EAGLE FINANCIAL CORP.
                            1996 ANNUAL REPORT


<PAGE>



TOTAL ASSETS

Dollars in Millions
at September 30,

1996      $1,402,809
1995      $1,237,286
1994      $1,070,276
1993        $792,468
1992        $751,171

NET INCOME PER SHARE

For the Years Ended September 30,

1996           $2.89
1995           $2.38
1994           $2.12
1993           $1.77
1992           $1.53

BOOK VALUE PER SHARE

At September 30,

1996          $22.31
1995          $20.73
1994          $19.24
1993          $17.98
1992          $16.88

RETURN ON AVERAGE
SHAREHOLDERS' EQUITY

For the Years Ended September 30,

1996          13.82%
1995          12.68%
1994          11.99%
1993          10.69%
1992           9.80%

CASH DIVIDENDS
PER SHARE

For the Years Ended September 30,

1996            $.92
1995            $.82
1994            $.69
1993            $.57
1992            $.50

NON-PERFORMING ASSETS
TO TOTAL ASSETS

At September 30,

1996            .88%
1995           1.10%
1994           1.15%
1993           1.51%
1992           1.38%


<PAGE>

<TABLE>
<CAPTION>


FINANCIAL HIGHLIGHTS

Financial Condition Data                                               At September 30,
(in thousands)                                  1996(a)         1995       1994(b)          1993      1992(b)   
                                                -------         ----       -------          ----      -------   
<S>                                          <C>          <C>           <C>             <C>          <C>        
Total assets                                 $1,402,809   $1,237,286    $1,070,276      $792,468     $751,171   
Investment portfolio (c)                         52,877      105,874        76,466        54,701       70,536   
Mortgage-backed securities                      450,120      355,785       116,063        49,176       71,064   
Loans receivable, net                           814,488      713,545       810,705       656,344      568,124   
Allowance for loan losses                         8,592        7,457         8,311         5,005        4,011   
Deposits                                      1,059,355      951,751       948,829       706,214      677,701   
FHLB advances and borrowed money                221,678      155,467        39,592        16,252        7,326   
Shareholders' equity                            101,148       92,460        66,276        60,407       55,004   
                                                                                                                
OPERATING DATA                                               For the  Years Ended September 30,               
(in thousands, except for per share data)          1996         1995       1994(b)          1993      1992(b)   
                                                   ----         ----       -------          ----      ------    
Net interest income                        $     39,759  $    40,017    $   31,071     $  27,285     $ 22,186   
Net income                                       13,638       10,972         7,566         6,152        5,166   
Loan originations                               236,097      155,666       219,904       209,901      163,478   
Loans serviced for others                       242,600      234,800        95,100        11,800       13,200   
Cash dividends declared per share (d)              0.92         0.82          0.69          0.57         0.50   
Net income per share: (d)                                                                                       
    Primary                                        2.92         2.41          2.13          1.79         1.55   
    Fully diluted                                  2.89         2.38          2.12          1.77         1.53   
                                                                                                                
SIGNIFICANT STATISTICAL DATA                       1996         1995       1994(b)          1993      1992(b)   
                                                   ----         ----       -------          ----      -------   
For the period:                                                                                                 
Return on average assets                           1.00%        0.95%         0.85%         0.79%        0.81%  
Return on average shareholders' equity            13.82%       12.68%        11.99%        10.69%        9.80%  
Average interest rate spread                       2.92%        3.43%         3.41%         3.40%        3.26%  
Net interest margin                                3.08%        3.63%         3.60%         3.64%        3.59%  
Operating expenses to average assets               2.12%        2.11%         2.24%         2.10%        2.02%  
Operating expenses to average assets               2.04%        2.04%         2.09%         1.97%        1.90%  
   (excluding real estate owned expense)                                                                        
Net interest income to operating expenses          1.37x        1.64x         1.55x         1.67x        1.72x  
Efficiency ratio                                     47%          53%           55%           51%          49%  
At end of period:                                                                                               
Shareholders' equity to total assets               7.21%        7.47%         6.19%         7.62%        7.32%  
Common shares outstanding                                                                                       
   (net of treasury) (e)                       4,534,067   4,459,824     3,131,911     3,054,481    2,692,305   
Book value per share (d)                          $22.31      $20.73        $19.24        $17.98       $16.88   
Non-performing assets to total assets               0.88%       1.10%         1.15%         1.51%        1.38%  
Allowance for loan losses to non-                                                                               
   performing loans                                   93%         67%          104%           77%         100%  
Tangible capital ratio                              5.42%       6.59%         5.17%         7.26%        6.87%  
                                                                                    
</TABLE>


(a) Fiscal 1996 data reflect the impact of the Fleet/Shawmut  branch acquisition
and the sale of the Danbury area branches.

(b)  Fiscal  1994  and 1992  data  reflect  the  impact  of  government-assisted
acquisitions.

(c) Includes interest-bearing deposits,  investment securities held to maturity,
investment securities available for sale and Federal Home Loan Bank stock.

(d) All per share data for all  periods and dates  prior to  September  30, 1995
have been  adjusted  retroactively  to give  effect to a 10% stock  dividend  to
common shareholders of record on February 15, 1995.

(e) 1996,  1995, 1994, 1993 and 1992 common shares  outstanding  exclude 47,373,
47,373,  43,066,  43,066, and 39,151 shares,  respectively,  held in treasury at
year end.

<PAGE>


Company Profile

Eagle Financial Corp. is a $1.4 billion unitary savings bank holding company and
parent to Eagle Federal Savings Bank.  Eagle Federal operates 19 traditional and
4 supermarket banking offices located in Hartford and Litchfield  counties,  all
in Connecticut.  Historically the Bank has primarily  engaged in the business of
accepting  deposits  from  the  general  public  and  using  such  funds  in the
origination of first mortgage loans for the purchase,  refinance or construction
of 1-4  family  homes.  Eagle is  currently  positioning  itself as a  mid-sized
community  bank  offering  a broader  base of  services  to both  consumers  and
businesses in its local market.

<PAGE>
To Our Shareholders

I am proud to report that your Company  continues to make  progress in expanding
its franchise and increasing value for its shareholders.  Throughout the year we
realized  solid growth in total assets,  deposits and loans and reported  record
earnings of $13.6 million or $2.89 per share. Shareholders' equity grew by 9.4%,
net of dividends which totaled $4.1 million or $.92 per share.

One major  accomplishment  this year was our ability to improve our  competitive
position in the  marketplace  by further  expansion in our primary  market area.
While  seven  branches  in  the  Danbury  area  were  sold,  we  purchased  five
traditional  branches,  opened four  supermarket  branches and  installed  three
off-site ATMs, all in the Hartford area. This expansion, together with a special
marketing effort,  positioned Eagle as a major provider of financial services in
central  Connecticut.  Eagle Federal Savings now ranks fifth in deposit share in
Hartford county, second in Litchfield county and ninth statewide.

To help  diversify  our asset  base and  leverage  the  branch  system,  we have
significantly increased our capacity to provide commercial banking services. Our
new  commercial   lending  staff  has  been  working  in  partnership  with  all
departments to serve the needs of small businesses in our market.

The  fundamental  structure of the banking  business is changing and the pace of
change  continues  to  accelerate.  Customer  preferences,  competition  and the
advanced technology of today's information age are forcing banks to redesign the
way they price, package and deliver products and services.

Supermarket  branching  is one  strategy  we are using to enhance  our  delivery
system. Consumers are looking for easy access to banking, and in-store locations
meet this need plus provide us with an ideal  opportunity  to sell  products and
services.  All our branches have been given updated  technology and  centralized
support  for  customer  service,  and are now  focused on  improved  performance
through better productivity and sales efforts.

We continue to take  advantage of improved  technology  to serve  customers  and
improve  efficiency in  operations.  More advanced  software  applications,  for
example,  have  been  utilized  to  support  loan  origination,  asset/liability
management  and  communications.  Setting  the stage for home  banking,  we have
established  a home page on the  internet  and have  continued  to improve  home
banking options via the telephone.

                                       1
<PAGE>


To be successful  bankers, we must better understand which products and services
are most profitable. The enhancements we have made to our cost center accounting
system will provide the information we need to better allocate  resources and to
develop strategies to serve the needs of our customers in the most efficient and
effective manner.

The thrift  industry won two major  legislative  victories in 1996:  the Savings
Association  Insurance  Fund was  recapitalized  and the special thrift bad debt
provisions were repealed. As a result, our franchise value has been strengthened
and our ability to compete has been enhanced.  We are hopeful that progress will
be made during  1997 in  revising  our bank  charter  and  expanding  the Bank's
ability to offer a broader range of services.

After  experiencing a lagging  recovery over the past few years,  Connecticut is
beginning  to move more in line with  economic  growth  at the  national  level.
Economists  are now  forecasting  annual  employment  growth in the state of 1.2
percent through the turn of the century.

The  overall  driving  force  behind our efforts is to remain a  profitable  and
successful company which creates value for our shareholders.  By enhancing value
for our  shareholders,  we secure our future  and create  opportunities  for our
employees to grow individually and professionally.

Our future  goals are to further  increase  market  share  through  acquisition,
continue to invest in technology and alternative delivery systems,  grow revenue
in all business lines,  maintain  quality  service and reduce expenses  whenever
possible.

Thank you for your continued  confidence in our company.

Robert J. Britton
President and Chief Executive Officer
Eagle Financial Corp.

September 30, 1996

                                       2
<PAGE>





Commercial Banking

Our goal is to ensure that
we remain responsive to
the needs of small and
medium-sized businesses.
-- Peter J. Melly
Senior Vice President, Commercial Banking

During fiscal 1996, Eagle's Commercial Banking Department greatly benefited from
the  acquisition  of five  branches  in  greater  Hartford.  The  move  not only
increased the base of customers owning small to medium-sized businesses, it also
expanded the number of convenient  Eagle  locations in the Hartford  market.  In
addition, by bringing in commercial bankers with many years of experience, Eagle
gained immediate credibility in the marketplace.

Eagle  introduced  products  designed  specifically  to meet the stated needs of
local  businesses.  Among these were high-paying  money market  accounts,  sweep
investment  vehicles,  and a full array of credit products,  including access to
all governmental guarantee programs.

The opening of bank  branches in  supermarkets  reinforced  our presence in four
greater Hartford  communities  while increasing our reach to new  neighborhoods.
Also,  the  supermarket  branches'  longer hours of operation  make banking more
convenient, especially for the retail business owners Eagle wants to attract.

The result of all these moves was a significant increase in commercial business.
Eagle made loans up to $2.5  million to a broad array of firms.  We also brought
in substantial  commercial related deposits.  These strategies have strengthened
both sides of the balance sheet.

The number of  commercial  staff  positions  has  increased  in the past year in
response  to our  growing  portfolio.  The next  fiscal  year  promises  further
expansion with more innovative products to serve commercial customers.

Our goal is to  ensure  that we  remain  responsive  to the  needs of small  and
medium-sized  businesses,  with  quick  decisions  and a focus on  attention  to
detail.  Most importantly we are committed to maintaining  asset quality through
sound credit decisions.

                                       3
<PAGE>




Retail Banking

This past fiscal year the emphasis was on new ways of  delivering  bank products
and services to our customers.
-- Kenneth F. Burns
Senior Vice President,
Retail Banking and Marketing

In Retail  Banking  this  past  fiscal  year,  the  emphasis  was on new ways of
delivering  bank products and services to our customers.  Chief among these were
supermarket banking and off-premise electronic banking.

