properties, with an interest rate which adjusts annually based on the one-year Constant Maturity Treasury Bill Index, after either a one-, three-, four-, five-, seven-, or nine-year initial fixed rate period. The Bank’s adjustable rate mortgage loans typically amortize over terms of up to 30 years. The Bank offers a first time home buyer program at reduced rates and favorable closing costs. This program allows the first time home buyer to borrow with lower down payment requirements, lower origination points, and reduced fees. These loans are offered with adjustable rates of interest at terms of up to 30 years. Such loans are secured by one-to-four family residential properties. All of these loans are originated using agency underwriting guidelines. The Bank also offers home equity loans and home equity of lines of credit, both of which are secured by owner-occupied one-to-four family residences.

The Bank originates commercial real estate loans, construction loans and loans on owner occupied properties used for a variety of business purposes including small office buildings, industrial facilities, retail facilities, hotels, golf courses, religious facilities, and restaurants. The Bank also offers real estate subdivision development loans to licensed contractors and builders for the construction and development of commercial real estate projects and one-to-four family residential properties.

The Bank originates construction loans to individuals and contractors for the construction and acquisition of personal residences. The Bank’s construction mortgage loans generally provide for the payment of interest only during the construction phase, which is typically up to nine months although its policy is to consider construction periods as long as 12 months. At the end of the construction phase, the construction loan converts to a longer term mortgage loan.

The Bank offers a limited range of installment and collateral consumer loans, principally to customers residing in its primary market area with acceptable credit ratings. The Bank’s installment and collateral consumer loans generally consist of loans on new and used automobiles, loans collateralized by deposit accounts and unsecured personal loans.

Interest and dividend income increased by $321,000, or 0.8%, to $38.8 million for the year ended December 31, 2004 from $38.5 million for the year ended December 31, 2003.

Interest expense increased $71,000, or 0.5%, to $13.1 million for the year ended December 31, 2004 from $13.0 million for the year ended December 31, 2003.

Net interest income increased $250,000, or 1.0%, to $25.7 million for the year ended December 31, 2004 from $25.5 million for the year ended December 31, 2003.

Noninterest income decreased by $769,000, or 19.4%, to $3.2 million for the year ended December 31, 2004 compared to $4.0 million for the year ended December 31, 2003.