<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
(Mark One)
[ X ]               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended     December 31, 1995
                          --------------------------

                                       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 0-16193


                                 DS BANCOR, INC.
                                 ---------------
             (Exact name of registrant as specified in its charter)
                 Delaware                                    06-1162884
                 --------                                    ----------
(State or other jurisdiction of incorporation             (I.R.S. Employer
              or organization)                           Identification No.)

                     33 Elizabeth Street, Derby, Connecticut
                     ---------------------------------------
                    (Address of principal executive offices)
                           06418                          (203) 736-1000
                           -----                          --------------
                          (Zip Code)                (Registrant's telephone #)

           Securities registered pursuant to Section 12(b) of the Act:
                                 Not Applicable
           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $1.00 per share
                     ---------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
                                         -----     -----

Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [X]

Based upon the market price of the registrant's common stock as of March 19,
1996, the aggregate market value of the voting stock held by non-affiliates of
the registrant is $66,911,694 *

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                 Class:  Common Stock, par value $1.00 per share
                Outstanding at March 19, 1996:  3,029,027 shares


                      DOCUMENTS INCORPORATED BY REFERENCE:
Parts I and II:
    Portions of the Annual Report to Stockholders for the year ended December
    31, 1995.
Part III:
    Portions of the definitive proxy statement for the Annual Meeting of
    Stockholders to be held April 24, 1996.


*   Solely for purposes of this calculation, all executive officers and
    directors of the registrant are considered affiliates.  Excludes
    all other shareholders beneficially owning more than 5% of the
    registrant's common stock.

<PAGE>

ITEM 1.  BUSINESS

GENERAL

On August 31, 1987, DS Bancor, Inc. (the "Company" or "DS Bancor") became the
holding company for Derby Savings Bank ("Derby Savings" or the "Bank").  The
Company was formed in 1986 at the direction of the Board of Directors of the
Bank, and became the holding company for the Bank in August 1987.  At that time,
each of the outstanding shares of Derby Savings common stock was automatically
converted and exchanged into one share of the Company's common stock.  The
Company's principal asset consists of all of the outstanding shares of Derby
Savings.  The Company's business consists mainly of the business of Derby
Savings.  Derby Savings is a Connecticut-chartered stock savings bank operating
through 22 full-service banking offices in western New Haven and eastern
Fairfield counties and Hartford County.  The Bank obtained its Connecticut
charter as a mutual savings bank in 1846.  On December 4, 1985, the Bank
converted to a stock savings bank, selling 2,217,856 shares of common stock, and
receiving net proceeds of approximately $28.8 million.  Deposits at Derby
Savings are federally insured by the Bank Insurance Fund ("BIF"), which is
administered by the Federal Deposit Insurance Corporation (the "FDIC").  The
Bank is subject to comprehensive regulation, examination and supervision by the
FDIC and the Banking Commissioner of the State of Connecticut (the
"Commissioner").  The Company, as a bank holding company, is subject to
regulation and examination by the Board of Governors of the Federal Reserve
System (the "FRB").

Derby Savings is primarily engaged in the business of attracting deposits from
and providing loans to the residents and businesses located within the Bank's
market area.  The Bank's customer base includes long-time customers mainly
employed in manufacturing and service industries as well as newer customers
employed by high technology industries in the northern and western parts of the
Bank's market area.  At December 31, 1995, the Bank had deposits of $1.06
billion, funding 84.3% of the Bank's $1.25 billion in assets.  The Bank offers a
variety of deposit products to meet the various investment objectives of its
depositors, including regular savings, certificates of deposit, money market
accounts, individual retirement accounts and keogh accounts.  In addition to
deposits, which serve as the Bank's primary source of funds, the Bank augments
its lending and investment activities through borrowings from the Federal Home
Loan Bank of Boston ("the FHLBB"), which serves as a credit facility for its
members.  At December 31, 1995, the Bank had borrowings from this source of
$96.9 million, funding 7.7% of assets.

The lending activities of the Bank are primarily focused upon meeting the credit
needs of the consumer segment of the Bank's market area.  The Bank's consumer
orientation has evolved into essentially two primary products which are secured
by residential real estate and represent the core business of the Bank.  At
December 31, 1995, $691.6 million, representing 55.1% of the Company's assets,
were invested in loans secured by first liens on one-to-four family residences.
Complementing the Bank's financing of residential real estate is the home equity
line of credit (the "HELOC") which is also secured by residential real estate
and utilized by consumers to finance various purchases and expenditures.  The
flexibility of this means of consumer finance is reflected in the demand for
this product which has enabled the Bank to allocate $78.5 million or 6.3% of its
assets to this product.  In addition to these primary products, the Bank also
provides financing for other consumer needs, multi-family housing, as well as
financing for commercial real estate, construction and local businesses.  The


                                       1.
<PAGE>


Bank's investment in these product lines in the aggregate totaled $112.1
million, representing 8.9% of the Company's assets at December 31, 1995.  The
Company's corporate headquarters are located at 33 Elizabeth Street, Derby,
Connecticut 06418 (telephone:  203-736-1000).

RESULTS OF OPERATIONS.  Net income 1995 for totaled $7,613,000 or $2.45 per
share (fully diluted) compared to $5,710,000 or $1.86 per share (fully diluted)
for the prior year.  The Company paid 5% stock dividends on March 29, 1995 and
November 24, 1995.  The per share amounts for the prior period have been
retroactively adjusted to give effect to these stock dividends.

Net interest income for 1995 increased $.5 million or 1.4% from $34.5 million
for 1994 to $35.0 million for 1995.  For 1995, the net yield on interest-earning
assets increased to 2.97%, from 2.94% for 1994.

Stockholders' equity totaled $80.8 million or $26.68 per share at December 31,
1995 and represented 6.5% of total assets.  In accordance with Financial
Accounting Standards Board Statement No. 115, Stockholders' equity at December
31, 1995 included an unrealized gain on securities classified as available-for-
sale, net of tax effect, of $426,000 compared to an unrealized loss, net of tax
effect, of $5.6 million at December 31, 1994. (see "Consolidated Financial
Statements contained in the 1995 Annual Report to Stockholders").

For 1995, net income represented a return on average assets and a return on
average stockholders' equity of .63% and  9.95%, respectively, compared to .47%
and 8.34% respectively, for 1994.

During 1995, the Company made further progress in reducing the level of
non-performing assets, which includes non-performing loans and foreclosed
assets.  At December 31, 1995, non-performing assets totaled $17.5 million or
1.4% of total assets, reflecting a $3.3 million or 16% decline from $20.8
million or 1.7% of total assets at year end 1994.

During 1995, the Bank charged off loans, net of recoveries, totaling $2.4
million against the allowances for credit losses.  For 1995, the provision for
credit losses totaled $2.5 million compared to $2.3 million for 1994.  At
December 31, 1995, the allowances for credit losses totaled $6.9 million
representing 50.2% of non-performing loans.

For 1995, the Bank provided $1.5 million to the allowance for estimated losses
on foreclosed assets compared to $2.2 million for 1994.  The allowance for
estimated losses on foreclosed assets totaled $230,000 at December 31, 1995,
after foreclosed asset charge-offs of $1.7 million during the year.

BURRITT TRANSACTION.  On December 4, 1992, Derby Savings entered into an Insured
Deposit Purchase and Assumption Agreement ("P & A") with the FDIC, pursuant to
which Derby purchased certain assets and assumed the insured deposits and
certain other liabilities of Burritt Interfinancial Bancorporation, New Britain,
Connecticut in an FDIC-assisted transaction.  In the transaction, the Bank
assumed approximately $460 million of insured deposits and approximately $5.5
million of other liabilities of Burritt.


                                       2.
<PAGE>


The assets of Burritt acquired included, among others, loans totaling
approximately $169.3 million.  These loans were purchased at a $10.4 million
discount, which had been added to the Bank's allowance for credit losses.
During the year ended December 31, 1993, the Bank completed a valuation analysis
of the loans acquired in connection with the Burritt transaction.  As a result
of this analysis, the Company allocated $6.0 million of the Burritt allowance
for credit losses as a purchased loan discount.  This amount is being accreted
to interest income over the remaining terms of the acquired loans.

As a result of the Burritt transaction, Derby added 11 banking offices located
in the greater New Britain area.

REGULATORY MATTERS.  In August 1995, the Federal Deposit Insurance Corporation
and the Connecticut Banking Commissioner terminated the Memorandum of
Understanding (the "Memorandum") originally entered into with Derby Savings in
1992.  The Memorandum, as amended, required among other things that the Bank
achieve a tier 1 capital to total assets ratio of at least 5.75% and that
adversely classified assets and delinquent loans be reduced to certain targeted
levels.  Additionally, the Memorandum had limited the payment of cash dividends
by the Bank to DS Bancor to the Company's debt service and non-salary expenses.
In connection with the termination of the Memorandum, the Bank's Board of
Directors has adopted a policy that limits the payment of cash dividends by the
Bank to the Company of up to 10% of the Bank's net income.

BRANCH OFFICES.  In January 1996, the Bank relocated its Stratford branch
office.  The original Stratford office, opened in 1989 as a Savings Center,
experienced significant growth in its deposit base and corresponding customer
transaction activity, outstripping the physical capacity of the facility.  To
better serve existing customers, and to provide for continued growth, the office
was relocated within Stratford to a high traffic retail area known as Paradise
Green.  The new facility, which is in close proximity to the former office, is a
traditional branch offering full teller and platform customer service and an
automated teller machine.

In keeping with the Bank's overall strategy as a broad-based community bank, the
Bank has filed an application for the establishment of a new, full service
branch office in the town of Hamden.  The Hamden location will expand the Bank's
service area within New Haven county and complement the Bank's existing branch
network.  It is anticipated that the Hamden branch will be opened in mid-1996.
In addition, the Bank is actively searching for new branch sites which will
offer an opportunity to increase earnings, build upon the Bank's existing retail
network and enhance the franchise value of the Company.  (See Item 2 --
Properties.)

DERBY FINANCIAL SERVICES.  Complementing the financial services offered to the
communities served by the Company, the Bank, through it's wholly owned
subsidiary, Derby Financial Services, began offering brokerage services in 1993.
Through an arrangement with Liberty Securities Corporation, a NASD registered
broker-dealer, the products offered include various equity securities, bonds and
mutual funds.

MARKET AREA.  The Bank currently operates twenty-two banking offices located in
western New Haven, eastern Fairfield and Hartford counties.  The Bank has ATM's
at 18 of its offices.  The Bank primarily generates deposits and originates
loans in these geographic areas.


                                       3.
<PAGE>


The Company is headquartered in Derby, which is located in close proximity to
New Haven, Bridgeport and Danbury.  This area is served by an excellent highway
system, which allows both east/west (Interstates 95 and 84 and the Merritt
Parkway) and north/south (Route 8) travel both within the state and access to
New York City, Hartford and Boston.  Long distance travel is facilitated by
service at three airports.  The ports of New Haven and Bridgeport are active
entry points to the Northeast.

The Route 8 corridor has experienced an influx of high technology and service
companies.  Such companies include Southern New England Telephone, Tetley Tea,
Philips Medical Systems and Black & Decker.  This influx has contributed to a
shift in the employment mix away from traditional industries, including
machinery, metal working and chemical processing.  Additionally, the area is
known for its educational and medical facilities, such as Yale University.

LENDING ACTIVITIES

GENERAL.  Derby Savings, like most other savings institutions, traditionally
concentrates its lending activities on the origination of loans secured by first
mortgage liens for the construction, purchase or refinancing of residential real
property.  Also during the past several years, the Bank has enhanced its
consumer lending through the origination of HELOC's.  While residential first
mortgage loans and HELOC's are the primary focus of Derby Savings' lending
activities, the Bank also originates other consumer loans, commercial real
estate mortgages and commercial business loans.  At December 31, 1995, the
Bank's loan portfolio totaled $882.2 million and represented 70.3 % of total
assets.

ONE-TO-FOUR FAMILY UNITS.  At December 31, 1995, Derby Savings' total mortgage
loan portfolio was $737.4 million, of which $2 million is identified as held-
for-sale, compared to $724.3 million, with $55.2 million identified as held-for-
sale at December 31, 1994.  At December 31, 1995, Derby Savings Bank held in its
portfolio $691.6 million of first mortgage loans secured by one-to-four family
residential units which represented 78.4% of its total mortgage loan portfolio.
Of this amount, $7.3 million or 1.0 % were non-performing loans.  These include
loans which are non-accruing or past due 90 days.

During 1995, Derby Savings offered adjustable-rate residential mortgage loans
having one-year and three-year adjustment periods, each for a maximum term of 30
years.  The interest rate on the one-year adjustable-rate loans is 3.00% above
the One-Year Treasury Index.  The payment and interest rate adjust annually with
a maximum interest rate adjustment of 2% per adjustment and 6.00% above the
original interest rate over the term of the loan.  Derby Savings Bank also
offers a convertible mortgage program which allows the borrower to convert their
one year adjustable rate mortgage to a fixed rate mortgage between the 13th and
60th payment.  Interest rates on the three-year adjustable-rate loans are fixed
for the first three years and either adjust every three years thereafter or
adjust annually thereafter on the same basis as the one-year adjustable-rate
loans.  The Bank offers adjustable-rate loans to finance non-owner occupied
residences at a somewhat higher margin above the One-Year Treasury Index.

The Bank offers special mortgage programs to assist first time home-buyers
purchasing one and two family homes, or condominium units, including a five year
fixed rate mortgage priced below the regular 30 year fixed rate product.  There
are no points, and the Bank will accept applications up to 40 years in term and
financing of up to 90%.  Additionally, the Bank offers a 30-year fixed rate


                                       4.
<PAGE>


program with financing of up to 95% with private mortgage insurance coverage
(PMI).

Derby Savings does not originate residential mortgage loans which exceeded 95%
of the value of the security for the loan.  In the event that the amount of a
mortgage loan exceeds 80% of the value of the real estate and improvements, the
Bank requires that the loan be insured against default by private mortgage
insurance, which effectively reduces the loss exposure to a 75% loan-to-value
ratio.

The Bank originates fixed-rate mortgage loans which, from time to time, are sold
in the secondary market in order to achieve the desired balance between
interest-sensitive assets and liabilities and to be able to continue to meet the
credit needs of the local community.  The Bank pools such mortgages to
facilitate their sale to investors, primarily the Federal Home Loan Mortgage
Corporation (the "FHLMC") under its forward commitment programs and, to a lesser
extent, the Federal National Mortgage Association (the "FNMA").  The Bank
retains the servicing rights on loans sold in the secondary market.