The supermarket banking initiative resulted in four new in-store branches.  This
gave us the opportunity to interact with our customers  face-to-face more often,
and helped increase our presence east of the Connecticut  River.  ATMs and phone
banking also were  expanded in fiscal  1996.  Three ATMs were opened in non-bank
locations,  including one at the  Legislative  Office  Building  attached to the
State Capitol.

The Totally Free  Checking  product,  combined  with an  aggressive  direct-mail
initiative,  helped Eagle make  impressive  inroads  into the consumer  checking
account  market  -  an  important   accomplishment,   because  for  many  people
establishing  a  checking  account  is the first step  toward  using  other bank
products.  In the past fiscal year,  Totally Free Checking  attracted  more than
5,000 new customers in the Hartford area alone.

This year, the Eagle  Excellence  initiative,  a major program to help employees
better define and improve customer service,  was begun. It includes a network of
specially  selected  customers  who  "shop" the  various  branches  and  report,
candidly and confidentially, on how they were treated.

In the next year,  we will expand  Eagle  Excellence.  Delivery of products  and
services will continue to be  decentralized,  with each branch acting as a total
sales and service center.  The Bank's ATM network will be further enlarged,  and
more supermarket branches are being studied.

Combining old-fashioned helpfulness and service with state-of-the-art technology
will keep Eagle a major player in the retail banking arena.

                                       4
<PAGE>




Residential and Consumer Lending

Residential  and  consumer  loans  originated  in the  branches  will  be a more
significant part of our total production.
-- Patrick Macomber
Senior Vice President,
Residential and Consumer Lending

This past year was one of positioning  Eagle for long term growth in Residential
and Consumer Lending.  We are now prepared to face the challenges and capitalize
on the opportunities in fiscal 1997.

The Bank  originated more than $200 million in residential and consumer loans in
our communities during fiscal 1996. We also took steps to revise and realign our
internal operations. Some of these were:

o implementing a secondary  market  operation to manage interest rate risk while
offering competitively priced mortgage loans,

o  streamlining the approval and closing processes and,

o  improving our delivery channels.

We know that progress must be gained by strengthening our link with the customer
through our retail  branches,  so we are realigning  our  production  efforts to
dedicate mortgage loan specialists to serve customers in the branches. We expect
that the number of  residential  and consumer  loans  originated in the branches
will be a more significant part of our total production. We will continue to use
external production sources as well.

Technology  will play an  important  role in meeting  customers'  needs.  We are
beginning several  initiatives in the residential and consumer areas to allow us
to reach more customers while providing  excellent  service.  We will be able to
efficiently  generate  and service  these  assets to meet our balance  sheet and
income objectives.

Competition from national and regional companies will continue to have an impact
on our markets.  Eagle is positioned to meet these challenges and take advantage
of the opportunities they provide.

                                       5
<PAGE>




DIRECTORS AND OFFICERS

EAGLE FINANCIAL CORP.  DIRECTORS

Ralph T. Linsley
Chairman
Eagle Financial Corp.

Robert J. Britton
President and Chief Executive Officer
Eagle Financial Corp.

Richard H. Alden
Attorney
Partner with the Law Firm
Anderson, Alden, Hayes & Ziogas LLC

George T. Carpenter
President
Carpenter Companies
Construction and Real Estate

Theodore M. Donovan
Attorney
Partner with the Law Firm Furey, Donovan, Eddy, Kocsis, Tracy & Daly

Thomas V. LaPorta
President and Chairman
The LaPorta Funeral Home

Steven E. Lasewicz, Jr.
President
SELCO Controls, Inc.
Senior Account Executive
Barber-Colman/Cosentino, Inc. Building Automation and Temperature Controls

John F. McCarthy
President
J & M Sales, Inc.
Beer Distributorship

Ernest J. Torizzo
Executive Vice President
O & G Industries, Inc. Construction

EAGLE FEDERAL SAVINGS BANK OFFICERS

Robert J. Britton
President and
Chief Executive Officer

Ercole J. Labadia
Executive Vice President,
Administration and Operations

Mark J. Blum
Senior Vice President,
Chief Financial Officer,
Secretary

Kenneth F. Burns
Senior Vice President,
Retail Banking and Marketing

Patrick Macomber
Senior Vice President,
Residential and Consumer Lending

                                       6
<PAGE>




Peter J. Melly
Senior Vice President,
Commercial Lending

Mark B. Shaw
Senior Vice President,
Technology and Operations

William Anderson
Vice President,
Residential Lending

John A. Baker
Vice President,
Commercial Lending

Victoria L. Bextel
Vice President,
Lending Servicing Operations

Donald E. Crandall, Jr.
Vice President,
Loan Servicing

Anne P. Fetzner
Vice President,
Secondary Market Lending

Rosellyn G. Giampietro
Vice President,
Marketing Director

Susan J. Laberge
Vice President,
Retail Sales Director

Marc A. Lambert
Vice President,
Finance

Karen Landsberg
Vice President,
Human Resources Director

Donald G. Lorusso
Vice President,
Commercial Lending

Robert L. Messier, Jr.
Vice President,
Commercial Lending

Barbara S. Mills
Vice President,
Treasurer

Janet E. Recidivi
Vice President,
Retail Administration


                                       7
<PAGE>

Louise D. Rohner
Vice President,
Business Development Manager

Joan F. Warkoski
Vice President,
Loan Originations

EAGLE FINANCIAL CORP. EXECUTIVE OFFICERS

Robert J. Britton
President and
Chief Executive Officer

Mark J. Blum
Vice President,
Secretary,
Chief Financial Officer

Kenneth F. Burns
Vice President

Ercole J. Labadia
Vice President,
Administration

Barbara S. Mills
Vice President,
Treasurer






                                       8

<PAGE>
CONTENTS

10. Management's Discussion and Analysis

20. Consolidated Balance Sheets

21. Consolidated Statements of Income

22. Consolidated Statements of Shareholders' Equity

23. Consolidated Statements of Cash Flows

24. Notes to Consolidated Financial Statements

46. Independent Auditors' Report 

47. Additional Information

                                       9
<PAGE>
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

General
Eagle Financial Corp. (the "Holding  Company") is a unitary savings bank holding
company and parent of Eagle Federal Savings Bank ("Eagle Federal" or the "Bank")
(collectively  referred to as the "Company").  The Bank is a federally chartered
savings bank headquartered in Bristol, Connecticut, which conducts business from
19  traditional  branch  offices and 4  supermarket  branch  offices  located in
Hartford and eastern Litchfield  counties.  Prior to January 1, 1993 the Holding
Company  had two bank  subsidiaries,  Bristol  Federal  Savings  Bank and  First
Federal Savings and Loan Association of Torrington.  Effective  January 1, 1993,
the two bank subsidiaries were combined into a single subsidiary,  Eagle Federal
Savings Bank.

The Bank has been an active acquirer of other  financial  institutions in recent
years including two acquisitions in fiscal 1992 and another in fiscal 1994. That
trend  continued  in the  second  quarter  of  fiscal  1996 when  Eagle  Federal
purchased  five large  branch  offices in the Hartford  county  market that were
being divested as part of the merger  transaction  between Fleet Bank,  N.A. and
Shawmut  Bank   Connecticut,   N.A.  (the   "Fleet/Shawmut   transaction")   and
simultaneously  closed two existing branches that were in close proximity to the
newly acquired offices. The transaction, which increased the Bank's deposit base
by $253  million,  allowed  Eagle to expand an  already  established  network of
branch offices in the Hartford area.

The  Company's  strategy  to focus on the  greater  Hartford  market was further
emphasized  in the same  quarter  when the Bank  sold  seven  relatively  small,
geographically  separate  branch offices in northern  Fairfield  county and $184
million of related deposits which resulted in a $15.9 million gain. Later in the
year Eagle Federal added four supermarket  branches and three off-site ATMs, all
of which were  located in Hartford and its  suburbs,  to its  customer  delivery
system.  The 1996 events  substantially  changed the landscape of the Company by
creating a more efficient and  geographically  concentrated  network of branches
located in Hartford and eastern  Litchfield  counties.  In comparing the Bank at
year end to where it was twelve months earlier,  Eagle Federal now operates four
fewer full service branch offices but has a higher amount of total deposits in a
more concentrated market area.

Fiscal  1996  also  included  the  long  awaited   passage  of   legislation  to
recapitalize the Savings Association Insurance Fund ("SAIF"). Although the event
resulted in a one-time  charge to Eagle  Federal of $4.7 million  before  income
taxes, it will  significantly  reduce the Bank's deposit  insurance costs in the
future beginning in the first quarter of fiscal 1997, initially through a refund
of  amounts   previously  paid  and  then,   beginning  January  1,  1997,  from
significantly reduced assessment rates.

While the Company's  primary business has historically been and will continue to
be the  origination  of  first  mortgage  loans  on  1-4  family  homes,  it has
implemented  strategies  in the last two years  that will put more  emphasis  on
originating  commercial  real estate and small business loans within its primary
market area.  The Company also intends to increase its emphasis on  multi-family
and consumer  lending  products.  The marketing of these loans will focus on the
existing  customer  base,  customers  acquired  as  part  of  the  Fleet/Shawmut
transaction, and new relationships within the Company's primary market area.

Eagle Financial Corp. had record net income of $13.6 million, or $2.89 per share
on a fully diluted basis, for the year ended September 30, 1996. The Company has
posted higher annual earnings for eight  consecutive years with average earnings
per share  growth of 25% during  that  period.  The  Company's  earnings  depend
largely on its net interest income, which is the difference between the interest
earned on its loan and  investment  portfolios  versus the interest  paid on its
deposits and borrowed funds.  Additional  earnings are derived from a variety of
financial  services  provided  to  customers  and  from  income  related  to the
servicing of loans sold. 

As of September 30, 1996, the Company had total assets of $1.41 billion compared
to $1.24  billion  at the  start of the  fiscal  year.  Net  growth  in the loan
portfolio  for the year was just over $100  million,  including  $36  million of
loans  purchased  as  part  of the  Fleet/Shawmut  transaction.  The  investment
portfolio  increased by $41 million during the year. The majority of the balance
sheet growth was funded by deposits,  which increased by $108 million  including
approximately $69 million of deposits  purchased during the year net of deposits
sold.  The remainder of the asset growth was funded with FHLB advances and other
borrowed money, which grew by $66 million in fiscal 1996.

Liquidity and Capital Resources
Eagle  Federal's core capital ratio fell from 6.6% at September 30, 1995 to 5.4%
at fiscal year end, reflecting strong balance sheet growth as well as the impact
of the intangible asset created by the  Fleet/Shawmut  transaction in the second
quarter.  The  Bank  continued  to meet  the  regulatory  definition  of a "well
capitalized" institution throughout the year.

As a member of the Federal Home Loan Bank ("FHLB") system,  the Bank is required
to maintain  liquid assets at 5% of its  withdrawable  deposits plus  short-term
borrowings.  At September 30, 1996,  the Bank was in  compliance  with Office of
Thrift Supervision ("OTS") liquidity requirements, having a ratio of 6.1%.

                                       10
<PAGE>

The Bank's principal sources of funds include deposits, loan payments (including
interest,  scheduled  amortization of principal and  prepayments),  interest and
amortization   on   investments   and   mortgage-backed   securities,   maturing
investments,  FHLB  advances and other  borrowed  money.  While  scheduled  loan
amortization,  maturing  securities,  and short-term  investments  are generally
predictable  sources of funds, loan and mortgage-backed  securities  prepayments
are greatly  influenced  by interest  rates.  One of the risks of  investing  in
mortgage-backed   securities  is  the  ability  of  such  instruments  to  incur
prepayments of principal  prior to maturity at prepayment  rates  different than
those  estimated  at the time of  purchase.  This  generally  occurs  because of
changes in market  interest  rates.  For example,  in periods of rising interest
rates the level of  prepayments  on  mortgage-backed  securities  and loans will
typically decline.