Most of the mortgage loans originated by Derby Savings include a "due-on-sale"
clause, giving the Bank the right to declare a loan immediately due and payable
in the event, among other things, that the borrower sells or transfers title of
the real property subject to the mortgage.  Due-on-sale clauses contained in
residential real estate mortgages have been ruled enforceable in Connecticut by
the state's highest court.  Federal legislation also provides for the
enforceability of due-on-sale clauses.

MULTI-FAMILY AND COMMERCIAL REAL ESTATE LOANS.  At December 31, 1995, loans
secured by multi-family residences totaled $11.2 million or 1.5% of the Bank's
mortgage loan portfolio.  At December 31, 1995, $2.4 million or 21.1% of loans
secured by multi-family residences were non-performing.  Loans to finance
commercial real estate totaled $31.1 million and represented 4.2% of the Bank's
mortgage loan portfolio at year end 1995.  There were $1.5 million or 4.8% of
commercial real estate loans that were non-performing at year end 1995.  The
interest rate on multi-family and commercial real estate loans generally ranges
from 3.75% to 4.0% above the One-Year Treasury Index and adjusts every year with
annual adjustment limits ranging from 2% to 3% and total adjustments over the
life of the loan generally limited from 5% to 7.5% above the initial interest
rate.  Multi-family and commercial real estate loans generally amortize over
terms of 15 to 25 years, but may be called or modified by the Bank after ten
years.  Derby Savings generally limits multi-family and commercial real estate
loans to 75% of the value of the property securing the loan.

CONSTRUCTION LOANS.  In the area of real estate development and construction
lending, which is primarily for residential and condominium construction, the
Bank, at December 31, 1995, had commitments to lend $5.6 million, of which $3.5
million was outstanding at year end 1995, representing .5% of the mortgage loan
portfolio.  In comparison, at year end 1994, $4.2 million was committed to
construction projects, of which $2.4 million was advanced, which represented .3%
of the mortgage loan portfolio.  At December 31, 1995, there were no
construction and development loans that were non-performing.

The allowance for credit losses specifically allocated to the mortgage loan
portfolio totaled $4.2 million at December 31, 1995, which represented 37.7% of
the non-performing mortgage loans.  This allowance includes $.9 million
allocated


                                       5.
<PAGE>


to the loans acquired in the Burritt transaction.

CONSUMER LOANS.  Connecticut savings banks are currently authorized by statute
to invest in secured and unsecured consumer loans without limitation as to
dollar amount.  Savings banks are also authorized to issue credit cards and lend
money to individuals in connection with related lines of credit and to make
student loans under the Connecticut Guaranteed Student Loan program (the
"CGSL").  At December 31, 1995, the Bank had $125.9 million or 14.3% of its
total loan portfolio invested in consumer loans.

To enable home owners to utilize some of the equity in the value of their homes,
Derby Savings offers basically two types of second mortgage loans.  Under the
HELOC program, loans amortizing up to 20 years are made at rates designed to be
competitive in the market place.  At December 31, 1995 and 1994, the Bank had
$21.7 million and $19.3 million, respectively in home equity loans.  Under the
Home Equity Line of Credit ("HELOC") program, loans are made for an original
term of twenty years at an interest rate adjusting monthly at 1.0% to 1.5%,
above a commercial bank prime rate as published under key rates in the New York
Times ("Derby Savings Prime").

During 1995, the Bank originated HELOC's at a discount for the first six months,
and thereafter at 1.5% to 2.5% over prime.  These loans typically require
payment of interest only for ten years at which point the note requires
amortization to maturity.  The amortizing second mortgage loan and the home
equity line of credit loan have loan to value ratios of 75% to 90% on owner
occupied homes.  Home Equity Lines of Credit outstanding totaled $144.0 million
with $78.5 million in use at year end 1995 compared to $130.5 million with $70.4
million in use at year end 1994.  These loans represented 62.4% of the consumer
loan portfolio and 8.9% of total loans at December 31, 1995.

The Bank offers both marine loans and automobile loans to its customers.  Marine
loans are made up to 75% of the sale price on new boats and 75% of the appraised
value of used boats and are personally guaranteed by the principals of any
corporate borrowers.  The rates on these loans are generally fixed for a maximum
of fifteen years.  The Bank, at December 31, 1995, had $1.1 million in marine
loans.  Automobile loans on new vehicles are made up to 90% of the sales price,
while used vehicles are limited to 80%.  Loans are generally made up to five
years at fixed rates on new vehicles.  During 1995, the Bank purchased
approximately $16.6 million of automobile loans from a third party provider.

Under the Connecticut Guaranteed Student Loan (CGSL) program, the Bank is
authorized to loan annually up to $4,000 to qualifying parents.  At December 31,
1995, the Bank had $181,000 in parent loans.  The interest rate on these loans
is partially subsidized and the principal and interest are fully guaranteed by
the federal government.  Additionally the Bank also accepts loan applications
for student loans.  These applications are forwarded to CGSL for processing.

At December 31, 1995, $1.5 million or 1.2% of the consumer loan portfolio was
non-performing.  Of this amount, $978,000 or 67.1% are HELOC loans.  The
allowance for credit losses specifically allocated to consumer loans totaled
$1.8 million at December 31, 1995, which represented 120.1% of the non-
performing consumer loans.  This allowance includes $356,000 allocated to loans
acquired in the Burritt transaction.


                                       6.
<PAGE>


COMMERCIAL LENDING.  The Bank has developed a commercial loan portfolio which
totaled $19.0 million or 2.2% of the total loan portfolio at December 31, 1995.
The Bank targets businesses with $1 million to $5 million in annual revenues.
The Bank's commercial lending personnel, including a credit analyst, have
considerable experience in commercial lending.

Derby Savings also offers traditional line of credit loans to businesses which
are secured by inventories and receivables.  At December 31, 1995, $14.2 million
was committed to such lines of credit, $4.2 million of which was being used.
These lines of credit, which individually range from $10,000 to $4.0 million,
had an average amount outstanding of $100,900 at December 31, 1995.  The
interest rate on these loans varies monthly at a margin above Derby Savings
Prime.  Each loan on the credit line must be repaid within 11 months of its
origination.

The commercial loan portfolio at December 31, 1995, in part, consisted of loans
to local real estate developers and builders.  Land improvement loans are made
up to 75% of the value of the land.  When construction loans are made to an
experienced developer who already has a signed purchase contract with a buyer,
and a 10% deposit, the loan is classified as a commercial loan rather than a
construction loan.  Such loans are made up to 100% of construction cost,
exclusive of the developer's equity in the land.  All such loans are short-term
with an interest rate floating at a margin above Derby Savings Prime.

At December 31, 1995, $3.6 million or 18.9% of the Company's investment in
commercial loans was for the development of real estate, with the remaining
portfolio comprised of loans for various business needs.

At year end 1995, $1.2 million, representing 6.4% of the commercial loan
portfolio, was non-performing.  The allowance for credit losses allocated to
commercial loans totaled $1.0 million at December 31, 1995, which represented
80.3% of the non-performing commercial loans.

LOAN MATURITIES.  The following table sets forth certain information at December
31, 1995 regarding maturities and repricing in the Bank's loan portfolio.  Loans
are net of deferred loan fees and of non-accruing loans.

                                     One Year     One Through      Over
                                      or Less     Five Years    Five Years
                                     ---------    ----------    ----------
                                            (AMOUNTS IN THOUSANDS)

Permanent mortgage loans             $512,552      $ 77,929      $131,822
Construction loans                      3,046           426           923
Commercial loans                       17,487           113           160
Consumer loans                         97,176        20,145         7,176
                                     --------      --------      -------
Total loans receivable               $630,261      $ 98,613      $140,081
                                     --------      --------      --------
                                     --------      --------      --------



                                       7.
<PAGE>


The following table sets forth, as of December 31, 1995, the principal dollar
amount of performing loans due after one year, net of deferred fees which have
pre-determined interest rates and floating or adjustable interest rates.

                                   Due After December 31, 1996
                                   ---------------------------
                                   Predetermined    Floating or
                                       Rates      Adjustable Rates
                                   -------------  ----------------
                                        (AMOUNTS IN THOUSANDS)

Permanent mortgage loans             $172,819        $36,932
Construction loans                        945            404
Commercial loans                          273            ---
Consumer loans                         27,054            267
                                     --------        -------
    Total loans receivable           $201,091        $37,603
                                     --------        -------
                                     --------        -------

LOAN ORIGINATIONS.  Loan originations are developed by the Bank's mortgage,
consumer and commercial loan departments from a number of sources including
realtor, builder and customer referrals.  Bank personnel routinely call on
various real estate firms and, from time to time, attend meetings of the local
real estate board.  Commercial loan originations are primarily developed by
direct solicitation of both present and new customers by commercial loan
officers.  Consumer loan services are solicited by direct mail to existing
depositors and mortgage loan customers.  Also, newspaper and television
advertising is also used to promote various consumer loans.

Applications for all types of loans are taken at all of the Bank's offices.  The
Bank's commercial banking and loan representatives go to borrowers' homes or
businesses to assist with the preparation of loan applications.  All mortgage
and commercial loan application underwriting is centralized.

The Bank's staff underwriters have individual lending authority with limits
ranging up to $250,000; the senior lending officer has a $500,000 limit.  The
management loan committee, which is composed of the Bank's president, executive
vice president, senior lending officer, chief financial officer and the senior
officer of each lending department, can approve loans of up to $1.5 million.
Loans in excess of $1.5 million require approval by the Board of Directors.
Loans to one entity, which aggregate over $750,000 and up to $4.0 million, must
be approved by the management loan committee.

All property securing real estate loans made by Derby Savings is appraised
primarily by an independent appraiser selected by the Bank.  For all real estate
loans, Derby Savings requires the borrower to obtain title, fire and extended
casualty insurance and, where appropriate, flood insurance.

The Bank encounters certain environmental risks in its lending activities.
Under federal and state environmental laws, lenders may become liable for the
costs of cleaning up hazardous materials found on security properties.  Certain
states may also impose liens with higher priorities than first mortgages on
properties to recover funds used in such efforts.  Although the foregoing
environmental risks are more usually associated with industrial and commercial
loans, environmental risks may be substantial for residential lenders, like
Derby Savings, since environmental contamination may render the security
property unsuitable for residential use.  In addition, the value of residential
properties may become substantially diminished by contamination of nearby
properties.  In accordance with the guidelines of FNMA and FHLMC, appraisals for
single-family homes on


                                       8.
<PAGE>


which the Bank lends include comment on environmental influences and conditions.
The Bank attempts to control its exposure to environmental risks with respect to
loans secured by larger properties by requiring an environmental survey and/or
audit.  No assurance can be given, however, that the value of properties
securing loans in Derby Savings' portfolio will not be adversely affected by the
presence of hazardous materials or that future changes in federal or state laws
will not increase the Bank's exposure to liability for environmental cleanup.

Derby Savings issues commitments to prospective borrowers to make loans subject
to various conditions.  Loan commitments are generally issued to finance
residential properties, commercial loans and for construction loans secured by
commercial and multi-family residential properties.  With respect to fixed rate
single-family residential mortgage loans, it is the policy of the Bank either to
issue 30-day commitments to lend at the prevailing rate of interest at the time
of commitment, or to lock in the interest rate after the time of application.
In order to lock in the interest rate, the applicant must pay an origination fee
of one half of one percent of the loan amount.  This fee is deducted from the
mortgage origination fee due at closing.  On adjustable rate mortgages, it is
the policy of the Bank to hold the prevailing interest rate at the time of
application and to issue a 60 day commitment when the loan is approved, or to
lock in the interest rate after the time of application, for 60 days.  In order
to lock in the interest rate for 60 days, the applicant must pay an origination
fee of one half of one percent of the loan amount.  This fee is deducted from
the mortgage origination fee due at closing.  The proportion of the total volume
of commitments derived from any particular category of loan varies from time to
time and depends upon market conditions.  At December 31, 1995, Derby Savings
had $15.6 million of loan origination commitments outstanding.


                                       9.
<PAGE>


LOAN COMPOSITION.  The following table summarizes the types of loans held by the
Bank at the dates indicated and the percentage of loans in each category to net
loans:

                                          At December 31,
                       ---------------------------------------------
Types of Loans:         1995     1994     1993      1992      1991
                        ----     ----     ----      ----      ----
                       Amount   Amount   Amount    Amount    Amount
                         %        %        %         %         %
                       ---------------------------------------------
                                    (DOLLAR AMOUNTS IN THOUSANDS)
MORTGAGES
One-to-Four Family   $691,629 $684,745  $623,110  $555,821  $369,327
                         79.0     81.6      79.2      77.1      70.2

Multi-Family           11,172    8,682    10,323     9,998    11,276
                          1.3      1.0       1.3       1.3       2.2

Commercial             31,056   28,506    30,064    33,391    34,503
                          3.5      3.4       3.8       4.6       6.6

Construction            3,499    2,363     2,753     2,782     2,825
                           .4       .3        .3        .4        .5
                     -------- --------  --------  --------  --------
Total                 737,356  724,296   666,250   601,992   417,931
                         84.2      86.3     84.6      83.4      79.5

CONSUMER LOANS
HELOC                  78,523   70,358    68,687    72,313    60,774
                          9.0      8.4       8.7      10.0      11.5

Other Consumer         47,396   27,866    27,176    34,239    14,206
                          5.4      3.3       3.5       4.8       2.7
                     -------- --------  --------  --------  --------
Total                 125,919   98,224    95,863   106,552    74,980
                         14.4     11.7      12.2      14.8      14.2

COMMERCIAL LOANS       18,970   23,710    31,957    26,539    36,690
                          2.2      2.8       4.1       3.7       7.0
                     -------- --------  --------  --------  --------
Total Loans           882,245  846,230   794,070   735,083   529,601
                        100.8    100.8     100.9     101.9     100.7
Less Allowances For
    Credit Losses       6,906    6,803     6,979    13,937     3,674
                           .8       .8        .9       1.9        .7
                     -------- --------  --------  --------  --------
Loans Receivable,Net $875,339 $839,427  $787,091  $721,146  $525,927
                     -------- --------  --------  --------  --------
                     -------- --------  --------  --------  --------

PURCHASE AND SALE OF LOANS AND LOAN SERVICING.  The Bank, from time to time,
sells loans in the secondary mortgage market while retaining servicing rights.
The loans that are sold are predominantly fixed rate mortgage loans.  The
Company sold $32.6 million, of which $7.4 million were fixed rate, in 1995,
compared to $12.1 million in 1994, in order to achieve the desired balance
between interest-sensitive assets and liabilities and to provide additional
funds to meet the credit needs of the local community.  Loan servicing on loans
sold is performed by the Bank, which retains a portion (normally 3/8 of 1%,
exclusive of any excess servicing fees) of the interest paid by the borrower in
consideration for the servicing of the loan.


                                       10.
<PAGE>


In order to supplement local mortgage loan originations, the Bank has purchased
single family adjustable rate mortgage loans.  These purchases totaled $97.1
million during 1995 and $21.9 million during 1994.  At year end 1995,
approximately 75% of the mortgage portfolio was invested in adjustable rate
loans, compared to 73% in 1994.

The following table sets forth information as to Derby Savings' loan servicing
portfolio at the dates shown.
<TABLE>
<CAPTION>

                                          At December 31,
                      ----------------------------------------------------------------
                             1995                 1994                   1993
                      ------------------- --------------------    --------------------
                                       (AMOUNTS IN THOUSANDS)
<S>                   <C>            <C>    <C>          <C>      <C>           <C>
Loans owned by
          the Bank    $  789,382     84.3%  $  796,138    86.0%   $  743,197     83.2%
Loans Serviced
          For Others     147,122     15.7      129,345    14.0       149,868     16.8
                      ----------    -----   ----------   -----    ----------    -----
Total Loans Serviced  $  936,504    100.0   $  925,483   100.0    $  893,065    100.0
                      ----------    -----   ----------   -----    ----------    -----
                      ----------    -----   ----------   -----    ----------    -----
</TABLE>

LOAN ACTIVITIES.  During 1995, the Bank originated $44.9 million in mortgage
loans and $93.9 million in other loans, compared to $164.9 million in mortgage
loans and $91.2 million in other loans during 1994.  Even though the Bank
remained competitive in its loan pricing, the decline in mortgage loan
originations in 1995 compared to 1994 was reflective of the soft real estate
market in Connecticut and the sluggish demand for both home purchases and
refinancings.

The table below shows real estate mortgage loan origination, sale and repayment
activities of Derby Savings for the periods indicated.

                                                    At December 31,
                                            ------------------------------
                                               1995      1994      1993
                                            ---------  --------  ---------
Loans originated:                              (AMOUNTS IN THOUSANDS)
   Construction loans originated            $  7,169   $  1,981  $  1,580
   Purchase/refinance                         37,701    162,875   187,056
                                            --------   --------  --------
   Total loans originated                     44,870    164,856   188,636

   Loans purchased                            97,101     21,938     8,663
                                            --------   --------  --------
   Total loans originated and purchased      141,971    186,794   197,299

Loans sold:
   Participations                                ---        ---       111
   Whole loans                                32,612     12,139    29,875
                                            --------   --------  --------
   Total loans sold                           32,612     12,139    29,986

Loan principal reductions                     95,309    118,301    94,156
                                            --------   --------  --------
Total loans sold and principal reductions    127,921    130,440   124,142
                                            --------   --------  --------
   Increase in real estate mortgage
       loans (before net items)             $ 14,050   $ 56,354  $ 73,157
                                            --------   --------  --------
                                            --------   --------  --------


                                       11.
<PAGE>


The following table shows non-real estate loan originations and purchases and
principal reductions of the Bank for the periods indicated.

                                                         At December 31,
                                             --------------------------------
                                                1995        1994        1993
                                                ----        ----        ----
                                                      (AMOUNTS IN THOUSANDS)
Loans originated and purchased:
  Personal                                   $  3,009    $    637      $   331
  Home improvement                                160         243           88
  Home equity credit line                      57,390      43,781       43,236
  Auto                                         18,169       1,879           58
  Education                                        51         111          545
  Collateral                                    2,853       2,194        2,246
  Marine                                           61         ---           13
  Leeway                                          ---         ---           --
  Commercial                                   26,386      42,324       32,002
                                             ---------    --------     -------
       Total loans originated and purchased  108,079      91,169        78,519
                                             ---------    --------     -------
Loan principal reductions:
  Personal                                      1,855         583        1,326
  Home improvement                                449         342        2,647
  Home equity credit line                      46,059      41,224       47,192
  Auto                                          2,549       1,116        1,704
  Education                                        19         389          491
  Collateral                                    2,718       2,200        2,203
  Marine                                          386         646        1,247
  Leeway                                           46          61           --
  Commercial                                   31,248      49,866       24,389
                                             ---------    --------     -------
       Total principal reductions              85,329      96,427       81,199
                                             ---------    --------     -------
  Increase (decrease) in loans
      (before net items)                     $ 22,750   $ (5,258)     $(2,680)
                                             ---------    --------     -------
                                             ---------    --------     -------

FEE INCOME FROM LENDING ACTIVITIES.  Fee income from lending activities is
primarily generated from origination fees on one-to-four family mortgage loans.
These fees range from 1% to 3% of the total loan amount and vary depending on
the mortgage program.  Origination fee income is also generated from home
improvement loans, commercial loans, multi-family loans and other
non-residential loans.

As required by the Statement of Financial Accounting Standards No. 91 ("SFAS
91"), "Accounting for Non-refundable Fees and Costs Associated with Originating
or Acquiring Loans and Initial Direct Costs of Leases," the Bank defers certain
direct costs and loan fees resulting from the origination of loans, which will
be amortized as an adjustment of yield over the contractual term of the related
loans.

In addition to origination fees, Derby Savings charges annual fees for HELOC
loans, and fees for loan modifications, late payments, changes of property
ownership and for related miscellaneous services.

USURY LIMITATIONS.  Federal legislation preempted all state usury laws
concerning residential first mortgage loans unless the state legislature acted
to override the pre-emption by April 1, 1983.  The Connecticut legislature did
not act to override the federal pre-emption.  Connecticut law currently does not
impose a ceiling on interest rates on loans made by the Bank.


                                       12.
<PAGE>


COLLECTION PROCEDURES AND ALLOWANCE FOR CREDIT LOSSES.  When a borrower fails to
make a required payment by the 20th day after the payment is due, Derby Savings
attempts to cause the delinquency to be cured by corresponding with the
borrower.  If the delinquency continues, the Bank corresponds further with the
borrower and, through telephone calls and letters, attempts to determine the
reason for and cure the delinquency.  If the delinquency cannot be cured, the
Bank institutes appropriate legal action.

When Derby Savings acquires real estate through foreclosure or by deed in lieu
of foreclosure ("foreclosed assets"), the real estate is placed on the Bank's
books at the lower of the carrying value of the loan or generally 90% of the
fair value of the real estate based upon a current appraisal.  Any reduction
below the value previously recorded on the books is charged against the
allowance for estimated losses on foreclosed assets.

The allowance for credit losses has been established through provisions for
credit losses and is a valuation allowance which is reflected as a deduction
from loans.  The allowance represents amounts which, in management's judgment,
will be adequate to absorb possible losses on loans that may become
uncollectible, based on such factors as changes in the nature and volume of the
loan portfolio, current economic conditions that may affect the borrowers'
ability to pay, overall portfolio quality, the average of the Bank's credit
losses less recoveries for the current and preceding five years, and review of
specific problem loans.  At December 31, 1995, the allowance for credit losses
totaled $6.9 million, which represented 50.2% of the $13.8 million of
non-performing loans.

Transactions in the allowance for credit losses for each of the five years in
the period ended December 31, 1995 were as follows.
<TABLE>
<CAPTION>

                                            At And For The Years Ended December 31,
                                    -------------------------------------------------------
                                       1995       1994       1993       1992        1991
                                    ---------  ---------  ---------   --------    ---------
<S>                                 <C>        <C>        <C>         <C>         <C>
                                                 (DOLLAR AMOUNTS IN THOUSANDS)
Balance at beginning
of period                           $  6,803   $  6,979   $ 13,937    $ 3,674     $  2,313
Charge-offs:
  Mortgage loans                      (2,306)    (1,848)    (2,857)      (941)      (1,325)
  Consumer loans                        (399)      (573)      (860)      (211)        (267)
  Commercial loans                       (78)      (195)      (114)      (660)      (1,606)
                                    ---------  ---------  ---------   --------    ---------
                                      (2,783)    (2,616)    (3,831)    (1,812)      (3,198)
                                    ---------  ---------  ---------   --------    ---------
Recoveries:
  Mortgage loans                         269        63         329         76           45
  Consumer loans                          84        46          21         41           43
  Commercial loans                         8         6          11        229           71
                                    ---------  ---------  ---------   --------    ---------
                                         361       115         361        346          159
                                    ---------  ---------  ---------   --------    ---------
  Net charge-offs                      2,422      2,501      3,470      1,466        3,039

Provision for credit losses            2,525      2,325      2,475      1,375        4,400
Acquired allowance                      ---        ---      (5,963)    10,354          ---
                                    ---------  ---------  ---------   --------    ---------
Balance at end of period             $ 6,906    $ 6,803    $ 6,979    $13,937       $3,674
                                    ---------  ---------  ---------   --------    ---------
                                    ---------  ---------  ---------   --------    ---------
Ratio of net charge-offs to
average loans outstanding                .29%       .31%       .47%       .27%         .57%

</TABLE>


                                       13.
<PAGE>


During 1993, the Bank completed a valuation analysis of the loans acquired in
the Burritt transaction and allocated approximately $6.0 million from these
amounts to a purchased loan discount which is being accreted to interest income
over the remaining terms of the acquired loans.  At December 31, 1995 and 1994,
the Allowance for credit losses, which totaled approximately $6.9 million and
$6.8 million, respectively, included approximately $1.2 million and $1.8
million, respectively, allocated to the loans acquired in the Burritt
transaction.


NON-PERFORMING ASSETS.

NON-PERFORMING AND RESTRUCTURED LOANS.  The following table summarizes the
Bank's non-performing and restructured loans.  For a discussion of
non-performing loans see "Management's Discussion and Analysis - Financial
Condition" contained in the 1995 Annual Report to Stockholders on pages 16 - 18,
which are incorporated herein by reference.

                                               At December 31,
                               ---------------------------------------------
                                  1995    1994      1993     1992     1991
                                  ----    ----      ----     ----     ----
                                           (AMOUNTS IN THOUSANDS)
Non-accrual loans:
         Mortgage              $10,658  $11,000   $12,302  $18,262  $18,859
         Construction              ---      ---       ---      125      125
         Consumer                1,421    1,280     1,789    2,082    1,616
         Commercial              1,210    1,576     3,215    3,901    8,108
                               -------  -------   -------  -------  -------
Total                           13,289   13,856    17,306   24,370   28,708
                               -------  -------   -------  -------  -------
Accruing loans past
     due 90 days:
         Mortgage                  442    1,186     2,317    3,006    4,096
         Construction              ---      ---       ---      ---      ---
         Consumer                   37      ---       249        1      151
         Commercial                ---      ---       ---      ---      ---
                               -------  -------   -------  -------  -------
Total                              479    1,186     2,566    3,007    4,247
                               -------  -------   -------  -------  -------
Total non-performing
         loans                 $13,768  $15,042   $19,872  $27,377  $32,955
                               -------  -------   -------  -------  -------
                               -------  -------   -------  -------  -------
Restructured loans             $ 4,385  $ 4,213   $ 2,273  $ 8,262  $ 6,985
                               -------  -------   -------  -------  -------
                               -------  -------   -------  -------  -------

Effective January 1, 1995, the Bank implemented the provisions of SFAS Nos.
114/118, "Accounting by Creditors for Impairment of a Loan."  The basic
provisions of these statements eliminate the financial statement classification
of in-substance foreclosed assets as foreclosed assets, resulting in the
classification of such amounts and related specific allowance for credit losses
as Loans receivable.  Additionally, these statements address the accounting for
loans considered impaired and the recognition of impairment.  A loan is
considered impaired when, in management's judgement, current information and
events indicate it is probable that collection of all amounts due according to
the contractual terms of the loan agreement will not be met.  In-substance
foreclosed assets prior to January 1, 1995 have been reclassified to Loans
receivable for comparability purposes.


                                       14.
<PAGE>


The recorded investment in impaired loans at December 31, 1995 approximated
$13.8 million and includes approximately $11.1 million in mortgage loans, $1.5
million in consumer loans and $1.2 million in commercial loans.  The amount of
the related Allowance for credit losses on these loans at December 31, 1995
approximated $1.6 million.  The average recorded investment in impaired loans
during the year ended December 31, 1995 was approximately $14.6 million.  During
the year ended December 31, 1995, amounts recognized as interest income on
impaired loans were not significant.

The recorded investment in impaired loans at January 1, 1995 was approximately
$15.1 million and included approximately $12.2 million in mortgage loans, $1.3
million in consumer loans and $1.6 million in commercial loans.  These loans
were reflected as non-performing loans at December 31, 1994 in accordance with
accounting principles in effect at that date.


The following table summarizes the allocation of the Bank's allowance for credit
losses and the percentage of loans in each category to total loans.

                                 Allocation of Allowance for Credit Losses:
                               --------------------------------------------
                                              At December 31,
                               --------------------------------------------
                                 1995     1994      1993     1992    1991
                                 ----     ----      ----     ----    ----
                                Amount   Amount    Amount   Amount  Amount
                                   %        %        %        %        %
                                ------   ------    ------   ------  ------
Balance at end of period                  (DOLLAR AMOUNTS IN THOUSANDS)
applicable to:
   Mortgage loans              $ 4,183  $ 4,495   $ 4,605  $11,166  $2,180
                                  83.6     85.6      83.9     81.9    78.9

   Consumer loans                1,751    1,266     1,193    1,987      704
                                  14.3     11.6      12.1     14.5     14.2

   Commercial loans                972    1,042     1,181      784      790
                                   2.1      2.8       4.0      3.6      6.9
                               -------  -------   -------  -------  -------
Total                          $ 6,906  $ 6,803   $ 6,979  $13,937  $ 3,674
                                 100.0    100.0     100.0    100.0    100.0
                               -------  -------   -------  -------  -------
                               -------  -------   -------  -------  -------

Comparative information with respect to non-accrual loans is as follows:

                                                           At December 31,
                                                  -------------------------
                                                           1995      1994
                                                         --------  --------
                                                (AMOUNTS IN THOUSANDS)
Interest income that would have been recorded
   under original terms:                                   $2,468   $1,116
Interest income recorded during the period:                $  715   $  487


It is the Bank's general policy that no additional interest income is accrued
with respect to loans on which a default of interest has existed for a period in
excess of 90 days, at which time previously accrued interest is reversed.