Principal  uses of funds  include the  origination  of consumer  and  commercial
loans,  investments,  payments of interest on deposits and borrowed  money,  and
payments  to meet  operating  expenses.  At  September  30,  1996,  the Bank had
approximately $67 million in loan commitments  outstanding including $32 million
in available  home equity  credit  lines.  It is expected  that these and future
loans  will  be  funded  primarily  by  deposits,  loan  repayments  and  sales,
investment  maturities  and  amortization,  and  borrowings.  The  Bank  has the
aggregate  capacity to borrow up to $688  million in  advances  from the FHLB of
Boston.  At September 30, 1996,  FHLB  advances and borrowed  money totaled $222
million versus $155 million at September 30, 1995.

The  Company  purchases  certain  debt  securities  (including   mortgage-backed
securities)  with the intent and ability to hold to maturity for the purposes of
earning income and meeting regulatory liquidity  requirements.  Events which may
be reasonably  anticipated are considered when  determining the Company's intent
and ability to hold  investment  securities  to maturity.  Such  securities  are
classified  as  investment  securities  held to maturity  and are stated at cost
adjusted for  amortization  of premiums and accretion of  discounts.  Other debt
securities are purchased and classified as available for sale.  Management  will
sell  securities  from  time to time and use the  proceeds  to fund  loans  when
deposit  flows are not  adequate,  the rates  offered on borrowed  money are not
favorable,   and  liquidity   ratios  support  such  sales.   The  Company  also
occasionally   sells   available  for  sale   securities  to   restructure   its
asset/liability  mix. Securities  classified as available for sale are accounted
for in the  aggregate  at market  value with any  unrealized  gain or loss being
recorded as an adjustment to shareholders'  equity, net of income tax effect. At
September  30,  1996,  approximately  $385  million,  or 83%,  of the  Company's
investment and mortgage-backed  securities portfolio was classified as available
for sale and had an after-tax net unrealized loss of $1.8 million.

During the year ended  September  30,  1996,  the Company  sold $198  million of
investment and mortgage-backed securities producing net losses of $463,000 while
maturing  investment  securities  totaled  $25  million.  Much  of the  activity
occurred in the second quarter when the Bank sold  approximately $100 million of
its lowest yielding securities, incurring a loss of $1.2 million, and reinvested
the proceeds of the sale in securities  with an estimated  yield  improvement of
approximately  150 basis points on average.  During fiscal 1995,  investment and
mortgage-backed  securities sold totaled $101.3 million,  producing net gains of
$42,000, while maturing securities totaled $15.2 million.

The Bank is  required by the OTS to meet  minimum  capital  requirements,  which
include tangible capital, core capital and risk-based capital requirements.  The
Bank's actual  capital as reported to the OTS at September 30, 1996 exceeded all
three  requirements.  The  following  chart sets  forth the actual and  required
minimum  levels  of  regulatory  capital  for  the  Bank  under  applicable  OTS
regulations as of September 30, 1996 (in thousands):

                Actual      Percent      Required        Percent    Excess
Core           $74,566        5.42%       $41,283        3.00%      $33,283
Tangible        74,566        5.42%        20,641        1.50%      53,925
Risk-based      81,953       13.89%        47,186        8.00%      34,767

The OTS has proposed to increase the minimum  required  core capital  ratio from
the  current 3% level to a range of 4% to 5% for all but the most  highly  rated
financial  institutions.  While  the OTS  has not  taken  final  action  on such
proposal,  it has adopted a prompt  corrective action regulation that classifies
any savings  institution that maintains a core capital ratio of less than 4% (3%
in the event the  institution  was  assigned  a  composite  1 rating in its most
recent report of examination) as  "undercapitalized."  As of September 30, 1996,
the Bank had a core capital ratio of 5.42% and met the  requirements for a "well
capitalized" institution.

In August 1993,  the OTS issued new  regulations,  to be effective  beginning on
January 1, 1994,  which were going to add an  interest-rate  risk component to a
bank's risk-based capital  requirement.  The OTS then delayed  implementation of
this new regulation pending action on the issue from the other banking agencies.
In early 1996 the other  regulators (the Federal Reserve Board,  Federal Deposit
Insurance Corp.,  and Office of the Comptroller of the Currency)  announced that
their approach to evaluating a financial  institution's interest rate risk would
not include a standard model to calculate a required  capital  component.  While
the OTS will likely  review its  approach  to  evaluating  a bank's  exposure to
interest rate fluctuations as a result of the other regulators' conclusions, the
OTS under any scenario will require that a bank have  adequate  board and senior
management  oversight  and a  comprehensive  process for managing  interest rate
risk.

                                       11

The Holding Company's liquidity and ability to pay dividends to its shareholders
is primarily derived from and dependent on the ability of its Bank subsidiary to
pay dividends to the Holding Company. Under current OTS regulations, because the
Bank meets the OTS  capital  requirements,  it may pay out the higher of 100% of
net income to date over the calendar year and 50% of surplus capital existing at
the  beginning  of the  calendar  year,  or 75% of its net income  over the most
recent four-quarter period, without regulatory supervisory approval. In general,
the Bank pays dividends to the Holding Company only to the extent that funds are
needed to cover  operating  expenses  and  dividends  paid to  shareholders.  At
September 30, 1996,  the Bank had  approximately  $35 million in excess  capital
over the OTS  risk-based  requirement,  one half of which would be available for
declaration of dividends to the Holding Company.  The OTS regulations permit the
OTS to prohibit capital distribution under certain circumstances.

Asset/Liability Management
Net interest  income,  the primary  component of the  Company's  net income,  is
derived from the  difference or "spread"  between the yield on  interest-earning
assets and the cost of interest-bearing  liabilities.  The Company has sought to
reduce its  exposure to changes in interest  rates by matching  more closely the
effective  maturities  and  repricings  of  its  interest-sensitive  assets  and
liabilities.   At  the  same  time,  the  Company's  asset/liability  management
strategies  also must  accommodate  customer  demands  for  particular  types of
deposit and loan products.

While  much  of  the  Company's   asset/liability   management  efforts  involve
strategies  which increase the rate  sensitivity  of its loans and  investments,
such as the sale of fixed rate loans,  originations of adjustable rate loans and
purchases of adjustable  rate  mortgage-backed  securities  or relatively  short
average life fixed rate investments,  it also uses certain  techniques to reduce
the rate  sensitivity  of its  deposits  and borrowed  money.  Those  techniques
include  attracting  longer term  certificates  of deposit  when the market will
permit,  emphasizing  core  deposits  which are less  sensitive  to  changes  in
interest rates, and borrowing through long term FHLB advances.

The amount and composition of the Company's  mortgage loan origination  activity
will  continue  to  be  directly  influenced  by  interest  rates.  The  Company
experienced  strong  loan  origination  activity  in 1993 and 1994  driven  by a
relatively low interest rate environment that resulted in customers  refinancing
their  existing  mortgage  loans into lower  rate,  and  generally  fixed  rate,
products.  While loan  origination  activity  declined in fiscal 1995,  customer
preference continued for fixed rate loans. That activity resulted in an increase
in the  percentage of fixed rate loans in the Company's loan  portfolio.  During
fiscal  1995,  the Company  securitized  $154  million of long term,  fixed rate
mortgage loans.  The resultant  securities were then sold in the last quarter of
fiscal  1995 and  first  quarter  of  fiscal  1996,  with  most of the  proceeds
reinvested in adjustable rate or relatively  short term fixed rate,  securities.
While the strategy resulted in an expected decline in the Company's net interest
margin, it also improved the rate sensitivity of the Company's  interest-earning
assets and strengthened its ability to absorb the impact of future interest rate
volatility,  primarily in the event of a sustained rise in interest rates. It is
currently  the  Company's   policy  to  sell  into  the  secondary   market  all
originations  of long  term,  fixed  rate  mortgage  loans.  It is  management's
intention to continue this policy as needed to maintain an  acceptable  interest
rate risk profile.

During the year ended September 30, 1996, the Company sold  approximately  $18.7
million of fixed rate mortgage loans into the secondary  market and  securitized
approximately   $16.9   million  of  fixed  rate   mortgage   loans  into  FHLMC
mortgage-backed  securities.  In  addition  to  the  loans  that  were  sold  or
securitized,  the Company transferred  approximately $21.9 million of fixed rate
mortgage loans  classified as held for sale into the loan  portfolio.  The loans
were  recorded in the portfolio at their  estimated  market value at the date of
the transfer.  The loans were transferred to the portfolio  primarily due to the
determination  that the loans,  after initial  classification  as held for sale,
were not underwritten to secondary market standards.

The Company  measures its exposure to interest rate  fluctuations on a quarterly
basis,  primarily  by using a computer  modeling  system  designed  for  savings
institutions such as Eagle Federal.  The computer modeling system quantifies the
approximate  impact that increases and decreases in interest rates would have on
the Company's  net interest  income.  The model is run on both a "shock"  basis,
under which interest rates are assumed to move up or down  immediately,  as well
as on the basis of gradual  movements  in rates based upon prior  interest  rate
cycles.  The Board  approved  maximum  tolerance  for  decreases in net interest
income is 20%,  based upon the model's  prediction of the impact of an immediate
200 basis point increase in interest rates. At September 30, 1996,  according to
the computer model and using asset/liability  repricing assumptions based on the
Company's  historical  experience  and industry  data, if interest rates were to
immediately  increase by 200 basis points the negative  impact on the  Company's
net interest income would be well within the Board approved tolerance level.

The Company also monitors other  indicators of interest rate risk.  Market value
of equity  ("MVE")  analysis is  intended to address the change in equity  value
arising from  movements in interest  rates.  The MVE is estimated by valuing the
Company's assets and liabilities. The extent to which assets have gained or lost
value  in  relation  to the  gains  or  losses  of  liabilities  determines  the
appreciation or depreciation in equity on a market value basis. MVE analysis can
be a good indicator of long term interest rate risk inherent in a balance sheet.
The Company  measures its market value risk on a quarterly basis under a variety
of interest rate environments. The Company has also established

                                       12
<PAGE>

acceptable tolerances for change in MVE under different interest rate scenarios.

Another commonly used measure of interest rate risk exposure is reflected in the
Company's  one-year  cumulative  gap,  which  is  the  difference  between  rate
sensitive assets and rate sensitive liabilities maturing or repricing within one
year.  An asset or  liability  is said to be interest  rate  sensitive  within a
specific  period if it will mature or reprice  within that period.  The interest
rate  sensitivity  gap is  defined  as the  difference  between  the  amount  of
interest-earning  assets maturing or repricing within a specific time period and
the amount of  interest-bearing  liabilities  maturing or repricing  within that
same time period. A gap is considered  positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive liabilities,  and
is considered  negative when the amount of interest rate  sensitive  liabilities
exceeds the amount of interest rate sensitive assets.