                                       15.
<PAGE>


FORECLOSED ASSETS.  Foreclosed assets consisted of the following:

                                                    At December 31,
                                                  ------------------
                                                  1995       1994
                                                  ----       ----
                                                 (AMOUNTS IN THOUSANDS)

Foreclosed assets                                 $ 3,942  $ 6,195
Allowance for estimated losses                       (230)    (439)
                                                  -------  --------
         Net carrying amount                      $ 3,712  $ 5,756
                                                  -------  --------
                                                  -------  --------

At December 31, 1995 and 1994, there were 27 and 37 properties, respectively,
included in foreclosed assets.  See "Management's Discussion and Analysis -
Financial Condition" contained in the 1995 Annual Report to Stockholders pages
16 - 17, which is incorporated herein by reference.

SECURITIES PORTFOLIO.  The Bank's securities portfolio totaled $320.2 million or
25.5% of total assets at December 31, 1995.  Of such amount, $295.4 million, or
92.3% of the securities portfolio consisted of U.S. government and agency bonds
and mortgage-backed securities.  In addition, the Company's securities portfolio
also includes investment grade corporate bonds and marketable equity securities.
At December 31, 1995, the Bank had common stock securities totaling $3.8 million
with a fair value of $4.0 million managed by an outside investment firm under
the Bank's general direction for maximum return.  Additionally, the Bank
maintains a trading portfolio comprised of common stocks.  At year end 1995,
there were $1.2 million of common stocks in this portfolio.

Derby Savings increases or decreases its liquid investments depending upon,
among other things, the availability of funds and loan demand.  Historically,
the Bank has maintained its liquid assets at levels believed adequate to meet
requirements of normal business activities.

At December 31, 1995, securities, including Federal funds sold, maturing or
repricing within 12 months represented 28.3% of the Bank's interest-sensitive
assets maturing or repricing during 1996.

The following table sets forth the composition and carrying amount of the Bank's
securities portfolio and other money market securities, including securities
available-for-sale, at the dates indicated:

                                                       At December 31,
                                             ------------------------------
                                               1995       1994       1993
                                             --------   -------    --------
                                                    (AMOUNTS IN THOUSANDS)
Bonds and money market securities:
           Federal funds                     $  2,305   $  4,500   $ 30,500
           U.S. Government and agency bonds    10,406     22,419      2,000
           Mortgage-backed securities         284,971    269,544    243,848
           Other bonds and notes                4,167     27,927     66,352
           Mutual funds                         1,131        ---        ---
           Money market preferred stock         5,000        ---      9,000
Marketable equity securities                   14,513      2,256      1,399
                                             --------   --------   --------
              Total                          $322,493   $326,646   $353,099
                                             --------   --------   --------
                                             --------   --------   --------


                                       16.
<PAGE>


The following table sets forth certain information at December 31, 1995
regarding maturities and yields in the Bank's securities portfolio:

<TABLE>
<CAPTION>

                                    One       Five      Over
                        One Year   Through   Through     Ten
                        Or Less  Five Years Ten Years   Years      Total
                        -------- ---------- ---------   ------    -------
                                   (DOLLAR AMOUNTS IN THOUSANDS)
<S>                    <C>        <C>       <C>       <C>         <C>
US Government &        $ 2,000    $   ---    $ 5,322  $   2,975   $  10,297
  Agencies                4.34        ---       7.34       8.00        6.95

Mortgage-Backed            ---     36,964     35,340    212,114     284,418
  Securities               ---       5.96       5.79       6.83        6.59

Other Notes & Bonds        ---      4,175       ---        ---        4,175
                           ---       5.34        ---        ---        5.34
                       -------   --------   --------   --------    --------
          Total        $ 2,000   $ 41,139   $ 40,662   $215,089    $298,890
                          4.34       5.90       5.99       6.85        6.58
                       -------   --------   --------   --------    --------
                       -------   --------   --------   --------    --------
</TABLE>

The stated yields on mortgage backed securities in the preceding table may vary,
based on changes in the level of prepayments experienced over the remaining term
of the securities.

The securities constituting the Bank's investments in other bonds and notes are
all publicly traded.  All of these securities are rated in one of the top four
rating categories by a nationally recognized rating firm.

The Bank adopted Financial Accounting Standards Board Statement No. 115 as of
December 31, 1993.  This statement requires, in part, that certain securities
that are classified as available-for-sale be recorded at fair value, with
unrealized gains and losses, net of tax, reported in a separate component of
stockholders' equity.  As a result, at December 31, 1995, the Bank recorded an
unrealized gain, net of tax effect, of $426,000 compared to an unrealized loss,
net of tax effect, of $5.6 million at December 31, 1994, which is included in
Stockholders' Equity.  (See 1995 Annual Report to Stockholders).

The Financial Accounting Standards Board issued a "Special Report" in November
1995, "A Guide to Implementation of SFAS 115" (Note 1).  This guide provided
additional guidance as to the criteria for the financial statement
classifications prescribed in SFAS 115.  As a result of this additional
guidance, the Bank could reassess the appropriateness of the classification of
all its securities held.  Accordingly, the Bank reclassified securities Held-to-
maturity with an aggregate amortized cost of approximately $20.4 million, which
approximated fair value, to the classification of Available-for-sale.


                                       17.
<PAGE>


The following table summarizes the Bank's security investments by portfolio
type:
<TABLE>
<CAPTION>

                                                     December 31, 1995
                                        --------------------------------------------
                                                  Gross unrealized holding
                                        Amortized ------------------------    Fair
                                          Cost        Gains      Losses       Value
                                        ---------  ----------    ------     --------
                                                    (AMOUNTS IN THOUSANDS)
<S>                                     <C>        <C>           <C>        <C>
TRADING
Marketable equities                     $  1,148      $     23   $    ---    $  1,171
                                        --------      --------   --------    --------
                                        --------      --------   --------    --------
AVAILABLE-FOR-SALE


U.S. Government and agency
  obligations                           $  8,297      $    109   $    ---    $  8,406
Mortgage-backed securities               213,538         2,378      1,826     214,090
Other bonds and notes                      4,175             3         11       4,167
                                        --------      --------   --------    --------
          Total debt securities          226,010         2,490      1,837     226,663
Marketable equities                       13,329           307        294      13,342
Mutual funds                               1,070            61        ---       1,131
                                        --------      --------   --------    --------
Total                                   $240,409      $  2,858   $  2,131    $241,136
                                        --------      --------   --------    --------
                                        --------      --------   --------    --------
HELD-TO-MATURITY
U.S. Government and agency
  obligations                           $  2,000      $    ---   $    ---    $  2,000
Mortgage-backed securities                70,881            62        549      70,394
                                        --------      --------   --------    --------
          Total debt securities           72,881            62        549      72,394
Money market preferred stock               5,000           ---        ---       5,000
                                        --------      --------   --------    --------
Total                                   $ 77,881      $     62   $    549    $ 77,394
                                        --------      --------   --------    --------
                                        --------      --------   --------    --------

<CAPTION>
                                                     December 31, 1995
                                        --------------------------------------------
                                                  Gross unrealized holding
                                        Amortized ------------------------    Fair
                                          Cost        Gains      Losses       Value
                                        ---------  ----------    ------     --------
                                                    (AMOUNTS IN THOUSANDS)
TRADING
Marketable equities                     $    918      $    ---   $    148    $    770
                                        --------      --------   --------    --------
                                        --------      --------   --------    --------
AVAILABLE-FOR-SALE
U.S. Government and agency obligations  $ 21,095      $      1   $    677    $ 20,419
Mortgage-backed securities               174,667             7      7,832     166,842
Other bonds and notes                     28,903             2        978      27,927
                                        --------      --------   --------    --------
          Total debt securities          224,665            10      9,487     215,188
Marketable equities                        1,556            37        107       1,486
                                        --------      --------   --------    --------
Total                                   $226,221      $     47   $  9,594    $216,674
                                        --------      --------   --------    --------
                                        --------      --------   --------    --------

HELD-TO-MATURITY
U.S. Government and agency obligations  $  2,000     $    ---    $     60    $  1,940
Mortgage-backed securities               102,702           ---      7,714      94,988
                                        --------      --------   --------    --------
Total                                   $104,702      $    ---   $  7,774    $ 96,928
                                        --------      --------   --------    --------
                                        --------      --------   --------    --------
</TABLE>

See Note 2 to the Consolidated Financial Statements in the Company's Annual
Report to Stockholders for the year ended December 31, 1995 for information
concerning the fair values and other information regarding the Bank's securities
portfolio, incorporated herein by reference.


                                       18.
<PAGE>

SOURCES OF FUNDS

GENERAL.  Deposits are the primary source of Derby Savings' funds for use in its
lending and investment activities.  In addition, the-Bank derives funds from
interest and principal payments on loans and other investments and from FHLBB
advances and other borrowings (See "Management's Discussion and Analysis -
Financial Condition" contained in the 1995 Annual Report to Stockholders,
incorporated herein by reference).  Loan repayments are a relatively stable
source of funds, while deposit inflows and outflows are significantly influenced
by prevailing interest rates, money market conditions and competitive factors.
Borrowings may be used on a short-term basis to compensate for reductions in
normal sources of funds or on a longer term basis to support expanded lending
and investment activities.  During the past several years, the use of FHLBB
advances has played a significant part in the overall funding of the Bank's
growth.

DEPOSIT ACTIVITIES. Derby Savings has developed a variety of deposit products 
ranging in maturity from demand-type accounts to certificates with maturities 
of up to five years. The Bank's deposits are primarily derived from the areas 
where its offices are located. Derby Savings does not solicit deposits 
outside of Connecticut.

In addition to traditional certificates of deposit, the Bank offers two types of
money market deposit accounts.  At December 31, 1995, one of the money market
accounts paid 2.25% for balances of $10,000 or more.  The other money market
account, which has been marketed under the name of the No Maturity CD, pays a
minimum rate of interest equal to 2.5 percentage points below the Bank's prime
rate on balances of $25,000 or more.  During 1993, Derby Savings Bank ceased
offering this account type.  At December 31, 1995, $176.6 million of the Bank's
deposits, or 16.7% of total deposits were held in the No Maturity CD, which paid
interest at the rate of 6.25% per annum at year end.

The Bank seeks to price its deposits in order to meet its need for liquidity to
fund loans and make other investments.  The Bank reviews and establishes its
rates weekly.

Derby Savings promotes the establishment of IRA and Keogh accounts because
management believes the Bank's relationship with such depositors tends to be
stable.  Additionally, the Bank seeks to act as trustee, administrator or, in
conjunction with an investment advisor, the manager of corporate pension funds
and actively solicits this business from smaller businesses in its market area.
At December 31, 19954, $137.3 million of the Bank's deposits, or 13.0% of total
deposits, were held in retirement accounts.

                                       19.

<PAGE>

The following table sets forth the average dollar amounts of deposits of the
Bank by type and the weighted average rates paid for the periods indicated:

<TABLE>
<CAPTION>
                                                   For the Years Ended December 31,
                            ------------------------------------------------------------------------------
                                       1995                         1994                      1993     
                            ---------------------------   ----------------------     ---------------------
                                               Weighted                Weighted                   Weighted
                              Average          Average    Average       Average       Average      Average
Type                          Amount            Rate      Amount         Rate          Amount       Rate
-------------------------   ----------         -------    --------     ---------     --------     --------
                                                              (AMOUNTS IN THOUSANDS)
<S>                          <C>               <C>        <C>          <C>            <C>          <C>
Non-interest-bearing:
 Demand Deposit              $  32,121            ---    $ 30,179            ---     $ 26,409          ---
                             ----------        -------   --------      ---------     --------     --------
                             ----------        -------   --------      ---------     --------     --------

Interest-bearing deposits:
 Demand Deposits             $  46,336           1.94%   $ 47,794          1.95%     $ 45,678         2.43%

 Savings Deposits              203,963           2.02     231,318           2.01      237,846         2.58

 Money Market
     Deposits                  205,086           5.47     203,867           3.91      186,983         3.19

 Time
Deposits                       556,628           5.40     513,471           4.37      515,368         4.73
                             ----------        -------   --------      ---------     --------     --------

Total interest-
 bearing Deposits            $1,012,013          4.57%   $996,450           3.61%    $985,875        3.81%
                             ----------        -------   --------      ---------     --------     --------
                             ----------        -------   --------      ---------     --------     --------


</TABLE>

The following table sets forth the deposit flows for Derby Savings during the
periods indicated.

<TABLE>
<CAPTION>
                                                 At December 31,
                                   -----------------------------------------
                                      1995           1994           1993
                                   -----------   ----------      -----------
                                              (AMOUNTS IN THOUSANDS)
<S>                                 <C>          <C>              <C>
Deposits                            $1,758,078   $1,741,505       $1,803,245
Withdrawals                          1,773,895    1,755,921        1,829,414
                                   -----------   ----------      -----------
Net cash inflow (outflow)              (15,817)     (14,416)         (26,169)
Interest credited                       46,216       35,941           37,459
                                   -----------   ----------      -----------
Net increase in deposits           $    30,399    $  21,525       $   11,290
                                   -----------   ----------      -----------
                                   -----------   ----------      -----------
</TABLE>

The following table presents, by various interest-rate categories, the amounts
of certificate accounts as of the dates indicated.

                                                At December 31,         
                                   -------------------------------------
                                     1995          1994           1993  
                                   --------      --------       --------
                                          (AMOUNTS IN THOUSANDS)   

           2.01- 4.00%             $  1,076      $189,891       $289,841
           4.01- 6.00%              462,206       282,210        148,873
           6.01- 8.00%              116,393        55,655         54,509
           8.01-10.00%                  136         1,112          8,824
          10.01-12.00%                  ---            50            143
                                   --------      --------       --------
                                   $579,811      $528,918       $502,190
                                   --------      --------       --------
                                   --------      --------       --------

                                     21.
<PAGE>

The following table presents the maturities of the Bank's certificates of
deposit in amounts of $100,000 or more at December 31, 1995 by time remaining to
maturity.

                                        At December 31, 1995
                                       ----------------------
                                       (AMOUNTS IN THOUSANDS)
Matures:
     Less than 6 months                     $  14,620
     Over 6 through 12 months                   7,765
     Over 12 months                            15,663
                                            ---------
        Total                               $  38,048
                                            ---------
                                            ---------

BORROWINGS.  The FHLB System functions in a reserve credit capacity for savings
institutions and certain other financial institutions.  As a member of the FHLB
System, Derby Savings is required to own capital stock in the FHLBB and is
authorized to apply for advances on the security of such stock and other
qualified collateral, which includes certain of its home mortgages and other
assets (principally securities which are obligations of, or guaranteed by, the
United States), provided certain credit worthiness standards have been met.  See
"Regulation - Federal Home Loan Bank System".  Under its current credit
policies, the FHLBB limits advances to a member's qualified collateral.  At year
end 1995 the Bank had a borrowing capacity with the FHLBB of approximately $760
million, of which $96.9 million was outstanding.  FHLBB advances are used for
several separate programs.  First, FHLBB advances are used to match fund five to
ten year fixed-rate commercial real estate mortgage loans at a spread of at
least 200 basis points.  At December 31, 1995, advances primarily for this
purpose totaled $6.3 million.  Second, the Bank uses these advances to match
fund both one year adjustable-rate mortgages and Home Equity Lines of Credit
through floating rate advances.  In addition to cash management, these advances
have been used to fund purchases of various mortgage-backed securities.

At December 31, 1995 and 1994, respectively, the Company had total borrowings
outstanding of $96.9 million and $111.1 million, respectively.  

In 1990, the Board of Directors authorized and the Company established a $3.0
million line of credit to partially fund the repurchase of the Company's common
stock in 1989 and 1990.  This line of credit was paid off in June 1994.

                                     21.


<PAGE>

The following table summarizes the Company's borrowings:

<TABLE>
<CAPTION>
                                     At And For The Years Ended December 31,
                                     --------------------------------------
                                       1995         1994        1993  
                                     --------     --------    --------
                                              (AMOUNTS IN THOUSANDS)
<S>                                  <C>          <C>         <C>
Notes payable--Bank                  $    ---     $    ---    $  1,450
FHLBB advances                         96,876      111,145     104,991
                                     --------     --------    --------
 Total                               $ 96,876     $111,145    $106,441
                                     --------     --------    --------
                                     --------     --------    --------
Weighted average interest rate on
 FHLBB advances                          5.65%        5.52%       5.47%

Weighted average interest rate on total
 borrowings during the period            5.70%        5.53%       5.48%

Highest month-end balance of total
 borrowings                           $113,627     $142,451    $144,340

Average balance of total borrowings   $ 93,097     $123,190    $113,376
</TABLE>

See Note 7 to Consolidated Financial Statements in the 1995 Annual Report to
Stockholders for further information regarding the Company's borrowings.

See Management's Discussion and Analysis and Selected Financial and Other Data
in the 1995 Annual Report to Stockholders for the average balance sheet, rate
volume analysis, interest rate sensitivity analysis and selected financial
ratios which are herein incorporated by reference.

EMPLOYEES

At December 31, 1995, Derby Savings had 300 employees, of whom 74 were
part-time and none of whom were represented by a collective bargaining group. 
Employee benefits include the Bank's pension plan, life, health and dental
insurance, and long-term disability insurance which are supplied by the Bank
for all employees.  Management considers its relations with its employees to
be excellent.

COMPETITION

Derby Savings experiences substantial competition in attracting and retaining
deposits and in making mortgage and other loans.  The primary factors in
competing for deposits are interest rates, the quality and range of financial
services offered, convenience of office locations and office hours. 
Competition for deposits comes primarily from other savings institutions and
commercial banks and money market funds.  Additional competition for deposits
comes from various types of corporate and government borrowers and credit
unions.

The primary factors in competing for loans are interest rates, loan
origination fees and the quality and range of lending services offered. 
Competition for origination of first mortgage loans comes primarily from other
savings institutions, mortgage banking firms, commercial banks, insurance
companies and real estate investment trusts.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"IBBEA") authorized the acquisition of banks in any state by bank holding

                                     22.
<PAGE>

companies, subject to compliance with federal and state antitrust laws, the
Community Reinvestment Act ("CRA") and specific deposit concentration limits. 
The IBBEA removes most state barriers to interstate acquisitions of banks and
ultimately will permit multi-state banking operations to merge into a single
bank.  Enactment of the IBBEA may result in increase competition and financial
institution acquisition from out of state financial institutions and their
holding companies.

                                REGULATION

FEDERAL BANK HOLDING COMPANY REGULATION

The Company is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), and is subject to FRB
regulations, examination, supervision and reporting requirements.  Among other
things, the Company is required to file with the FRB annual reports and such
additional information regarding the business and operations of the Company
and its subsidiaries as the FRB may require pursuant to the BHCA.  The FRB may
conduct examinations of the Company and its subsidiaries.  Under the BHCA and
regulations adopted by the FRB, the Company and its subsidiaries are
prohibited from requiring certain tie-in arrangements in connection with any
extension of credit, lease, or sale of property or furnishing of services.

Under the BHCA, FRB approval is required for any action which causes a bank or
other company to become a bank holding company for any action which causes a
bank to become a subsidiary of a bank holding company.  Under the BHCA, a bank
holding company such as the Company, must obtain FRB approval before (i) it
acquires direct or indirect ownership or control of any voting shares of any
bank if, after such acquisition, it will own or control directly or indirectly
more than 5% of the voting stock of such bank unless it already owns a
majority of the voting stock of such bank; (ii) it or any of its subsidiaries,
other than a bank, acquires all or substantially all of the assets of a bank;
or (iii) it merges or consolidates with another bank holding company.  Any
application by a bank holding company or its subsidiaries to acquire any
voting shares of, or interest in, or all or substantially all of the assets of
any bank located outside of the state in which the operations of the bank
holding company's banking subsidiaries are principally conducted, may not be
approved by the FRB unless the laws of the state in which the bank to be
acquired is located expressly authorize such an acquisition.  Additionally,
the Change in Bank Control Act generally requires persons who at any time
intend to acquire control of a bank holding company, acting directly or
indirectly or through or in concert with one or more persons, to give 60 days
prior written notice to the FRB.  "Control" exists when the acquiring party
has voting control of at least 25% of the bank holding company's voting
securities, or the power directly or indirectly to direct the management or
policies of such company.

Under the FRB's regulations, a rebuttable presumption of acquisition of
control arises with respect to an acquisition where, after the transaction,
the acquiring party has ownership, control or the power to vote at least 10%
(but less than 25%) of any class of the holding company's voting securities if
(i) the holding company has securities registered under Section 12 of the
Securities Exchange Act of 1934 or (ii) immediately after the transaction no
other person will own a greater proportion of that class of voting securities. 
The FRB may disapprove proposed acquisitions of control on certain specified
grounds.

                                     23.
<PAGE>

A bank holding company is prohibited, except in certain statutorily prescribed
instances, from acquiring direct or indirect ownership or control of more than
5% of the voting shares of any company which is not a bank or bank holding
company, and from engaging directly or indirectly in activities other than
banking, managing or controlling banks, or furnishing services to its
subsidiaries.  A bank holding company may, however, subject to the approval of
the FRB, engage in, or acquire shares of companies engaged in, activities
which  are deemed by the FRB to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto.  In making any such
determination, the FRB is required to consider whether the performance of such
activities by the holding company or an affiliate can reasonably be expected
to produce benefits to the public, such as greater convenience, increased
competition, or gains in efficiency, that outweigh possible adverse affects,
such as undue concentration of resources, decreased or unfair competition,
conflicts of interest, or unsound banking practices.

The principal activities that the FRB has determined by regulation to be so
closely related to banking as to be a proper incident thereto include, among
other things:  (1) making, acquiring or servicing loans; (2) performing
certain data processing services; (3) providing certain securities brokerage
services; (4) acting as a fiduciary or an investment or financial advisor; (5)
leasing personal or real property; (6) performing appraisals of real estate
and tangible and intangible personal property; (7) making investments in
corporations or projects designed primarily to promote community welfare; and
(8) owning or operating a savings association, if the savings association's
activities are limited to those permissible for a bank holding company.  In
addition, a bank holding company may also file an application with the FRB for
approval to engage in other activities that the holding company reasonably
believes are so closely related to banking as to be a proper incident thereto.

Bank holding companies with consolidated assets of $150 million or more such
as the Company, are required under FRB regulations to maintain minimum levels
of leverage-based capital. Bank holding companies that have a composite rating
of 1 under the uniform CAMEL rating system are required to maintain a minimum
ratio of 3% tier 1 capital to total assets.  All other bank holding companies
are required to maintain tier 1 capital levels ranging from 4% to 5% of total
assets.  Higher capital ratios may be required by the FRB if warranted by
particular circumstances or risk profiles of the bank holding company.  For
purposes of the leverage-based standard, tier 1 capital includes common
equity, minority interests in equity accounts of consolidated subsidiaries and
qualifying noncumulative perpetual preferred stock less goodwill.  The FRB may
exclude certain other intangibles and investments in subsidiaries as
appropriate.  At December 31, 1995, the Company had a ratio of tier 1 capital
to total assets of  6.2%.

The FRB has also adopted a risk-based capital measure to assist in the
assessment of the capital adequacy of bank holding companies.  The FRB's risk-
based capital guidelines require bank holding companies to maintain a minimum
ratio of capital to total risk-weighted assets of 8%.

The risk-based capital guidelines include a definition of capital and a
framework for calculating risk-weighted assets by assigning assets and off-
balance-sheet items to broad risk categories.  Qualifying total capital
consists of two types of capital components:  "core capital elements"
(comprising tier 1 capital) and "supplementary capital elements" (comprising
tier 2 capital).  Core capital 

                                     24.
<PAGE>

elements consist of common stock, surplus, undivided profits, capital 
reserves, foreign currency translation adjustments, perpetual preferred stock 
within certain limits, and minority interests in consolidated subsidiaries, 
minus goodwill.  At least 50% of a bank holding company's qualifying capital 
must consist of tier 1 capital.

Supplementary capital elements consist of allowances for loan and lease losses
(up to a maximum of 1.25% of risk-weighted assets), perpetual preferred stock
and related surplus, hybrid capital instruments, perpetual debt, mandatory
convertible debt securities, term subordinated debt, and intermediate term
preferred stock including related surplus.  The maximum amount of tier 2
capital that may be included in an organization's qualifying total capital is
limited to 100 percent of tier 1 capital (net of goodwill).  At December 31,
1995, the Company had a ratio of total capital to total risk-weighted assets
of 11.9%.

In accordance with the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"), the FRB has proposed to modify its risk-based capital
adequacy guidelines to take account of interest-rate risk, concentration of
credit risk and the risks of non-traditional activities.  The interest-rate
risk proposal would attempt to estimate the effect that changes in market
interest rates might have on the net economic value of an institution.  An
institution with interest-rate risk exposure in excess of an as yet to be
determined threshold level would be required to have additional capital equal
to the dollar amount of the estimated change in its net economic value that is
in excess of the threshold level.  The FDIC has proposed similar changes to
its risk-based capital guidelines that would apply to the Bank.  Management
does not anticipate that the proposals will have a material effect on the
ability of the Company or the Bank to meet applicable risk-based capital
standards.  The federal banking agencies have proposed to treat concentration
of credit risk and the risks of nontraditional activities as additional
factors in assessing whether to impose higher capital requirements for
individual bank holding companies and banks.

CONNECTICUT BANK HOLDING COMPANY REGULATION

The Company is subject to registration and filing requirements, as well as
general supervision by the Connecticut Commissioner, under the Connecticut
Bank Holding Company and Bank Acquisition Act ("CBHCA").

In the event that a Company seeks to acquire a Connecticut capital stock bank
or savings and loan association, the acquirer must file with the Connecticut
Commissioner a plan of acquisition approved by its board of directors and the
holders of two-thirds of the common stock of the bank or association to be
acquired.  The plan of acquisition must be approved by the Connecticut
Commissioner before it becomes effective.

Under the CBHCA, an acquirer is required to file with the Connecticut
Commissioner an acquisition statement prior to acquiring or offering to
acquire the stock of a Connecticut bank or savings and loan association or a
holding company thereof if the acquisition would result in the acquirer being
the beneficial owner of 10% or more of any class of the voting securities of
such bank or savings and loan association.  The acquirer may proceed with the
tender offer or acquisition only if the acquisition statement has not been
disapproved by the Connecticut Commissioner within a statutorily prescribed
period.  Under the CBHCA, the Connecticut Commissioner may seek to enjoin an
unlawful offer or acquisition.

                                     25.
<PAGE>

The payment of dividends by Derby Savings to the Company is subject to the
discretion of the Board of Directors of Derby Savings and depends upon a
variety of factors, including Derby Savings' operating results and financial
conditions, regulatory limitations and tax considerations.  The amount which a
Connecticut- chartered capital stock savings bank, such as Derby Savings, may
pay out in dividends in any calendar year may not exceed the total of its net
profits of that year combined with its retained net profits of the preceding
two years, unless the Connecticut Commissioner approves the dividend. 
Additionally, Derby Savings may not pay cash dividends on its stock if its net
worth would thereby be reduced below the amount required for the liquidation
account established in connection with Derby Savings' conversion from mutual
to stock form in December 1985, or as may be required by the Connecticut
Commissioner or the FDIC.  In May, 1991, during the second quarter of 1991,
the Bank was informed by the regional office of the FDIC that it will be
permitted to pay dividends to the Company in an amount limited to the holding
company's non-salary expenses and debt service payments.  In April 1992, the
Bank entered into a Memorandum of Understanding with the FDIC and the
Connecticut Commissioner of Banks, which included a similar limitation on the
payment of cash dividends.  Since the Bank is the sole source of funds for
cash dividend payments by the Company to its stockholders, the Memorandum
restriction has resulted in the Company being unable to pay cash dividends to
stockholders.

The Company is registered as a holding company under the CBHCA and is subject
to general supervision and examination by the Connecticut Commissioner,
including the requirement that it file such reports as the Connecticut
Commissioner may require.  The CBHCA provides that submission to the
Connecticut Commissioner of reports prepared for federal authorities will
satisfy the reporting requirement for bank holding companies.  Under the
CBHCA, the Connecticut Commissioner has the power to issue rules and
regulations necessary for the administration of the CBHCA but to date no such
regulations have been issued.

CONNECTICUT SAVINGS BANK REGULATION

As a state-chartered savings bank, Derby Savings is subject to the applicable
provisions of Connecticut law and the regulations adopted thereunder by the
Commissioner.  The Commissioner administers Connecticut banking laws, which
contain comprehensive provisions for the regulation of savings banks.  Derby
Savings is subject to periodic examination by and reporting requirements of
the Commissioner.