At September 30, 1996,  the Company's  one-year gap was a negative 3.7% of total
assets.  The  Company's  current  asset/liability   management  strategy  is  to
generally  maintain a  one-year  gap  within a  tolerance  of plus or minus 15%.
However, the Company believes there are certain shortcomings inherent in the gap
analysis and, accordingly, relies less on gap analysis than other tools, such as
simulation analysis, for an accurate measure of interest rate risk. For example,
although  certain assets and liabilities may have similar  maturities or periods
of repricing,  they may react in different degrees to changes in market interest
rates.  The  interest  rates on  certain  types of assets  and  liabilities  may
fluctuate in advance of changes in market interest  rates,  while interest rates
on other  types of assets  and  liabilities  may lag  behind  changes  in market
interest rates. Certain assets, such as adjustable-rate mortgages, have features
which restrict changes in interest rates on a short-term basis and over the life
of the assets. In the event of a change in interest rates,  prepayment and early
withdrawal  levels would likely deviate  significantly  from those assumed.  The
ability of many  borrowers to service their debt may decrease in the event of an
interest rate increase.

The Company has an Asset/Liability Management Committee (the "ALCO") which meets
regularly  and reports at least  quarterly to the Board of  Directors.  The ALCO
sets interest rate risk goals and formulates strategies to achieve those goals.

Effect of Interest Rate Fluctuations
The Company's consolidated results of operations depend to a large extent on the
level of its net  interest  income,  which is the  difference  between  interest
income earned on its loan and investment  portfolios versus the interest paid on
deposits  and borrowed  funds.  If the cost of funds  increases  faster than the
yield on its  interest-earning  assets, net interest income will be reduced. The
Company measures its interest rate risk primarily using simulation analysis.

While the Company uses various tools to monitor interest rate risk, it is unable
to predict future fluctuations in interest rates or the specific impact thereof.
The market  value of most of the  Company's  financial  assets is  sensitive  to
fluctuations in market interest rates. Fixed rate investments including mortgage
loans and  mortgage-backed  securities  decline in value as interest rates rise.
Adjustable rate loans and securities generally have less market value volatility
than do fixed rate products.

It is the Company's current policy to sell all of its long term, fixed rate loan
originations  into  the  secondary  market.  The  Company  retains  in its  loan
portfolio adjustable rate and shorter term loans including mortgages that adjust
annually  (one year ARMs) and loans  that are fixed  rate for an  initial  term,
typically  three to five years,  and then convert to a one year ARM (3-1 and 5-1
ARMs).  The majority of the Company's loan  origination  activity  during fiscal
1996 was  comprised  of 3-1 and 5-1  ARMs  which  the  Company  retained  in its
portfolio.  Such loans,  while  sensitive to changing rates during most of their
term, would not adjust to declines and increases in rates during the first three
to five years. In addition, since these loans do not impose a prepayment penalty
on the borrower,  they are subject to  refinancing  before they convert to a one
year ARM especially in the event of a meaningful  drop in market  interest rates
during the initial term.

Changes in interest rates also can affect the amount of loans  originated by the
Company and its ability to realize gains on the sale of such assets.  The extent
to which borrowers  prepay loans also is affected by prevailing  interest rates.
When interest rates  increase,  borrowers are less likely to prepay their loans;
whereas,  when  interest  rates  decrease,  borrowers  are more likely to prepay
loans.  Funds  generated  by  prepayments  may  be  invested  at a  lower  rate.
Prepayments may adversely affect the value of mortgage loans, the levels of such
assets  that  are  retained  in the  portfolio,  net  interest  income  and loan
servicing income. Similarly,  prepayments on mortgage-backed securities also may
affect adversely the value of these securities and interest income. Increases in
interest  rates may cause  depositors  to shift funds from  accounts that have a
comparatively  lower cost such as regular  savings  accounts to accounts  with a
higher cost such as certificates of deposit.  If the cost of deposits  increases
at a rate that is  greater  than the  increase  in  yields on  interest-earnings
assets,  the interest rate spread is negatively  affected.  Changes in the asset
and liability mix also affect the interest rate spread.

Although the Company's average net interest margin has been relatively stable in
recent years,  various factors  including rapid changes in interest rates and/or
changes in the shape of the  treasury  yield  curve can result in  expansion  or
compression of the Company's  interest rate spread and a corresponding  increase
or decrease in
                                       13
<PAGE>
earnings.  For example, the Company's average net interest margin in fiscal 1996
declined to 3.08% from 3.63% in the prior year. This  compression was the result
of a number of events.  A flat  treasury  yield curve (i.e. a relatively  narrow
difference  between short term and long term rates)  resulted in a below average
spread between the yield on the Company's loans and investments  versus the cost
of its deposits and borrowed funds. The  securitization  of  approximately  $154
million  of long  term,  fixed  rate  mortgage  loans and sale of the  resultant
securities  during the last  quarter of fiscal 1995 and first  quarter of fiscal
1996 improved the Company's interest rate risk profile,  but also resulted in an
expected decline in interest income.  The Company had a higher than normal level
of lower  yielding  investments  in the second quarter as cash received from the
Fleet/Shawmut transaction early in the quarter was kept in overnight investments
needed to fund the sale of seven branch offices late in the same quarter.  While
more than one half of the  Company's  strong  balance  sheet  growth in 1996 was
funded with retail  deposits,  the Company also utilized  Federal Home Loan Bank
advances  and other  borrowed  money as part of its growth plan.  This  strategy
increased  earnings per share,  but at a higher interest cost than growth funded
using lower cost retail deposits.  Finally,  the intangible asset created by the
Fleet/Shawmut transaction resulted in a decline in total interest-earning assets
relative to total interest-bearing  liabilities. All of these events contributed
to the  compression of the Company's net interest margin and a modest decline in
net interest income, primarily during the first half of the year.

Asset Quality
At September 30, 1996, the Company had total non-performing assets in the amount
of $12.3  million,  including  $9.3  million  of  non-performing  loans and $3.0
million in real estate owned. Loan loss reserves totaled $8.6 million, or 93% of
non-performing  loans. This compares with total  non-performing  assets of $13.6
million at September 30, 1995,  including $11.2 million of non-performing  loans
and $2.4 million in real estate owned.

The  Company's  non-performing  assets are  almost  exclusively  residential  in
nature,  comprising  approximately  90% of the total at September 30, 1996. Loan
delinquencies  (greater than 60 days) totaled $10.7  million,  or 1.31% of total
loans, at September 30, 1996 compared to $11.1 million, or 1.55% of total loans,
at September 30, 1995.  The Company  makes every effort to work with  delinquent
borrowers to negotiate an affordable  payment  schedule.  This strategy has been
more  prevalent in hardship  cases where rates have adjusted  upward one or more
times on adjustable rate mortgages. The terms of the restructures were primarily
reductions in interest rates to a rate  approximating  the current rate on newly
originated  one year  adjustable  rate  mortgage  loans.  The rate  reduction is
generally  in effect for a period of six months to one year and is then  subject
to review. The Company  restructured $4.2 million of loans during the year ended
September 30, 1996 and has $4.0 million of  restructured  loans  outstanding  at
September 30, 1996. Upon restructure, the loans are identified as impaired loans
and represent 59% of the $6.8 million of impaired  loans at year end. The entire
$4.0 million of restructured loans at year end were reported as performing loans
due to the borrowers  maintaining a current payment status with respect to their
revised loan terms. As with the Company's non-performing assets, the substantial
majority of restructured loans represent loans secured by residential  property.
All non-performing  assets and restructured loans are reviewed quarterly as part
of the Company's internal review process. The Company's level of troubled assets
continues to compare very favorably with other lenders in Connecticut.

During the year the Company  increased its commercial loan portfolio through the
purchase of loans as part of the  Fleet/Shawmut  transaction and through its own
originations.  As a result,  the resources in the commercial  banking department
and loan review  function were expanded to properly  monitor and  administer the
portfolio.  The purchased portfolio was assigned risk ratings in accordance with
the  Company's  risk rating  system and each  individual  loan was assigned to a
commercial loan officer for monitoring  purposes.  As of September 30, 1996 four
loans purchased from  Fleet/Shawmut,  totaling  $348,000,  were  non-performing.
Loans  originated by the Company are also assigned to a commercial  loan officer
who is responsible for periodically  collecting and analyzing  current financial
statements  for  each  borrower.  The loan  review  department,  which  operates
independently of the commercial  banking  department,  re-affirms the quality of
loans and  identifies any weakness that may need  attention.  Loans are reviewed
based on a schedule that considers the relative risk associated with the loan.

The following table represents a breakdown of non-performing assets at September
30, 1996:

                                                       Total
                      Non-Performing   Real Estate     Non-Performing       % of
(in thousands)                 Loans         Owned             Assets      Total
                               -----         -----             ------      -----
Mortgage loans:
   Residential                $6,893        $2,731          $9,624         78.0%
   Commercial                  1,031            --           1,031          8.4%
   Multi-family                   --           294             294          2.4%
   Land development               --            25              25          0.2%
Non-mortgage commercial loans    261            --             261          2.1%
Consumer loans                    47            --              47          0.4%
Home equity loans              1,047            --           1,047          8.5%
                              ------         ------        -------        ------
     Total                    $9,279         $3,050        $12,329        100.0%
                              ======         ======        =======        ======

                                       14
<PAGE>
The  allowance  for loan losses  increased to $8.6 million at September  30,1996
compared to $7.5 million at the start of the fiscal  year.  The $1.1 million net
increase in the balance includes $2.0 million of provisions  during the year and
a  $1.9  million   allowance   associated   with  the  loans  purchased  in  the
Fleet/Shawmut transaction less $2.8 million of net charge-offs in fiscal 1996.

Management  monitors  the  adequacy of the  allowances  for loan and real estate
owned losses on a continual basis.  While management uses available  information
to  recognize  losses on loans and real estate  owned,  future  additions to the
allowance may be necessary based on changes in economic conditions, particularly
in  Connecticut.  In  connection  with  the  determination  of  the  allowances,
management  reviews  and grades all  adversely  classified  loans as part of its
internal loan review  process.  Each loan is reviewed to determine loss exposure
and the borrower's ability to repay. Management utilizes a variety of techniques
to value adversely  classified  loans,  including full and drive-by  appraisals,
real estate broker estimates and income projection analysis.

In  addition,  various  regulatory  agencies,  as  an  integral  part  of  their
examination process,  periodically review the allowances for losses on loans and
real estate owned. Such agencies may require the Company to recognize  additions
to the allowance  based on their  judgments of information  available to them at
the time of the examination.

The following  table sets forth an analysis of the Company's  allowance for loan
losses for the periods indicated:

                                                 Years Ended September 30,
(in thousands)                                   1996     1995         1994
                                                 ----     ----         ----
Balance at beginning of year                   $7,457   $8,311      $5,005
Loans charged off:
   Residential mortgage loans                  (2,077)  (1,599)       (942)
   Multi-family, commercial and land 
      development loans                          (491)    (511)       (496)
   Consumer and home equity loans                (295)    (366)        (68)
                                               -------  -------      ------
   Total loans charged off                     (2,863)  (2,476)     (1,506)
Recoveries:
   Residential mortgage loans                      83      116          110
   Multi-family, commercial and land
      development loans                            --        5           --
   Consumer and home equity loans                   3        1            2
                                               -------  -------      ------
     Total recoveries                              86      122          112
Provision for loan losses                       2,041    1,500        1,200
Allowance associated with purchases             1,871       --        3,500
Balance at end of period                       $8,592   $7,457       $8,311
Ratio of net charge-offs to average loans        0.35%    0.28%        0.20%
Allowance for loan losses to gross loans 
      receivable                                 1.04%    1.03%        1.01%
                                               -------  -------      ------
Allowance for loan losses to non-performing 
      loans                                        93%      67%         104%
                                               =======  =======      ======

Total loan  charge-offs  increased to $2.9 million for the year ended  September
30,  1996 from $2.5  million in the  previous  year.  The  increase  is entirely
attributable to a 30% increase in residential  mortgage loan charge-offs to $2.1
million in fiscal 1996 from $1.6  million in fiscal  1995.  The  primary  factor
contributing to the increase is the continued  sluggishness of the 2 to 4 family
and  condominium  markets where the market remains  depressed and demand is low.
Charge-offs  related to mortgage loans secured by 2 to 4 family and  condominium
properties represented $1.4 million of the total in 1996. The increased trend of
charge-offs,  principally  those  resulting from 2 to 4 family  properties,  and
higher  resulting  charge-off  to loans  ratios were the primary  motive for the
decision to boost the  provision for loan loss from $1.5 million in 1995 to $2.0
million in 1996.