Savings banks in Connecticut are empowered by statute, subject to certain
limitations, to take savings and time deposits, to accept checking accounts,
to pay interest on such deposits and accounts, to make loans on residential
and other real estate, to make consumer and commercial loans, to invest, with
certain limitations, in equity securities and debt obligations of banks and
corporations, to issue credit cards, to establish an insurance department to
issue life insurance and grant annuities and to offer various other banking
services to their customers.  In addition, Connecticut savings banks may
accept demand deposits in connection with any commercial, corporate or
business loan relationship upon such terms and conditions as such savings bank
may from time to time require.  Savings banks may exercise trust powers and
make limited commercial, corporate and business loans.

                                     26.
<PAGE>

In addition to otherwise authorized securities, a Connecticut savings bank may
invest (subject to certain limitations) up to 20% of its total assets in
securities that are the debt obligations or equity securities of corporations
incorporated and doing a major portion of their business in the United States,
and up to 8% of its total assets in any securities, except securities of state
banks and trust companies, national banking associations having their
principal offices in Connecticut, or bank holding companies, and except
certain commercial, corporate and business loans.  Securities under this
unrestricted authority must be prudent in the opinion of the Bank given the
circumstances surrounding the investment.  Recent federal legislation limits
the Bank's ability to exercise certain of the foregoing investment powers. 
(See "Impact of Recent Federal Legislation on State Powers").

IMPACT OF RECENT FEDERAL LEGISLATION ON STATE POWERS

Pursuant to FDICIA, Derby Savings, as an insured state bank, may not engage as
principal in any activity that is not permissible for a national bank, unless
the FDIC has determined that the activity would pose no significant risk to
the BIF and the state bank is in compliance with applicable capital standards. 
Activities of subsidiaries of insured state banks are similarly restricted to
those activities permissible for subsidiaries of national banks, unless the
FDIC has determined that the activity would pose no significant risk to the
BIF and the state bank is in compliance with applicable capital standards. 
The FDICIA also provides that, except for subsidiaries of which the insured
state bank is a majority owner and except for certain investments in qualified
housing projects, an insured state bank may not, directly or indirectly,
acquire or retain any equity investment of a type that is not permissible for
a national bank.  Insured state banks are required to divest any equity
investment the retention of which is not permissible as quickly as can be
prudently done, but in no event later than the end of the five year period
ending on December 19, 1996.

Notwithstanding the foregoing, an insured state bank may, to the extent
permitted by the FDIC, acquire and retain ownership of common or preferred
stock listed on a national securities exchange, provided that the insured
state bank made or maintained an investment in such securities during the
period beginning on September 30, 1990 and ending on November 26, 1991 and
provided further that the aggregate amount of the investment does not exceed
100% of the bank's capital.  In accordance with the provisions of the FDICIA,
during each year in the three year period beginning on the date of enactment,
each insured state bank is required to reduce by not less than one-third of
its shares (as of the date of enactment) its ownership of securities in excess
of the amount equal to 100% of the capital of such bank.  This exception would
cease to apply with respect to any insured state bank upon any change in
control of such bank or any conversion of the charter of such bank. 
Determinations under these provisions by the FDIC must be made by regulation
or order.

The foregoing provisions do not apply to savings bank life insurance
activities of certain state banks, including those state banks, like Derby
Savings, that are chartered in Connecticut.  The FDICIA, however, grants the
FDIC the authority to restrict savings bank life insurance activities if the
FDIC determines that the activities pose a significant risk to the insured
bank or to the insurance fund of which such bank is a member.

                                     27.
<PAGE>

At December 31, 1995, the Bank had common stock investments totaling $5.0
million with a fair value of $5.2 million.  In accordance with the FDIC
regulation implementing the equity investment restrictions under FDICIA, the
Bank filed a notice and request for approval to retain its investment in
common stock and for permission to continue to invest in listed and/or
registered shares.  In March 1993, the FDIC granted such approval, subject to
the following conditions: (i) the maximum investment in listed and/or
registered shares shall not exceed 100% of the Bank's Tier 1 capital as
measured in the Bank's most recent consolidated report of condition;  (ii) the
Bank follows reasonable procedures limiting concentrations in listed and/or
registered shares; and (iii) the FDIC retains the right to alter, suspend or
withdraw this approval.

INSURANCE OF ACCOUNTS

Derby Savings' deposit accounts are insured by the FDIC up to a maximum of
$100,000 per insured depositor.  The FDIC issues regulations, requires the
filing of reports, and generally supervises the operations of its insured
banks.  The FDIC periodically conducts examinations of insured banks and,
based upon its evaluation, may revalue assets of an insured bank and require
establishment of specific reserves in amounts equal to the difference between
such revaluation and the book value of the assets.  The approval of the FDIC
is required prior to any merger or consolidation or the establishment or
relocation of an office facility.  This supervision and regulation is intended
primarily for the protection of depositors.  Any insured bank which does not
operate in accordance with or conform to FDIC regulations, policies and
directives may be sanctioned for noncompliance.  Under the Federal Deposit
Insurance Act, Derby Savings is required to pay annual insurance premiums and
is prohibited from paying dividends on its capital stock if it is in default
in the payment of a premium assessed by the FDIC.

The FDIC announced in 1995 that the Bank Insurance Fund ("BIF") was fully
capitalized as of May 31, 1995.  As a result, the FDIC refunded insurance
premium overpayments and interest to member banks for the period from June 1,
1995 through September 30, 1995 and the deposit insurance premiums assessed
most BIF member banks, including the Bank, were reduced effective June 1,
1995.  Additionally, the Bank has been notified by the FDIC that its deposit
insurance premium assessment will be essentially eliminated for 1996.

Pursuant to FDICIA, effective December 31, 1993, insured banks will be
examined no less frequently than every 12 months (as opposed to no less
frequently than every 18 months previously.)  Derby Savings is subject to
assessments by the FDIC to cover the costs of such examinations.

The FDIC has adopted regulations which define and establish minimum 
requirements for capital adequacy, including a minimum leverage capital 
requirement and a minimum risk-based capital requirement.  Under the leverage 
capital requirement adopted by the FDIC, state non-member banks must maintain 
"core" or "Tier 1" capital of at least 3% of total assets.  For all but the 
most highly rated banks, the minimum leverage requirement will be 4% to 5% of 
total assets.  At December 31, 1995, Derby Savings had a ratio of Tier 1 or 
core capital to total assets of 6.1%.  For purposes of the leverage ratio, 
Tier 1 or core capital is defined in a manner consistent with the risk-based 
capital requirement. The FDIC's risk-based guidelines require state 
non-member banks to achieve a ratio of total capital to total risk-weighted 
assets of 8% and a ratio of core capital to total risk-weighted assets of 4%. 
 At December 31, 1995, Derby Savings' ratio of total 

                                     28.
<PAGE>

capital to total risk-weighted assets was approximately 11.8% and 
its ratio of Tier 1 capital to risk-weighted assets was approximately 10.8%.

Under the FDIC's regulations, a bank's total capital base consists of two
types of capital elements, "core capital elements" (Tier 1) and "supplementary
capital elements" (Tier 2).  Core capital or Tier 1 elements consist of common
stock, surplus, undivided profits, capital reserves, foreign currency
translation adjustments, noncumulative perpetual preferred stock, minority
interests in consolidated subsidiaries, minus intangible assets (other than
mortgage servicing rights) and net-unrealized losses on marketable equity
securities.  At least 50% of the bank's qualifying total capital must consist
of Tier 1 capital.  Supplementary or Tier 2 capital consists of allowances for
loan and lease losses (up to a maximum of 1.25% of risk-weighted assets),
cumulative perpetual preferred stock, long-term preferred stock, perpetual
preferred stock with adjustable dividends (whether cumulative or
noncumulative), mandatory convertible debt securities, and term subordinated
debt or intermediate-term preferred stock.  The maximum amount of Tier 2
elements that may be counted in determining total capital may not, in the
aggregate, exceed 50% of Tier 1 capital.  For purposes of the risk-based
capital requirement, a bank's risk-weighted asset base is determined by
assigning each of the bank's assets and the credit equivalent amount of
off-balance sheet items to one of four separate risk categories.

The FDIC is required to amend its risk-based capital standards to ensure that
those standards provide adequately for interest-rate risk, concentration of
credit risk, and nontraditional activities.  The FDIC has proposed amending
its risk-based capital guidelines in a manner similar to that proposed by the
FRB.  See "Regulation - Holding Company Regulation - Federal Bank Holding
Company Regulation."

Banks with capital ratios below the minimum do not have adequate capital and
will be subject to appropriate administrative actions, including the issuance
by the FDIC of a capital directive requiring that the bank restore its capital
to the minimum required level within a specified period of time and the denial
or conditioning of certain applications, including merger and branch
applications.  Additionally, failure to achieve or maintain the minimum
capital requirements may be the basis for an action by the FDIC to terminate
deposit insurance.

Capital requirements higher than the generally applicable minimum requirements
may be established for a particular bank if the FDIC determines that the
Bank's capital was or may become inadequate in view of its particular
circumstances.  Individual minimum capital requirements may be appropriate
where a bank is receiving special supervisory attention, has a high degree of
exposure to interest rate risk, or poses other safety or soundness concerns.

Any insured depository institution which falls below the minimum capital
standards must submit a capital restoration plan.  Effective December 19,
1992, any company that has control of an undercapitalized institution, in
connection with the submission of a capital restoration plan, is required to
guarantee that the institution will comply with the plan and provide
appropriate assurances of performance.  The aggregate liability of any such
controlling company under such guaranty is limited to the lesser of (i) 5% of
the institution's assets at the time it became undercapitalized; or (ii) the
amount necessary to bring the institution into capital compliance at the time
it failed to comply with its capital plan.  If Derby Savings were to become
undercapitalized, the Company would be required to guarantee performance of
the capital plan submitted under 

                                     29.
<PAGE>

the FDICIA as a condition of FDIC approval.

Undercapitalized institutions are precluded from increasing their assets,
acquiring other institutions, establishing additional branches, or engaging in
new lines of business without an approved capital plan and a determination by
the FDIC that such actions are consistent with the plan.  Institutions that
are significantly undercapitalized or critically undercapitalized are subject
to additional restrictions and may be required to (i) raise additional
capital; (ii) limit asset growth; (iii) limit the amount of interest paid on
deposits to the prevailing rate of interest in the region where the bank is
located; (iv) divest or liquidate any subsidiary which the FDIC determines
poses a significant risk; (v) order a new election of members of the board of
directors; (vi) require the dismissal of a director or senior executive
officer; or (vii) take such other action that the FDIC determines is
appropriate.  The FDIC is required to appoint a conservator or receiver for a
critically undercapitalized bank no later than nine months after the bank
becomes critically undercapitalized, subject to a limited exception for banks
which are in compliance with an approved capital plan and which the FDIC
certifies are not likely to fail.

Under the prompt corrective action regulation adopted by the FDIC, which 
became effective on December 19, 1992, a savings bank is considered: (1) 
"well capitalized" if the savings bank has a risk based capital ratio of 10% 
or greater, a tier one or core capital to risk-weighted assets ratio of 6% or 
greater, and a leverage ratio to adjusted total assets of 5% of greater 
(provided the savings bank is not subject to an order, written agreement, 
capital directive or prompt corrective action to meet and maintain a 
specified capital level for any capital measure); (ii)"adequately 
capitalized" if the institution has a risk-based capital ratio of 8% or 
greater, a tier 1 or core capital to risk weighted assets ratio of 4% or 
greater, and a leverage ratio to adjusted total assets of 4% or greater (3% 
or greater if the institution is rated composite 1 in its most recent report 
of examination);(iii)"undercapitalized" if the institution has a risk based 
capital ration that is less than 8%, a tier 1 or core capital to risk 
weighted assets ratio that is less than 4% (3% if the institution is rated 
composite 1 in its most recent report of examination); (iv)"significantly 
undercapitalized" if the institution has a risk-based capital ratio that is 
less than 6%, a tier one or core capital to risk weighted assets ratio that 
is less than 3%, or a leverage ratio to adjusted total assets ratio that is 
less than 3%; and (v) "critically undercapitalized" if the institution has a 
ratio of tangible equity to total assets that is less than 2%.  The 
regulation also permits the FDIC to determine that a savings bank should be 
placed in a lower category based on other information such as a savings 
institution's examination report, after written notice.  At December 31, 
1995, the Bank met the "well capitalized" criteria based on its capital 
ratios at that date.  At December 31, 1995, the Bank had a ratio of total 
capital to risk-weighted assets of 11.8%, and a ratio of tier 1 capital to 
risk weighted assets of 10.8%. The Bank's ratio of tier one capital to total  
assets at December 31, 1995 was 6.1%.

The federal banking agencies have prescribed safety and soundness guidelines
relating to (i) internal controls, information systems, and internal audit
systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest
rate exposure; (v) asset growth; and (vi) compensation and benefit standards
for officers, directors, employees and principal shareholders.  Such
guidelines impose standards based upon an institution's asset quality and
earnings.  The guidelines are intended to set out standards that the agencies
will use to identify and address problems at institutions before capital
becomes impaired.  

                                     30.
<PAGE>

Institutions are required to establish and maintain a system to identify 
problem assets and prevent deterioration of those assets in a manner 
commensurate with its size and the nature and scope of their operations.  
Further, institutions must establish and maintain a system to evaluate and 
monitor earnings and ensure that earnings are sufficient to maintain adequate 
capital and reserves in a manner commensurate with their size and the nature 
and scope of its operation.

Under the guidelines, an institution not meeting one or more of the safety and
soundness guidelines is required to file a compliance plan with the
appropriate federal banking agency.  In the event that an institution, such as
Derby Savings, were to fail to submit an acceptable compliance plan or fail in
any material respect to implement an accepted compliance plan within the time
allowed by the agency, the institution would be required to correct the
deficiency and the appropriate federal agency would also be authorized to: 
(1) restrict asset growth; (2) require the institution to increase its ratio
of tangible equity to assets; (3) restrict the rates of interest that the
institution may pay; or (4) take any other action that would better carry out
the purpose of the corrective action.

FDIC insurance of deposits may be terminated by the FDIC, after notice and
hearing, upon a finding by the FDIC that the insured bank has engaged in
unsafe or unsound practices, or is in an unsafe or unsound condition to
continue operations, or has violated any applicable law, regulation, rule or
order of, or condition imposed by the FDIC.  The FDIC may temporarily suspend
an insured bank's insurance without a hearing if the insured bank has no
tangible capital under the FDIC's capital adequacy regulations or guidelines. 
The management of Derby Savings does not know of any practice, condition, or
violation that might lead to termination or suspension of Derby Savings'
deposit insurance.

Under Sections 23A and 23B of the Federal Reserve Act, as incorporated by the
Federal Deposit Insurance Act, transactions between FDIC-insured banks, such
as Derby Savings, and their "affiliates" (which term includes, with respect to
Derby Savings, the Company) are subject to restrictions which, among other
things, limit the amount of certain transactions with affiliates, prescribe
collateralization requirements for loans by a bank to its affiliates and
generally require that transactions with an affiliate be on terms and
conditions, including credit standards, that are substantially the same, or at
least as favorable to the bank as those prevailing at the time for comparable
transactions with or involving unaffiliated parties or, in the absence of
comparable transactions, on terms and under circumstances, including credit
standards, that in good faith would be offered or would apply to unaffiliated
parties.  The same restrictions apply to transactions between subsidiaries of
a bank and the bank's affiliates.  Further, neither a bank nor any of its
subsidiaries or affiliates may publish any advertisement or enter into any
agreement stating or suggesting that the bank is in any way responsible for
the obligation of its affiliates.

FEDERAL HOME LOAN BANK SYSTEM.

Derby Savings is a member of the FHLBB, which is one of 12 regional Federal
Home Loan Banks, each subject to Federal Housing Finance Board ("FHFB")
supervision and regulation.  The FHLBB provides a central credit facility for
member institutions.  As a member of the FHLBB, Derby Savings is required to
own shares of capital stock in that bank in an amount equal to the greater of
(i) one percent of assets secured by residential housing; (ii) .3% of total
assets; or (iii) 1/20 of outstanding advances.  Derby Savings is in compliance
with this 

                                     31.
<PAGE>

requirement with an investment in FHLBB stock at December 31, 1995
of $9.8 million.

At December 31, 1995, FHLBB advances to the Bank were $96.9 million. The
maximum amount which the FHLBB will advance for purposes other than meeting
deposit withdrawals fluctuates from time to time in accordance with changes in
policies of the FHFB and the FHLBB, and the maximum amount generally is
reduced by borrowings from any other source.

The FHFB has promulgated regulations that establish standards of community
service or support as a basis for FHLB members to maintain continued access to
long-term advances.  Pursuant to the regulations, each FHLB member will
provide a Community Support Statement ("CSS") to its FHLB for review on a
schedule established by the FHFB.  The CSS is to include information regarding
the member's Community Reinvestment Act Evaluation, evidence of assistance to
first-time home buyers, documentation of any judgments based on violations of
the Fair Housing and Equal Credit Opportunity Acts, and evidence of community
support.  The FHFB will review certain of the statements and will require a
Community Support Action Plan ("CSAP") if it disapproves the CSS.  If the
member has failed to submit a CSS, submits a CSAP that is not approved, or
fails to substantially meet its CSAP within one year, the FHFB may restrict
the member's access to long-term advances.

FEDERAL RESERVE SYSTEM

The FRB adopted regulations that require savings institutions to maintain
non-earning reserves against their net transaction accounts (primarily NOW and
regular checking accounts less certain permitted deductions), non-personal
time deposits (those which are transferable or held by a depositor other than
a natural person) with an original maturity or notice period of less than 18
months, and Eurocurrency liabilities.  At December 31, 1995, Derby Savings was
in compliance with the FRB's reserve requirement.

Savings institutions have authority to borrow from the Federal Reserve Bank
"discount window", but FRB regulations require institutions to exhaust all
FHLB sources before borrowing from the Federal Reserve Bank.  The FDICIA
prevents Federal Reserve Banks from providing a discount window advance to an
"undercapitalized" institution for more than 60 days in any 120-day period,
except in limited circumstances.

                                    TAXATION
FEDERAL

For federal income tax purposes, the Company and Derby Savings file a
consolidated calendar tax year income tax return and report their income and
expenses using the accrual method of accounting.  Prior to its 1987 tax year
Derby Savings used the cash method of accounting but it was required by the
Tax Reform Act of 1986 (the "Tax Act") to switch to the accrual method of
accounting.  The adjustment to its income resulting from this change must be
recognized ratably over a period not to exceed four years.

Savings institutions are generally taxed in the same manner as other
corporations.  Unlike other corporations, however, qualifying savings
institutions such as Derby Savings, that meet certain definition tests
relating to the nature of their supervision, income, assets and business
operations, are 

                                     32.
<PAGE>

allowed to establish a reserve for bad debts and are permitted to deduct 
additions to that reserve for losses on "qualifying real property loans" 
using one of two alternative methods.

"Qualifying real property loans" are, in general, loans secured by interests
in improved real property.  For each tax year, a qualifying institution may
compute the addition to its bad debt reserve for qualifying real property
loans using the more favorable of the following methods:  (i) a method based
on the institution's actual loss experience  (the "experience method") or 
(ii) a method based on a specified percentage of an institution's taxable
income (the "percentage of taxable income method").  The addition to the
reserve for losses on non-qualifying loans must be computed under the
experience method.

Derby Savings has generally computed its annual deduction for additions to its
allowance for losses on qualifying real property loans using the percentage of
taxable income method.  Under the percentage of taxable income method, a
qualifying institution may deduct up to a maximum of 8% of its taxable income
after certain adjustments, subject to the limitations discussed below.  The
net effect of the percentage of taxable income method deduction is that the
maximum effective federal income tax rate on income computed without regard to
actual bad debts and certain other factors for qualifying institutions using
the percentage of taxable income method is 31.28% (and at least 32.2% of
taxable income above $10 million for tax years after 1992), assuming a tax
rate of 34%.  For 1995, the Bank computed its addition to the reserve for
qualifying real property loans under the experience method.  Under the
experience method, a savings institution is permitted to deduct an amount
based on average yearly credit losses over the current and previous five
years.

The amount of the bad debt deduction that a savings institution may claim with
respect to additions to its reserve for bad debts is subject to certain
limitations.  First, the deduction may be eliminated entirely (regardless of
the method of computation) and the existing reserve will be recaptured into
taxable income and the institution will be permitted a deduction only for
specific charge-offs unless at least 60% of the savings institution's assets
fall within certain designated categories.  Second, the bad debt deduction
attributable to "qualifying real property loans" cannot exceed the greater of
(i) the amount deductible under the experience method or (ii) the amount
which, when added to the bad debt deduction for non-qualifying loans, equals
the amount by which 12% of the sum of the total deposits or withdrawable
accounts at the end of the taxable year exceeds the sum of the surplus,
undivided profits, and reserves at the beginning of the taxable year.  Third,
the amount of the bad debt deduction attributable to qualifying real property
loans computed using the percentage of taxable income method is permitted only
to the extent that the institution's reserve for losses on qualifying real
property loans at the close of the taxable year taking into account the
addition to the reserve for that taxable year does not exceed 6% of such loans
outstanding at such time.  Fourth, the amount of the bad debt deduction under
the percentage of taxable income method is reduced, but not below zero, by the
amount of the addition to reserves for losses on non-qualifying loans for the
taxable year.  Finally, a savings institution that computes its bad debt
deduction using the percentage of taxable income method and files its federal
income tax return as part of a consolidated group, as Derby Savings does, is
required to reduce proportionately its bad debt deduction for losses
attributable to activities of non-savings institution members of the
consolidated group that are "functionally related" to the savings institution
member.  (The savings institution member is permitted, however, to 

                                     33.

<PAGE>

proportionately increase its bad debt deduction in subsequent years to 
recover any such reduction to the extent the non-savings institution members 
realize income in future years from their "functionally related" activities.)

As of December 31, 1995, Derby Savings' bad debt reserve for tax purposes
totaled approximately $5.8 million.  To the extent that (i) Derby Savings'
reserve for losses on qualifying real property loans using the percentage of
taxable income method exceeds the amount that would have been allowed under
the experience method and (ii) Derby Savings makes distributions to its
stockholders that are considered to result in withdrawals from its excess bad
debt reserve, then the amounts considered to be withdrawn will be included in
Derby Savings' taxable income.  The amount considered to be withdrawn by a
distribution will be the amount of the distribution plus the amount necessary
to pay the federal income tax, with respect to the withdrawal.  Dividends paid
out of Derby Savings' current or accumulated earnings and profits as
calculated for federal income tax purposes will not be considered to result in
withdrawals from Derby Savings' bad debt reserves.  Distributions in excess of
Derby Savings' current and accumulated earnings and profits, distributions in
redemption of stock, and distributions in partial or complete liquidation of
Derby Savings will generally be considered to result in withdrawals from Derby
Savings' bad debt reserves.  At December 31, 1994, Derby Savings had
approximately $39.2 million in earnings and profits for tax purposes that
would be available for distribution to the Company, it's sole stockholder,
subject to various restrictions imposed by the Commissioner, without the
imposition of this additional tax.  The Company does not intend to cause Derby
Savings to make any distribution that would be considered to be made out of
its bad debt reserve.

Depending on the composition of its items of income and expense, a corporation
may be subject to alternative minimum tax.  For tax years beginning after
1986, a corporation must pay an alternative minimum tax equal to the amount
(if any) by which 20% of alternative minimum taxable income ("AMTI"), as
reduced by an exemption varying with AMTI, exceeds the regular tax due.  AMTI
equals regular taxable income increased or decreased by certain adjustments
and increased by certain tax preferences, including depreciation deductions in
excess of that allowable for alternative minimum tax purposes, tax-exempt
interest on most private activity bonds issued after August 7, 1986 (reduced
by any related interest expense disallowed for regular tax purposes), the
amount of the bad debt reserve deduction claimed in excess of the deduction
based on the experience method and, for tax years after 1989, 75% of the
excess of adjusted current earnings over AMTI.  AMTI may be reduced only up to
90% by net operating loss carryovers, but the payment of alternative minimum
tax will give rise to a minimum tax credit which will be available with an
indefinite carry-forward period, to reduce the federal income taxes of the
institution in future years (but not below the level of alternative minimum
tax arising in each of the carry-forward years).

The Internal Revenue Service ("IRS") is currently conducting an examination of
the Company's federal income tax returns for 1990.

STATE

State income taxation for the Company and Derby Savings is in accordance with
the corporate income tax laws of Connecticut, which require a tax to be paid
equal to the largest of amounts computed under three formulas.  The first is a
minimum tax of $250.  The second is a tax based on the average level of
deposits and 

                                     34.
<PAGE>

other borrowed money on which interest is paid.  The third is a tax based on 
11.25% (scheduled to decrease in increments, to 7.5% by 2000), of the year's 
taxable income which, with certain exceptions, is equal to taxable income for 
federal purposes.  Operating losses in any year may be carried forward to 
reduce taxable income over the succeeding five years.

INCOME TAX ACCOUNTING STANDARD.  In February 1992, the FASB issued Statement
of Financial Accounting Standards No. 109 ("SFAS 109") "Accounting For Income
Taxes", which superseded SFAS 96, as amended, which established financial
accounting and reporting standards for the effects of income taxes.  The
Statement requires the use of the liability method in determining the tax
effect of temporary differences in the recognition of items of income and
expense reported in the consolidated financial statements and those reported
for income tax purposes.

The Company adopted this statement for the year ended December 31, 1993, and
the cumulative effect of the change in accounting principal is reflected in
net income for 1993. 


EXECUTIVE OFFICERS OF REGISTRANT

The following table sets forth information with respect to the persons who
have been designated executive officers of the Company.

<TABLE>
<CAPTION>
                          Age at            Officer
                      December 31, 1995      Since    Positions Held with Company 
                      -----------------     -------   ---------------------------
<S>                   <C>                   <C>       <C>
Harry P. DiAdamo Jr.        52               1987     President,Chief Executive
                                                       Officer and Director

Alfred T. Santoro           46               1987     Vice President, Treasurer
                                                        and Chief Financial Officer

Thomas H. Wells             63                ---     Senior Vice President and
                                                        Chief Lending Officer of
                                                        Derby Savings Bank

</TABLE>

Harry P. DiAdamo Jr., President and Chief Executive Officer of the Corporation
and the Bank, has been a Director of Derby Savings since 1980 and served as
Chairman of the Board from March 1984 to March 1985.  He became President,
Treasurer and Chief Executive Officer of the Bank in October 1984. 
Mr. DiAdamo is also a member of the Executive Committee of the Corporation. 
He recently completed his second two-year term on the Board of the Federal
Home Loan Bank of Boston where he also served as chairman of its Audit
Committee and as a member of the Finance Committee.  Mr. DiAdamo is a member
of the Mortgage Finance Committee of America's Community Bankers, and the
Executive and Legislative Committees of the Connecticut Bankers Association,
as well as a director of the Savings Bank Life Insurance Company and Griffin
Health Services, and treasurer and Advisory Board member for WSHU Public
Radio.  He is president of the Shelton Educational Fund, and Endowment Fund
chairman and past president of the board of Notre Dame High School in West
Haven.  Mr. DiAdamo is also a member of the New Britain Downtown Council and a
Corporator of the Valley United Way, as well as past chairman of that
organization's annual campaign.

                                   35.
<PAGE>

Alfred T. Santoro, Vice President, Treasurer and Chief Financial Officer
of the Corporation, joined Derby Savings in September 1985 as Vice President,
Finance, was elected Senior Vice President and Chief Financial Officer in
April 1987, and Executive Vice President and Chief Financial Officer in
February 1993.  In September 1995, he assumed responsibility for all operating
and financial functions of the Company.  Mr. Santoro, who holds an M.B.A. in
finance from the University of New Haven, is a member and past president of
the Connecticut Chapter of the Financial Managers Society.  He currently
serves on the Board of Trustees of the New Britain YWCA and is a member of its
Finance Committee.