Impact of Deposit Insurance Funds Act of 1996
On September 30, 1996,  President  Clinton signed into law the Deposit Insurance
Funds Act of 1996, which included  provisions  recapitalizing the SAIF, provides
for the eventual merger of the thrift fund with the Bank Insurance Fund ("BIF"),
and reallocates  payment of the annual Financing Corp. ("FICO") bond obligation.
As part of the package,  the Federal Deposit Insurance Corp.  ("FDIC") imposed a
special  one-time  assessment  of 65.7 basis  points to be applied  against  all
SAIF-assessable  deposits as of March 31, 1995,  which will bring the SAIF up to
the statutorily  prescribed 1.25 percent  designated  reserve ratio. The special
assessment,  which will be paid in November 1996, was included as a $4.7 million
pretax charge to Eagle  Federal's  operations in September  1996. The assessment
reduced the Company's 1996 net income by  approximately  $2.8 million,  or $0.59
per share.

Effective January 1, 1997, SAIF members will have the same risk-based assessment
schedule as BIF members.  Eagle Federal, as a healthy bank, will effectively pay
no  assessment  for deposit  insurance  coverage  beginning  on January 1, 1997.
However,  all  SAIF  and  BIF  institutions  including  Eagle  Federal  will  be
responsible  for sharing the cost of  interest  payments on the FICO bonds.  The
cost will be an  annualized  charge of 1.3 basis points for BIF deposits and 6.4
basis points for SAIF deposits. The approximate annual cost of interest payments
for Eagle
                                       15
<PAGE>



Federal is estimated at $450,000.

As a result of the Deposit  Insurance  Funds Act of 1996,  the  Secretary of the
Treasury is to review  recommendations in 1997 for the establishment of a common
charter for banks and savings  associations.  Accordingly,  Eagle Federal may be
required to convert its federal  savings bank charter to either a national  bank
charter, a state depository  institution  charter,  or a newly designed charter.
Eagle  Federal may also become  regulated  at the holding  company  level by the
Board of Governors of the Federal Reserve System ("Federal Reserve") rather than
by the OTS.  Regulation  by the Federal  Reserve  could subject Eagle Federal to
capital  requirements  that are not  currently  applicable  to the  Company as a
holding company under OTS regulation and may result in statutory  limitations on
the type of business  activities  in which the Company may engage at the holding
company level,  which business  activities  currently are not restricted.  Eagle
Federal is unable to predict  whether  such  initiatives  will result in enacted
legislation  requiring a charter  change and if so whether  the  charter  change
would significantly impact Eagle Federal's operations.

Repeal of Special Thrift Bad Debt Deduction
On August 20, 1996,  President  Clinton  signed into law the Small  Business Job
Protection  Act of 1996 which included the repeal of the special thrift bad debt
provisions.  Although the percentage of taxable income method bad debt deduction
will no  longer  be  available  to the Bank,  the tax  requirement  to invest in
certain  qualifying  types of investments  and loans has been  eliminated,  thus
providing  greater  freedom  to the Bank in  structuring  its  balance  sheet to
maximize  returns.  These tax related  changes had no significant  impact on the
Bank's 1996 financial position or results of operations.

Financial Accounting Standards Board Releases
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed  of," was issued in March 1995 and is effective for fiscal
years  beginning  after December 15, 1995. SFAS No. 121 requires that long-lived
assets be reviewed for impairment  whenever  events or changes in  circumstances
indicate the carrying amount of an asset may not be recoverable. Management does
not  anticipate  the  adoption of SFAS No. 121 to have a material  effect on the
Company's consolidated financial statements.

SFAS No. 122, "Accounting for Mortgage Servicing Rights," was issued in May 1995
and is effective for fiscal years  beginning  after December 15, 1995.  SFAS No.
122 requires the  capitalization  of mortgage  servicing rights acquired through
either   purchase  of  mortgage  loan  servicing  or  origination  and  sale  or
securitization of mortgage loans with retention of servicing.  SFAS No. 122 also
requires the analysis of  capitalized  mortgage  servicing  rights for potential
impairment  based on the fair value of the rights.  The Company adopted SFAS No.
122 effective  October 1, 1996.  The effect of adoption on the Company will vary
based on the extent of mortgage  servicing  rights  existing  upon  adoption and
mortgage servicing rights acquired  subsequent to adoption,  but is not expected
to have a material effect on the Company's consolidated financial statements.

SFAS No. 123,  "Accounting for Stock-Based  Compensation," was issued in October
1995 and is effective for fiscal years  beginning  after December 15, 1995. SFAS
No. 123  establishes  a fair value based method of  accounting  for  stock-based
compensation   plans.   This  statement  also  establishes  fair  value  as  the
measurement basis for transactions in which an entity acquires goods or services
from  non-employees  in  exchange  for equity  instruments.  The  effects on the
consolidated financial statements of this statement will be disclosure only.

Comparison of Years Ended September 30, 1996 and 1995

Net  Income  -- Net  income  for the year  ended  September  30,  1996 was $13.6
million,  or $2.89 per fully diluted share,  compared to $11.0 million, or $2.38
per fully diluted  share,  for the year ended  September 30, 1995. The change in
net income of $2.7 million represents a 24% increase from the prior fiscal year.
Fully  diluted  earnings per share  increased by 21%. The increase in net income
was  primarily a result of a $15.9  million gain  recorded  upon the sale of the
Danbury  region  branch  offices and related  deposits to Union  Savings Bank of
Danbury.   The  gain  was  partially  offset  by  a  $9.4  million  increase  in
non-interest  expense which  included a $4.7 million  charge related to the FDIC
assessment to recapitalize the SAIF and additional charges of approximately $1.2
million  which were largely  non-recurring  in nature.  Fiscal 1996 results were
also impacted by several other charges including a $1.5 million loss on mortgage
banking activities and a $463,000 net loss on the sales of securities.

Interest  Income  --  Interest  income  was  $95.6  million  for the year  ended
September 30, 1996  compared to $82.9  million for the year ended  September 30,
1995, an increase of $12.7 million,  or 15%. The increase in interest income was
due  to  a  $191  million,   or  17%,   increase  in  the  average   balance  of
interest-earning  assets. A reduction in the yield on interest-earning assets to
7.40% in 1996 from  7.53% in 1995  contributed  to  reducing  the  impact of the
increased  earning assets. A larger than normal average  investment in overnight
investments  during the second  quarter  of fiscal  1996 and an  asset/liability
restructuring  involving the sale of  approximately  $154 million of securitized
fixed rate  mortgage  loans in late fiscal 1995 and early  fiscal 1996 worked to
reduce the overall yield on interest-earning assets.

                                       16
<PAGE>

Interest  Expense -- Interest  expense was $55.8 million in fiscal 1996 compared
to $42.9 million in the prior fiscal year, an increase of $12.9 million, or 30%.
The increase  was caused by a  combination  of a 38 basis point  increase in the
cost of interest-bearing  liabilities from 4.10% in 1995 to 4.48% in 1996 and an
approximately  $200 million increase in the average balance of  interest-bearing
liabilities.  Several  factors  contributed  to the  increased  cost  of  funds,
principally, the cost of deposits increasing from 3.87% in 1995 to 4.23% in 1996
along with a $104.1  million  increase in the average  balance of deposits.  The
increase  in  the  cost  of  deposits  is  primarily  due to a  somewhat  higher
percentage of  certificate  accounts to total deposits in fiscal 1996 and a more
competitive deposit rate environment  throughout fiscal 1996 versus fiscal 1995.
In addition, the average balance of borrowed funds, FHLB advances and repurchase
agreements increased by $95.9 million.

Net Interest  Income -- Net interest  income remained very stable when comparing
the years ended September 30, 1996 and 1995,  decreasing slightly by $258,000 to
$39.8 million from $40.0 million.  Strong growth in interest-earning  assets was
more than  offset by  compression  in the Bank's  interest  rate  spread and net
interest margin,  which averaged 2.92% and 3.08%,  respectively,  in fiscal 1996
compared  to 3.43% and 3.63%,  respectively,  in fiscal  1995.  The  significant
declines are due primarily to higher costs for interest-bearing liabilities. Net
interest  income was also  reduced  due to a decline  in total  interest-earning
assets  relative to total  interest-bearing  liabilities  that resulted from the
intangible asset created from the Fleet/Shawmut transaction.

Provision  for Loan Losses -- The  provision  for loan losses for the year ended
September  30, 1996  increased  by  $541,000,  or 36%, to $2.0 million from $1.5
million for the year ended September 30, 1995. Due to a modest level of increase
in the  charge-off  to loan balance  ratio on mortgage  loans  secured by 2 to 4
family and  condominium  properties  during the current year,  the provision was
increased.  The  ratio of  allowance  for loan  losses to  non-performing  loans
increased  from 67% at September  30, 1995 to 93% at  September  30, 1996 due in
part  to  additional   allowances   associated   with  loans  purchased  in  the
Fleet/Shawmut transaction.

Non-Interest Income -- Non-interest income for the year ended September 30, 1996
was $18.9  million,  an increase of $14.5  million  from the prior year total of
$4.4  million.  The  principal  cause of the increase was the $15.9 million gain
recorded from the sale of the Danbury  region  branches and related  deposits to
Union  Savings  Bank of Danbury in March  1996.  Approximately  $184  million of
deposits were sold in the transaction at a deposit premium of 9%. Offsetting the
gain on  sale  of  deposits  were a $1.5  million  loss  from  mortgage  banking
activities and a $463,000 loss on the sale of securities.

The primary component of the loss from mortgage banking activities resulted from
a $1.7 million  mark-to-market  charge  recorded in the second quarter of fiscal
1996.  The  loss  on  sale  of  securities  was  principally  generated  from an
approximate $100 million  restructuring  of the investment  portfolio during the
second quarter of fiscal 1996 that resulted in a loss of $1.2 million.

Other  components of non-interest  income increased to $4.9 million in 1996 from
$4.2 million  principally due to a $268,000  increase in servicing  income and a
$256,000 increase in demand account service fees.

Non-Interest  Expense --  Non-interest  expense  was $33.6  million for the year
ended September 30, 1996. This represents a $9.4 million,  or 39%, increase from
the $24.3 million  total  reported for the year ended  September  30, 1995.  The
primary  component of the  increase  was the $4.7 million SAIF  recapitalization
charge recorded in the fourth quarter of fiscal 1996. The following fluctuations
occurred when comparing the year ended September 30, 1996 to September 30, 1995;
compensation  increased  $1.4  million,  office  occupancy  increased  $845,000,
marketing increased $630,000, federal insurance premiums decreased $667,000, the
amortization  of intangible  assets  increased  $862,000 and other  non-interest
expenses increased $1.2 million.