Thomas H. Wells joined the staff of Derby Savings in April 1974 bringing with
him 11 years of mortgage banking experience.  He became Vice President in
January 1975 and in March 1985 was named Senior Vice President, Loans.  As
Chief Lending Officer, Mr. Wells is responsible for all aspects of retail
lending (mortgage and consumer) as well as the Bank's Community Reinvestment
Act programs.  A Director of the Connecticut Appraisal Foundation, he is a
licensed appraiser in the state of Connecticut, and is also a member and past
president of the Appraisal Institute and holds the SRPA and SRA designations. 
Mr. Wells is on the Loan Committee of Neighborhood Housing Services in New
Britain and the Prospect Review Committee of United Methodist Homes, Chairman
of the Finance Committee at Seymour Congregational Church, and a member of the
American Legion.  His past affiliations include teaching residential appraisal
and real estate finance for Fairfield University, and serving as President of
Connecticut Chapter #38 of the Society of Real Estate Appraisers, Chairman of
the Seymour Planning and Zoning Commission and chairman of the commercial
division of the Valley United Way campaign.















                                     36.
<PAGE>

ITEM 2. PROPERTIES

At December 31, 1995, Derby Savings had 22 banking offices located in New
Haven, Fairfield and Hartford Counties.  ATM's are currently in operation in
18 of the Bank's offices.  The Bank is currently a member of NYCE and Cirrus,
a shared national ATM network.

<TABLE>
<CAPTION>
                     Original  Current  Percent
                      Office   Office   of Total
New Haven County:     Opened   Opened   Deposits         Owned or Leased     Note
-----------------    -------   ------   --------    ------------------------ ----
<S>                  <C>       <C>      <C>         <C>                      <C>
Derby                  1846     1976     14.00%     Owned                     --
Derby (HQ)             1985     1985       ---      Owned                     --
Orange Derby           1969     1985      6.96      Land leased, bldg. owned   1
Orange                 1987     1987      5.68      Leased                     2
Seymour                1981     1981      4.46      Owned                     --
Southbury              1988     1988      1.23      Leased                     3

FAIRFIELD COUNTY:
-----------------
Shelton                1964     1975      5.19      Owned                     --
Huntington             1970     1973      7.70      Owned                     --
Stratford              1989     1996      6.20      Leased                     4
Trumbull               1990     1990      5.26      Leased                     5
Fairfield              1993     1993      2.60      Leased                     6

HARTFORD COUNTY:
----------------
Avon                   1987     1992      1.64      Leased                     7
East Hartford          1992     1992      1.38      Leased                     8
Glastonbury            1992     1992      2.79      Owned                     --
New Britain:
 Main Street           1992     1992      8.03      Leased                     9
 South Main Street     1992     1992      3.81      Owned                     --
 Newington Avenue      1992     1992      5.07      Leased                    10
 West Main Street      1992     1992      3.31      Leased                    11
Newington              1992     1992      2.95      Leased                    12
Plainville             1992     1992      1.93      Leased                    13
Rocky Hill             1992     1992      4.03      Leased                    14
West Hartford          1992     1992      4.85      Leased                    15
W. Hartford Central    1992     1992       .93      Leased                    16
                                        ------
                                        100.00%
</TABLE>

NOTES:

 1. Lease expires August, 2004.  Subject to three five-year renewal options
    followed by one seven-and-a-half year renewal option.

 2. Lease expires July, 1997.  Subject to one ten-year renewal option.

 3. Lease expires November, 1996.  Subject to three five-year renewal options.

 4. Lease expires December, 2000.  Subject to three three-year renewal
    options.

 5. Lease expires June, 1996.  Subject to one three-year renewal option.

 6. Lease expires April, 1996.  Subject to two five-year renewal options.

 7. Lease expires September, 1997.  Subject to one five-year renewal option.

 8. Leased expires September, 1999.  Subject to two five year renewal options.

 9. Leased expires April, 1999.  Subject to one five year renewal option.

10. Lease expires February, 1998.  Subject to three three-year renewal
    options.

11. Lease expires February, 1998.  Subject to three five-year renewal options.

12. Lease expires December, 2000.  Subject to one ten-year renewal option.

13. Lease expires June, 1998.  Subject to three five-year renewal options.

14. Lease expires November, 1998.  Subject to two five-year renewal options.

15. Lease expires May, 2000.  Subject to two five-year renewal options.

16. Lease expires June, 1997.  Subject to one five-year renewal option.

                                     37.
<PAGE>

The aggregate net book value of properties owned and used for offices at
December 31, 1995 was $4.2 million and the aggregate net book value of
lease-hold improvements on properties used for branch offices was $452,000.

The data processing for Derby Savings is supplied by an unaffiliated data
processing company.  The primary internal data processing equipment at Derby
Savings consists of teller terminals, ATM's and other automated equipment with
a net book value of $460,000 at December 31, 1995.

ITEM 3. LEGAL PROCEEDINGS
The Company is involved as a plaintiff or defendant in various legal actions
incidental to its business, all of which in the aggregate are believed by
management not to be material to the financial condition or operations of the
Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the year ended December 31, 1994, no matters were
submitted to a vote of security holders through the solicitation of proxies or
otherwise.
                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS
Information as to the principal market on which the stock is traded, the
Company's and the Bank's dividend policy, and the high and low closing sales
prices for the stock are included on page 31 of the 1995 Annual Report to
Stockholders and incorporated herein by reference.  There were approximately
890 holders of record of the stock as of December 31, 1995.

ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December 31, 1995, consisting
of data captioned "Selected Financial and Other Data" on page 1 of the 1995
Annual Report to Stockholders, is incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS  OF OPERATIONS.
Management's Discussion and Analysis on pages 9 through 31 of the 1995 Annual
Report to Stockholders is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated statements of position of DS Bancor, Inc. and Subsidiary as
of December 31, 1995 and 1994, the related consolidated statements of earnings
and stockholders' equity and the consolidated statements of cash flows for
each of the three years in the period ended December 31, 1995 together with
the related notes and the report of Friedberg, Smith & Co., P.C., independent
certified public accountants, all contained on pages 32 - 60 in the Company's
1995 Annual Report to Stockholders, are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
None.


                                     38.

<PAGE>

                            PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information regarding the directors of the Company is omitted from this report
as the Company intends to file a definitive proxy statement not later than 120
days after the end of the fiscal year and the information to be included
therein is incorporated herein by reference.  Information regarding the
executive officers of the Company is set forth in Part I above under the
caption "Executive Officers of the Registrant."

ITEM 11.  EXECUTIVE COMPENSATION
Information regarding remuneration of executive officers and directors of the
Company is omitted from this report as the Company intends to file a
definitive proxy statement not later than 120 days after the end of the fiscal
year and the information to be included therein (excluding the report on
executive compensation and the Comparative Performance Information) is
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is omitted from this report as the Company intends to file a
definitive proxy statement not later than 120 days after the end of the fiscal
year and the information to be included therein is incorporated herein by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
omitted from this report as the Company intends to file a definitive proxy
statement not later than 120 days after the end of the fiscal year and the
information to be included therein is incorporated herein by reference.

                             PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 

(a)(1).  The following financial statements of the Company included in the
         Annual Report to Stockholders for the year ended December 31, 1995
         are incorporated herein by reference in Item 8.  The remaining
         information in said Annual Report is not deemed to be filed as part
         of this report, except as expressly provided herein.

        (i) Consolidated Statements of Position as of December 31, 1995 and
            1994.
       (ii) Consolidated Statements of Earnings for years ended December
            31, 1995, 1994 and 1993.
      (iii) Consolidated Statements of Stockholders' Equity for years ended
            December 31, 1995, 1994 and 1993.
       (iv) Consolidated Statements of Cash Flows for the years ended
            December 31, 1995, 1994 and 1993.
       (vi) Notes to Financial Statements.
      (vii) Auditor's Opinion.

(a)(2). All financial statement schedules for which provision is made in
        applicable accounting regulations are inapplicable and have therefore
        been omitted.

(b)     EXHIBITS AND REPORTS ON FORM 8-K.  There were no Form 8-K filings
        during the quarter ended December 31, 1995.

                                    39.

<PAGE>

(c)    The following exhibits are either filed as part of this Report or are
       incorporated herein by reference.

       EXHIBIT 3.1.  Restated Certificate of Incorporation, as amended.

       EXHIBIT 3.2.  Bylaws

       EXHIBIT 10.1(a).  Employment Agreement, dated December 3, 1985, with
       Harry P. DiAdamo Jr., as amended on August 31, 1987.

       EXHIBIT 10.1(b).  Severance Agreement, dated November 28, 1986, with
       Alfred T. Santoro, as amended on August 31, 1987.

       EXHIBIT 10.1(c).  Severance agreement with Thomas H. Wells, as
       amended (incorporated herein by reference to the exhibit contained in
       the Company's annual report on Form 10-K for the year ended December
       31, 1994).

       EXHIBIT 10.2.  Stock Option Plan, as amended.

       EXHIBIT 10.3.  1994 Stock Option Plan (incorporated herein by
       reference to Exhibit 4 contained in the Company's Form S-8
       Registration Statement (Registration No. 33-53803) filed on March 25,
       1994).

       EXHIBIT 10.4(a).  Form of Deferred Compensation Agreement with
       Management Directors.

       EXHIBIT 10.4(b).  Form of Deferred Compensation Agreement with
       Non-Management Directors.

       EXHIBIT 10.5.  DS Bancor, Inc. Deferred Compensation Plan for Directors.

       EXHIBIT 10.6.  Derby Savings Bank Deferred Compensation Plan for
       Directors.

       EXHIBIT 10.7.  Split Dollar Insurance Agreement, dated as of October
       5, 1995 by and between Derby Savings Bank and Alfred T. Santoro.

       EXHIBIT 13.  Annual Report to Stockholders for the year ended
       December 31, 1995.

       EXHIBIT 21.  Subsidiaries of the Company.

       EXHIBIT 23(a).  Consent of Friedberg, Smith & Co., P.C. (Registrant
       No.33-3699).

       EXHIBIT 23(b).  Consent of Friedberg, Smith & Co., P.C. (Registrant
       No.33-71206). 

       EXHIBIT 23(c).  Consent of Friedberg, Smith & Co., P.C. (Registrant
       No.33-53803). 

       EXHIBIT 27.  Financial Data Schedule.

(d)    None.

                                    40.

<PAGE>



                           SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

          DS BANCOR, INC.



Date:   March 28, 1996            By:        /S/ Harry P. DiAdamo Jr.      
      -----------------                -----------------------------------
                                               Harry P. DiAdamo Jr.      
                                       President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the dates indicated.

Chief Executive Officer:



           /S/ Harry P. DiAdamo Jr.                  Date:   March 28, 1996
  ----------------------------------------                 ------------------
               Harry P. DiAdamo Jr.
Director, President and Chief Executive Officer
         (Principal executive officer)


Chief Financial Officer:



              /S/ Alfred T. Santoro                  Date:   March 28, 1996
  ----------------------------------------                 ------------------
              Alfred T. Santoro 
      Vice President, Treasurer and
         Chief Financial Officer
(Principal financial and accounting officer)

                                    41.

<PAGE>

Directors:

         /S/ Michael F. Daddona Jr.                  Date:   March 28, 1996
  ----------------------------------------                 ------------------
           Michael F. Daddona Jr.
           Chairman of the Board


          /S/ Harry P. DiAdamo Jr.                   Date:   March 28, 1996
  ----------------------------------------                 ------------------
           Harry P. DiAdamo Jr.
         Director, President and 
         Chief Executive Officer


          /S/ John F. Costigan                       Date:   March 28, 1996
  ----------------------------------------                 ------------------
          John F. Costigan
   Director and Corporate Secretary


         /S/ Achille A. Apicella                     Date:   March 28, 1996
  ----------------------------------------                 ------------------
            Achille A. Apicella
                 Director


         /S/ Walter R. Archer Jr.                    Date:   March 28, 1996
  ----------------------------------------                 ------------------
            Walter R. Archer Jr.
                 Director


         /S/ Angelo E. Dirienzo                      Date:   March 28, 1996
  ----------------------------------------                 ------------------
             Angelo E. Dirienzo
                 Director


         /S/ Laura J. Donahue                        Date:   March 28, 1996
  ----------------------------------------                 ------------------
             Laura J. Donahue
                Director


         /S/ Christopher H.B. Mills                  Date:   March 28, 1996
  ----------------------------------------                 ------------------
             Christopher H.B. Mills
                  Director


           /S/ John M. Rak                           Date:   March 28, 1996
  ----------------------------------------                 ------------------
               John M. Rak
                Director


         /S/ John P. Sponheimer                      Date:   March 28, 1996
  ----------------------------------------                 ------------------
             John P. Sponheimer
                 Director


          /S/ Gary M. Tompkins                       Date:   March 28, 1996
  ----------------------------------------                 ------------------
              Gary M. Tompkins
                  Director

                                    42.

<PAGE>


                                INDEX TO EXHIBITS

                                                                      Page (by
Exhibit                                                               Sequential
Number     Identity of Exhibit                                        Numbering)
--------   ------------------------                                   ----------

3.1        Restated Certificate of Incorporation, as amended                  43

3.2        Bylaws                                                             58

10.1(a)    Employment Agreement, dated December 31, 985, with Harry P.        82
           DiAdamo, Jr., as amended on August 31, 1987.

10.1(b)    Severance Payment Agreement, dated November 28, 1986,              94
           with Alfred T. Santoro, as amended on August 31, 1987. 

10.1(c)    Severance agreement with Thomas H. Wells, as amended                *
           (incorporated herein by reference to the exhibit contained in
           the Company's annual report on Form 10-K for the year ended
           December 31, 1994).

10.2       Stock Option Plan, as amended                                     100

10.3       1994 Stock Option Plan (incorporated herein by reference to         *
           Exhibit 4 contained in the Company's Form S-8 Registration 
           Statement (Registration No. 33-53803) filed on March 25, 1994).

10.4(a)    Form of Deferred Compensation Agreement with Management           139
           Directors

10.4(b)    Form of Deferred Compensation Agreement with Non-Management       149
           Directors.

10.5       DS Bancor, Inc. Deferred Compensation Plan for Directors          159

10.6       Derby Savings Bank Deferred Compensation Plan for Directors       164

10.7       Split Dollar Insurance Agreement, dated as of October 5, 1995,    169
           by and between Derby Savings Bank and Alfred T. Santoro

13         Annual Report to Stockholders for the year ended December 31, 1995

21         Subsidiaries of the Company                                       175

23(a)      Consent of Friedberg, Smith & Co., P.C.                           176
           (Registrant No. 33-3699).

23(b)      Consent of Friedberg, Smith & Co., P.C.                           177
           (Registrant No. 33-71206).

23(c)      Consent of Friedberg, Smith & Co., P.C.                           178
           (Registrant No. 33-53803).
27         Financial Data Schedule.                                          179

* Previously filed.

                                    43.