Non-interest  expense was  impacted by $1.2  million of  non-recurring  charges,
primarily  marketing  and  various  consulting  charges,  recorded in the second
quarter of fiscal 1996. The marketing  costs were  associated with enhancing the
Company's  visibility and image in the Hartford  market in conjunction  with the
Fleet/Shawmut   transaction.   The  compensation  increase  is  attributable  to
operating an expanded  branch network for  approximately  two months between the
Fleet/Shawmut  and  Danbury  transactions,  expansion  of the Bank's  commercial
banking  operations and the opening of four supermarket  branch locations in the
fourth  quarter of the year ended  September 30, 1996.  Occupancy  expenses were
also impacted by the operation of an expanded  branch network between the branch
acquisition  and  disposition  transactions  and  depreciation  on premises  and
equipment related to the acquired Fleet/Shawmut branches, particularly leasehold
improvements.

The  increase  in  intangible  asset  amortization  and the  decrease in federal
insurance  premiums are both directly related to the Fleet/Shawmut  transaction.
The $19.9 million of goodwill  created from the  transaction is responsible  for
the increased intangible amortization. The deposits assumed in the Fleet/Shawmut
transaction qualified for treatment at lower BIF deposit premium rates while the
deposits  disposed  of through  the  Danbury  transaction  had  previously  been
assessed at the higher SAIF deposit premium rates.

                                       17


<PAGE>

On an overall basis the Company's ratio of operating  expenses to average assets
increased only one basis point from 2.11% in 1995 to 2.12% in 1996.

Income Taxes -- The effective tax rate for the year ended September 30, 1996 was
40.6%,  down slightly from the 41.2% reported for fiscal 1995. As a result,  the
$1.7  million  increase  in  income  taxes to $9.3  million  for the year  ended
September 30, 1996 is  substantially  attributable  to a higher level of taxable
income.

Comparison of Years Ended September 30, 1995 and 1994

Net  Income  -- Net  income  was  $11.0  million,  or $2.38 per share on a fully
diluted basis,  for the twelve months ended  September 30, 1995 compared to $7.6
million, or $2.12 per share, in fiscal 1994. This represents an increase of $3.4
million,  or 45%, in net income and $0.26,  or 12%, in earnings  per share.  Net
interest  income  increased  by $8.9  million,  or 29%,  in  fiscal  1995  while
non-interest  income  increased by $1.2 million,  or 39%. The provision for loan
loss was  $300,000,  or 25%,  higher in  fiscal  1995 and  non-interest  expense
increased by $4.2 million,  or 21%.  Income taxes were $7.7 million for the year
ended  September  30, 1995 versus $5.4  million in fiscal 1994  representing  an
increase of $2.3 million, or 44%.

Interest Income -- Interest income increased by $22.8 million, or 38%, in fiscal
1995 as a result of a $237 million, or 27%, increase in average interest-earning
assets in addition to an  increase  in the  average  yield on loans  receivable,
mortgage-backed and investment securities from 6.96% to 7.53%. The strong growth
in interest-earning  assets were primarily driven by the acquisition of the Bank
of  Hartford  in June 1994.  The  increase  in average  interest-earning  assets
includes a $116 million  increase in average loans receivable and a $121 million
increase in average mortgage-backed and investment securities.

Interest Expense -- Interest expense increased by $13.9 million,  or 48%, during
the twelve months ended  September 30, 1995. The increase was due to an increase
in the average cost of deposits and  borrowed  money from 3.55% to 4.10%,  along
with a $228  million,  or 28%,  increase in the average  balance of these funds.
Approximately  35% of the  average  balance  increase  is  attributable  to FHLB
advances and other  borrowings  whose combined  average cost for fiscal 1995 was
6.18%. The growth in the average balance was largely attributable to the Bank of
Hartford acquisition.

Net Interest  Income -- Net interest income  increased $8.9 million,  or 29%, in
fiscal 1995 to $40.0  million  from $31.1  million for the twelve  months  ended
September 30, 1994.  The increase is  attributable  to growth in earning  assets
whereas the Bank's  interest rate spread and net interest margin were relatively
stable in 1995.  Eagle's interest rate spread and net interest margin were 3.43%
and  3.63%,   respectively,   in  fiscal  1995  compared  to  3.41%  and  3.60%,
respectively, in fiscal 1994.

Provision  for Loan  Losses -- Eagle  added  provisions  of $1.5  million to its
allowance  for loan  losses  during  the year ended  September  30,  1995.  This
compares to $1.2  million in loan loss  provisions  for the year  September  30,
1994. Net loan charge-offs for fiscal 1995 were $2.5 million, or .28% of average
net  loans  receivable,  versus  $1.5  million,  or  .20% of net  average  loans
receivable,  for fiscal 1994.  The  increased  provision in fiscal 1995 reflects
management's  analysis  of the  risk  elements  of the loan  portfolio,  current
delinquency   and  payment  trends   (including  the  increased  level  of  loan
charge-offs  in 1995) and the  adequacy of the  allowance  for loan  losses.  At
September 30, 1995,  Eagle's allowance for loan losses was $7.5 million,  or 67%
of loans receivable,  compared to $8.3 million, or 104% of loans receivable, one
year earlier.

Non-interest  Income -- Non-interest  income increased $1.2 million,  or 39%, to
$4.4  million for the year ended  September  30, 1995 from $3.2  million for the
same period in 1994.  The  increase is  attributable  primarily  to increases in
customer service fees, loan servicing fees and other non-interest income. Fiscal
1995 also includes a gain from the securitization of fixed rate loans classified
as held for sale of  $244,000  compared to  $120,000  recorded  from the sale of
loans during the year ended September 30, 1994.

Non-interest  Expense --  Non-interest  expense for the year ended September 30,
1995 increased $4.2 million,  or 21%, to $24.3 million compared to $20.1 million
for the year ended September 30, 1994.  Compensation and benefits were higher by
$1.4 million,  or 14%, in 1995. The net increase  results  primarily from higher
expenses  in fiscal  1995  related to the cost of  staffing  the six  additional
branch offices  acquired as part of the Bank of Hartford  acquisition  partially
offset by a one-time expense in fiscal 1994 of $740,000 before taxes relating to
the retirement of two senior officers.  A $485,000,  or 22%,  increase in office
occupancy expenses also reflects the impact of the Bank of Hartford  transaction
as  does  the  $667,000  increase  in  the  amortization  of  intangible  assets
principally  due to the  goodwill  recorded  as a result of the  transaction.  A
reduction  in the  Bank's  net  foreclosed  real  estate  from $4.3  million  at
September  30, 1994 to $2.4  million at  September  30, 1995 is  reflected  in a
reduction of $616,000,  or 45%, in the cost of real estate owned  operations  in
fiscal 1995. The Bank of Hartford  acquisition also resulted in higher operating
expenses  in a number  of  other  areas  including  federal  deposit  insurance,
marketing, data processing

                                       18
<PAGE>
expenses, office supplies, postage and telephone.

Income Taxes -- The increase in net income  before  income taxes and  cumulative
effect of  accounting  changes in fiscal 1995 versus 1994 is reflected in a $2.3
million,  or 44%, increase in income taxes for the year ended September 30, 1995
over the year ended September 30, 1994.

Cumulative  Effect  of  Accounting  Changes  --  Eagle  adopted  two  accounting
pronouncements  in the first quarter of fiscal 1994.  The  cumulative  effect of
these accounting changes, net of related tax benefits,  was to reduce net income
by approximately  $30,000 during the twelve months ended September 30, 1994. The
adoption of SFAS No. 109, "Accounting for Income Taxes," resulted in recognition
of a tax benefit of  approximately  $1.3 million  during the twelve months ended
September 30, 1994. The adoption of SFAS No. 106, "Accounting for Postretirement
Benefits  Other than  Pensions,"  resulted in a one-time  cumulative  adjustment
that, net of the related tax benefit,  reduced net income by approximately  $1.3
million.

The  following  table sets forth certain  information  relating to the Company's
average  interest-earning  assets and interest-bearing  liabilities and reflects
the average yield on assets and the average cost of liabilities  for the periods
and at the dates indicated.  During the periods indicated,  nonaccrual loans are
included in the net loans receivable category:

<TABLE>
<CAPTION>
                                                                    Years Ended September 30,
                                               1996                              1995                             1994
                                             Interest    Average               Interest   Average               Interest   Average
                                 Average      Income/     Yield/     Average    Income/    Yield/   Average     Income/     Yield/
(in thousands)                   Balance     Expense       Cost      Balance    Expense     Cost    Balance     Expense      Cost
--------------                   -------     -------       ----      -------    -------   ------    -------     -------     ------
<S>                            <C>          <C>           <C>     <C>         <C>         <C>     <C>        <C>            <C> 
Interest-earning assets: 
 Loans receivable (a) ......   $  785,769   $   61,089    7.77%    $827,127   $ 63,227    7.64%   $711,302   $   51,250     7.21%
 Mortgage-backed securities:
   Available for sale ......      338,766       23,432    6.92%      69,800      6,132    8.79%         --           --       --
   Held to maturity ........       73,381        5,496    7.49%     123,391      8,278    6.71%     66,197        4,288     6.48%
   Trading .................          732           53    7.24%          --         --      --          --           --       --
 Investment securities:
   Available for sale ......       32,792        2,124    6.48%      55,132      3,342    6.06%     17,197          810     4.71%
   Held to maturity (b) ....       10,732          708    6.60%       6,921        833   12.04%     50,875        2,953     5.80%
 Overnight investments and
   Federal funds sold ......       50,060        2,699    5.39%      18,645      1,085    5.82%     18,278          786     4.30%
                               ----------   ----------  --------  ---------   --------   -----    --------    ---------    ------
   Total ...................    1,292,232       95,601    7.40%   1,101,016     82,897    7.53%    863,849       60,087     6.96%
                               ----------   ----------  --------  ---------   --------   -----    --------    ---------    ------
Interest-bearing liabilities:
 Deposits (c)                   1,045,427       44,256    4.23%     941,371     36,449    3.87%    792,833       27,648     3.49%
 FHLB advances .............      147,641        8,504    5.76%      59,599      3,646    6.12%     21,968        1,266     5.76%
 Other borrowings ..........       52,396        3,082    5.88%      44,516      2,785    6.26%      2,450          102     4.16%
                               ----------   ----------  --------   --------   --------    ----    --------    ---------    ------
   Total ...................   $1,245,464   $   55,842    4.48%  $1,045,486   $ 42,880    4.10%   $817,251    $  29,016     3.55%
                                            ----------  --------  ---------   --------    ----    --------    ---------    ------
Net interest income ........                $   39,759                        $ 40,017                        $  31,071
                                            ==========                        ========                        =========
Average interest rate spread .                            2.92%                           3.43%                             3.41%
Net interest margin (d) ......                            3.08%                           3.63%                             3.60%
</TABLE>


(a) Interest  income  includes fees of $439,000,  $284,000 and $937,000 in 1996,
1995, and 1994, respectively.

(b) Investment securities include FHLB stock.

(c) Includes  non-interest bearing demand deposits which averaged $27.8 million,
$24.1  million and $17.4 million for fiscal 1996,  1995 and 1994,  respectively;
had these demand  deposits been  excluded  above the overall cost of funds would
have been 4.59%, 4.20% and 3.63% for fiscal 1996, 1995 and 1994, respectively.

(d) Net interest income divided by average interest-earning assets.

The  following  table  allocates the  period-to-period  changes in the Company's
various  categories of interest income and interest  expense between changes due
to changes in volume  (calculated by multiplying the change in average volume of
the related interest-earning asset or interest-bearing liability category by the
prior year's rate), changes due to changes in rate (change in rate multiplied by
prior year's volume) and changes due to changes in rate-volume  (changes in rate
multiplied by changes in volume):
<PAGE>
<TABLE>
<CAPTION>

                                                                  Years Ended September 30,
                                                             1996 v. 1995                1995 v. 1994
                                                             Rate/                                            Rate/
(in thousands)                        Rate      Volume      Volume      Total        Rate       Volume       Volume      Total
--------------                        ----      ------      ------      -----        ----       ------       ------      -----
<S>                               <C>        <C>              <C>      <C>       <C>           <C>          <C>          <C> 
Interest-earning assets:    
   Loans receivable ...........   $  1,077   $  (3,161)       $(54)    $(2,138)  $   3,123     $  8,345     $     509    $ 11,977
   Mortgage-backed securities:
     Available for sale .......     (1,304)     23,629      (5,025)     17,300          --           --         6,132       6,132
     Held to maturity .........        963      (3,355)       (390)     (2,782)        153        3,705           132       3,990
     Trading ..................         --          --          53          53          --           --            --          --
   Investment securities:
     Available for sale .......        229      (1,354)        (93)     (1,218)        232        1,787           513       2,532
     Held to maturity (a) .....       (376)        459        (208)       (125)      3,170       (2,551)       (2,739)     (2,120)
   Overnight investments and
     Federal funds sold .......        (80)      1,828        (134)      1,614         278           16             5         299
                                  --------    --------    --------    --------    --------     --------      --------    --------
     Total ....................        509      18,046      (5,851)     12,704       6,956       11,302         4,552      22,810
                                  --------    --------    --------    --------    --------     --------      --------    --------
Interest-bearing liabilities:
   Deposits ...................      3,402       4,029         376       7,807       3,050        5,180           571       8,801
   FHLB advances ..............       (213)      5,386        (315)      4,858          78        2,169           133       2,380
   Other borrowings ...........       (167)        493         (29)        297          51        1,751           881       2,683
                                  --------    --------    --------    --------    --------     --------      --------    --------
     Total ....................      3,022       9,908          32      12,962       3,179        9,100         1,585      13,864
                                  --------    --------    --------    --------    --------     --------      --------    --------
Net change in net
   interest income ............    $(2,513)    $ 8,138     $(5,883)   $   (258)   $  3,777       $2,202        $2,967     $ 8,946
                                   =======     =======     =======    ========    ========       ======        ======     =======
</TABLE>

(a) Investment securities include FHLB stock.

                                       19

<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS
                                                                                           September 30,
(in thousands, except for share data)                                                1996                 1995
                                                                                     ----                 ----
<S>                                                                             <C>                    <C>       
Assets
Cash and amounts due from depository institutions                               $   20,288             $   22,670
Interest-bearing deposits                                                           27,989                 40,637
                                                                                    ------                 ------
   Cash and cash equivalents                                                        48,277                 63,307
Investment securities available for sale
   (amortized cost: $13,458 in 1996 and $54,386 in 1995)                            13,453                 53,816
Investment securities held to maturity
   (market value: $1,036 in 1996 and $2,543 in 1995)                                   987                  2,476
Mortgage-backed securities available for sale
   (amortized cost: $375,010 in 1996 and $231,145 in 1995)                         372,018                232,160
Mortgage-backed securities held to maturity
   (market value: $77,973 in 1996 and $124,763 in 1995)                             78,102                123,625
Loans held for sale                                                                    705                  2,467
Loans, net of allowance for loan losses of
   $8,592 in 1996 and $7,457 in 1995                                               814,488                713,545
Accrued interest receivable:
   Loans                                                                             5,046                  4,900
   Investment securities                                                               563                    775
   Mortgage-backed securities                                                        3,280                  2,805
Real estate owned, net                                                               3,050                  2,439
Stock in Federal Home Loan Bank of Boston, at cost                                  10,448                  8,945
Premises and equipment, net                                                          9,796                  8,066
Prepaid expenses and other assets                                                   42,596                 17,960
                                                                                 ---------              ---------
       Total Assets                                                             $1,402,809             $1,237,286
                                                                                ----------             ----------

Liabilities and Shareholders' Equity
Liabilities:
   Deposits                                                                     $ 1,059,355            $   951,751
   Federal Home Loan Bank advances                                                  207,008                 73,150
   Repurchase agreements and other borrowed money                                    14,670                 82,317
   Advance payments by borrowers for taxes and insurance                              4,973                  5,498
   Accrued expenses and other liabilities                                            15,655                 32,110
                                                                                -----------            -----------
       Total Liabilities                                                          1,301,661              1,144,826
                                                                                -----------            -----------
Shareholders' Equity:
   Serial preferred stock, $.01 par value, 2,000,000 shares
     authorized and unissued                                                           --                     --
   Common stock, $.01 par value, 8,000,000 shares
     authorized; 4,581,440 and 4,507,197 shares issued
     at September 30, 1996 and 1995, respectively, including
     47,373 shares held in treasury                                                      46                     45
   Additional paid-in capital                                                        60,635                 59,514
   Retained earnings                                                                 42,598                 33,092
   Cost of common stock in treasury                                                    (362)                  (362)
   Employee stock ownership plan debt                                                  --                      (94)
   Net unrealized gain (loss) on available for sale securities                       (1,769)                   265
                                                                                -----------            -----------
       Total Shareholders' Equity                                                   101,148                 92,460
                                                                                -----------            -----------
       Total Liabilities and Shareholders' Equity                               $ 1,402,809            $ 1,237,286
                                                                                -----------            -----------
</TABLE>

See accompanying notes to consolidated financial statements.

                                       20

<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
                                                                               Years Ended September 30,
(in thousands, except for per share data)                                  1996          1995          1994
                                                                           ----          ----          ----


<S>                                                                       <C>          <C>            <C>    
Interest income:
   Interest and fees on loans                                             $61,089      $63,227        $51,250
   Interest on mortgage-backed securities                                  28,981       14,410          4,288
   Interest on investment securities                                        1,830        2,738          2,283
   Interest on overnight investments                                        2,694        1,085            676
   Dividends on investment securities                                       1,002        1,437          1,480
   Interest on Federal funds sold                                               5           --            110
                                                                           ------      --------      --------
       Total interest income                                               95,601       82,897         60,087
                                                                           ------      --------      --------
Interest expense:
   Interest on deposits                                                    44,256       36,449         27,648
   Interest on Federal Home Loan Bank advances                              8,504        3,646          1,266
   Interest on repurchase agreements and other borrowed money               3,082        2,785            102
                                                                            -----        -----            ---
       Total interest expense                                              55,842       42,880         29,016
                                                                           ------       ------         ------
       Net interest income                                                 39,759       40,017         31,071

Provision for loan losses                                                   2,041        1,500          1,200
                                                                            -----        -----          -----
       Net interest income after provision for loan losses                 37,718       38,517         29,871
                                                                           ------       ------         ------
Non-interest income:
   Net gain (loss) on sale of securities                                     (463)         (42)            --
   Net gain (loss) from mortgage banking activities                        (1,484)         244            120
   Gain on sale of deposits                                                15,904           --             --
   Checking account service fees                                            2,295        2,039          1,597
   Other customer service fees                                                952          781            588
   Other income                                                             1,704        1,379            861
                                                                            -----        -----            ---
       Total non-interest income                                           18,908        4,401          3,166
                                                                           ------        -----          -----
Non-interest expense:
   Compensation, taxes and benefits                                        12,441       11,088          9,703
   Office occupancy                                                         3,532        2,687          2,202
   Advertising                                                              1,579          949            571
   Net cost of real estate owned operations                                 1,190          744          1,360
   Federal insurance premium                                                1,443        2,110          1,597
   Amortization of intangible assets                                        2,276        1,414            747
   Data processing expenses                                                 1,609        1,578          1,257
   SAIF Assessment                                                          4,652           --             --
   Other                                                                    4,927        3,689          2,651
                                                                            -----        -----          -----
       Total non-interest expense                                          33,649       24,259         20,088
                                                                           ------       ------         ------
       Income before income taxes and cumulative effect of
accounting changes                                                         22,977       18,659         12,949
Income taxes                                                                9,339        7,687          5,353
                                                                            -----        -----          -----
       Income before cumulative effect of accounting changes               13,638       10,972          7,596
Cumulative effect of accounting changes                                        --           --            (30)
                                                                           ------       ------          ----- 
       Net income                                                         $13,638      $10,972         $7,566
                                                                          =======      =======         ======
Income per primary share:
   Income before cumulative effect of accounting changes                    $2.92        $2.41          $2.14
   Cumulative effect of accounting changes                                     --           --          (0.01)
                                                                           ------       ------         ------
       Net income                                                           $2.92        $2.41          $2.13
                                                                           ======       ======         ======
Income per fully diluted share:
   Income before cumulative effect of accounting changes                    $2.89        $2.38          $2.13
   Cumulative effect of accounting changes                                     --           --          (0.01)
                                                                           ------       ------         ------
       Net income                                                           $2.89        $2.38          $2.12
                                                                           ======       ======         ======
</TABLE>

See accompanying notes to consolidated financial statements.

                                       21
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                                                               Net Unrealized           
                                                                                     Cost of    Gain (Loss)     Employee
                                                                Additional            Common   on Available      Stock
                                            Common Stock         Paid-in   Retained  Stock in    for sale      Ownership
(in thousands, except  for per share data) Shares    Amount      Capital   Earnings  Treasury   Securities      Plan Debt     Total
---------------------                      ------    ------     -------   --------  --------    ----------      ---------     -----
<S>                <C>                      <C>       <C>       <C>       <C>       <C>        <C>             <C>        <C>    
Balance at October 1, 1993                  3,097     $31       $33,562   $27,928   $(362)     $     --        $(752)     $60,407

Net Income                                                                  7,566                                           7,566
Cash dividends declared, $0.69 per share                                   (2,355)                                         (2,355)
Reduction in debt related to Employee
   Stock Ownership Plan                                                                                           285         285
Exercise of stock options and other            48       1           486                                                       487
Dividend reinvestment plan                     30                   565                                                       565
Increase in net unrealized loss on
   available for sale securities                                                                     (679)                   (679)
                                            -----     -----      -----     -----     -----           -----      -----      ------
Balance at September 30, 1994               3,175      32        34,613    33,139    (362)           (679)       (467)     66,276
                                            
Net Income                                                                 10,972                                          10,972
Cash dividends declared, $0.82 per share                                   (3,627)                                         (3,627)
Reduction in debt related to Employee
   Stock Ownership Plan                                                                                           373        373
Exercise of stock options and other            37                   455                                                      455
Dividend reinvestment plan                     28                   418                                                      418 
Common stock dividend declared -10%,
   less fractional shares                     405       4         7,380    (7,392)                                            (8)
Common stock offering                         862       9        16,648                                                   16,657
Unrealized loss upon adoption of SFAS No.
   115 on October 1, 1994                                                                            (357)                  (357)
Change in unrealized gain (loss) on
   available for sale securities                                                                    1,301                  1,301
                                            -----     -----      ------   -----     -----           -----       -----     ------
Balance at September 30, 1995               4,507      45        59,514   33,092    (362)             265         (94)    92,460
                                           
Net Income                                                                13,638                                          13,638
Cash dividends declared, $0.92 per share                                  (4,132)                                         (4,132)
Reduction in debt related to Employee
   Stock Ownership Plan                                                                                            94         94
Exercise of stock options and other            48       1           508                                                      509
Dividend reinvestment plan                     26                   613                                                      613
Unrealized gain on securities transferred
   from held to maturity to available for sale                                                      1,323                  1,323
Change in unrealized gain (loss) on
   available for sale securities                                                                   (3,357)                (3,357)
                                            -----     ---       -------  -------   ------        --------        -----  --------- 
Balance at September 30, 1996               4,581     $46       $60,635  $42,598   $(362)         $(1,769)      $  --   $101,148
                                            =====     ===       =======  =======   ======        ========        =====  ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       22
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                Years Ended September 30,
(in thousands)                                                                  1996     1995       1994
                                                                                ----     ----       ----
<S>                                                                          <C>      <C>         <C>  
Operating Activities: 
   Net income                                                                $13,638  $10,972     $7,566
   Adjustments to reconcile net income to net cash provided (used) by
     operating activities:
       Provision for loan losses                                               2,041    1,500      1,200
       Provision for losses on real estate owned                                 419      333        675
       Provision for depreciation and amortization                             1,064      775        613
       Accretion of discounts and fees on loans                                 (399)    (238)      (937)
       Amortization of premiums (accretion of discounts) on
         investment and mortgage-backed securities                               897     (812)        45
       Amortization of core deposit and other intangibles                      2,276    1,414        747
       Loss on sale of premises and equipment                                     42       --         --
       Gain on sale of deposits                                              (15,904)      --         --
       Gain on trading securities                                                (64)      --         --
       Proceeds from sales of trading securities                              16,952   83,909         --
       Realized (gain) loss on sale of real estate owned                        (259)    (125)        18
       Realized loss on sale of securities, net                                  527       42         --
       Loss (gain) from mortgage banking activities, net                       1,484     (244)       (120)
       Origination of loans held for sale                                    (57,221)  (2,467)         --
       Proceeds from sale of loans held for sale                              18,732       --          --
       Increase in accrued interest receivable                                  (176)  (2,348)       (317)
       Decrease (increase) in prepaid expenses and other assets               (5,703)   8,242     (12,655)
       Loan origination fees                                                     582      352       1,016
       Increase in accrued expenses and other liabilities                      3,187    1,837       1,888
                                                                               -----    -----       -----
Net cash provided (used) by operating activities                             (17,885) 103,142        (261)
                                                                             -------  -------       ------ 

Investing Activities:
   Proceeds from sales of investment securities available for sale            25,593    2,210       2,800
   Proceeds from maturities of investment securities                          25,000   15,200       9,300
   Principal payments on investment securities available for sale              3,255    6,262          --
   Principal payments on investment securities held to maturity                   --    4,512      20,530
   Purchases of investment securities available for sale                    (22,017)   (5,742)     (4,800)
   Purchases of investment securities held to maturity                           --    (7,892)    (61,474)
   Principal payments on mortgage-backed securities available for sale       94,580    10,768          --
   Principal payments on mortgage-backed securities held to maturity          8,970    12,479      11,096
   Purchases of mortgage-backed securities available for sale              (314,399) (141,850)         --
   Purchases of mortgage-backed securities held to maturity                 (54,030)  (48,764)     (7,135)
   Proceeds from sales of mortgage-backed securities available for sale     155,566    11,164          --
   Proceeds from sales of mortgage-backed securities held to maturity            --     4,032          --
   Principal payments on loans receivable                                   127,903    95,847     129,877
   Loan originations                                                       (178,876) (155,666)   (219,904)
   Loan purchases                                                                --      (130)     (2,507)
   Proceeds from sales of loans                                                 999       152      11,153
   Decrease in real estate owned                                                 --       442       1,018
   Proceeds from sales of real estate owned                                   3,551     3,444       2,580
   Purchases of premises and equipment                                       (2,374)   (1,586)       (844)
   Proceeds from sales of premises and equipment                                713        --          --
   Increase in investment in Federal Home Loan Bank stock                    (1,503)   (2,410)       (586)
   Acquisition of loans, investments and other assets                       (39,108)       --    (155,724)
                                                                           --------     -----   ---------
Net cash used by investing activities                                      (166,177) (197,528)   (264,620)
-------------------------------------                                      ---------- ---------  ---------

See accompanying notes to consolidated financial statements.

                                       23
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

                                                                           Years Ended September 30,
(in thousands)                                                                  1996     1995       1994
                                                                                ----     ----       ----
Financing Activities:
   Net increase (decrease) in passbook, NOW and
     money market accounts                                                  (34,621)   (55,609)     8,699
   Net increase (decrease) in certificates of deposit                        73,496     58,531    (38,836)
   Assumption of deposits and liabilities of acquired banks                 235,893         --    275,986
   Sale of deposits                                                        (168,506)        --         --
   Borrowings under Federal Home Loan Bank advances                         546,238    195,875     53,275
   Principal payments under Federal Home Loan Bank advances                (412,380)  (154,500)   (37,000)
   Net increase (decrease) in repurchase agreements and
     other borrowed money                                                   (67,553)    74,873      7,065
   Net decrease in advance payments by borrowers for
     taxes and insurance                                                       (525)       (24)      (311)
   Proceeds from exercise of stock options and dividends reinvested           1,122        873      1,052
   Payment of fractional shares from stock dividend                              --         (8)        --
   Proceeds from common stock offerings                                          --     16,657         --
   Cash dividends                                                            (4,132)    (3,627)    (2,355)
                                                                            -------    -------    -------
Net cash provided by financing activities                                   169,032    133,041    267,575
-----------------------------------------                                  --------    -------     ------
                                           
Increase (decrease) in cash and cash equivalents                            (15,030)    38,655      2,694
Cash and cash equivalents at beginning of period                             63,307     24,652     21,958
------------------------------------------------                             ------     ------     ------
                                                 
Cash and cash equivalents at end of period                                  $48,277    $63,307    $24,652
                                                                            =======    =======    =======
                                             
Non-cash investing activities:
   Transfer of investment securities to investment
     securities available for sale                                             $ --   $ 53,124       $ --
   Transfer of mortgage backed securities to mortgage-backed
     securities available for sale                                           90,858     18,529         --
   Securitization of loans into mortgage-backed securities
     available for sale                                                          83     69,455         --
   Securitization of loans into trading mortgage-backed securities           16,888     83,909         --
   Securities purchased but not yet settled                                      --     20,216         --
   Transfer of loans held for sale to portfolio                              21,879         --         --
   Transfer of loans to foreclosed real estate                                4,322      2,223      3,130
                                                                             ======    =======      =====

Supplemental cash flow information:
   Interest paid                                                            $55,982    $42,146    $29,159
   Income taxes paid                                                        $14,448     $8,690     $6,078

See accompanying notes to consolidated financial statements.
</TABLE>

                                       24

<PAGE>

Notes to Consolidated Financial Statements

[1]  Accounting Policies

Principles of Consolidation
Eagle  Financial  Corp.  (the  "Holding  Company")  is the savings  bank holding
company for Eagle  Federal  Savings  Bank (the  "Bank"),  a federally  chartered
savings bank (collectively known as the "Company").  The Bank is a member of the
Federal  Home Loan  Bank  ("FHLB")  of  Boston  and is  principally  subject  to
supervision,  examination  and  regulation  by the Office of Thrift  Supervision
("OTS").  The Bank is primarily  engaged in the business of attracting  deposits
and investing  these deposits into loans secured by  residential  and commercial
real estate property,  consumer loans and securities.  Approximately  75% of the
Bank's  deposits  are  insured up to  applicable  limits by Savings  Association
Insurance  Fund ("SAIF") with the remainder of the deposits  insured by the Bank
Insurance Fund ("BIF").  Prior to January 1, 1993,  the Holding  Company had two
bank  subsidiaries,  Bristol  Federal Savings Bank and First Federal Savings and
Loan  Association  of  Torrington.  Effective  January  1,  1993,  the two  bank
subsidiaries were combined into one subsidiary,  Eagle Federal Savings Bank. All
significant intercompany balances and transactions have been eliminated.

Basis of Financial Statement Presentation
The  financial  statements  have been  prepared  in  accordance  with  generally
accepted  accounting   principles.   In  preparing  the  financial   statements,
management  is  required  to make  estimates  and  assumptions  that  affect the
reported  amounts of assets and  liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could differ from those
estimates.

Material estimates that are particularly  susceptible to change in the near term
relate to the  determination  of the allowance for loan losses and the valuation
of real estate owned. In connection with the  determination of the allowance for
loan  losses  and  the  valuation  of  real  estate  owned,  management  obtains
independent appraisals for significant properties.

While  management  uses available  information to recognize  losses on loans and
real estate  owned,  future  additions to the  allowance or  write-downs  may be
necessary based on changes in economic conditions,  particularly in Connecticut.
In  addition,  various  regulatory  agencies,  as  an  integral  part  of  their
examination process, periodically review the allowance for loan losses and value
of real estate  owned.  Such  agencies  may  require  the  Company to  recognize
additions to the allowance or write-downs based on their judgment of information
available to them at the time of their examination.

Investment and Mortgage-Backed Securities
As of October 1, 1994,  the Company  adopted  Statement of Financial  Accounting
Standards  ("SFAS") No. 115,  "Accounting  for Certain  Investments  in Debt and
Equity  Securities." SFAS No. 115 requires the classification of securities into
one of three  categories:  trading,  available  for sale,  and held to maturity.
Securities  for which  management  has the  positive  intent and ability to hold
until  maturity  are  classified  as held to  maturity  and are carried at cost,
adjusted  for  amortization  of premiums and  accretion  of  discounts  over the
estimated  terms of the  securities  utilizing  a  method,  the  result of which
approximates a level yield.  Securities that  management  intends to hold for an
indefinite  period of time are  classified as available for sale and are carried
at fair value with unrealized  gains or losses reported as a separate  component
of shareholders'  equity, net of income taxes. The underlying cost basis used in
determining the unrealized  gains and losses on available for sale securities is
adjusted  for  amortization  of premiums and  accretion  of  discounts  over the
estimated  terms of the  securities  utilizing  a  method,  the  result of which
approximates  a level  yield.  Included  in  securities  available  for sale are
securities  created  through the  securitization  of loans held in the Company's
loan portfolio.  Securities classified as trading are carried at fair value with
unrealized  gains and losses  included in income.  The Company had no securities
classified as trading as of September 30, 1996.

Prior to 1995,  marketable equity securities and mutual funds were classified as
available  for sale since they have  no stated maturity  and were carried at the
lower of aggregate cost or market value. A valuation  allowance was  established
and charged to  shareholders'  equity for the amount that the  aggregate  market
value of the  available  for sale  securities  portfolio  was less than the book
value of the  portfolio.  Other  securities  were stated at cost,  adjusted  for
amortization  of premiums and accretion of discounts over the estimated terms of
the  securities  utilizing a method,  the result of which  approximates  a level
yield.

Upon adoption of SFAS No. 115, $71.7 million of investment  and  mortgage-backed
securities  were  classified  as  available  for sale which  resulted in the net
unrealized  loss on these  securities  of $1.1  million,  net of an  income  tax
benefit of $442,000, being shown as a reduction to shareholders' equity.

Gains or losses on the sale of investment  and  mortgage-backed  securities  are
computed by the specific identification method.  Unrealized losses on investment
securities that are determined to be other than temporary are charged to income.

                                       25
<PAGE>
Revenue Recognition
Interest on loans is accrued and  credited  to income  based upon the  principal
amount  outstanding.  The accrual of interest  income is generally  discontinued
when a loan becomes 90 days past due as to principal or interest or when, in the
opinion of  management,  full  collection  of principal or interest is unlikely.
When a loan is in nonaccrual  status,  interest income is recognized only to the
extent of cash  received  and when the full  collection  of  principal is not in
doubt.  Management  may elect to  continue  the  accrual  of  interest  when the
estimated fair value of collateral is sufficient to cover the principal  balance
and accrued interest.

Net premiums on loans purchased are recognized in interest income over the lives
of the loans using a method that approximates a level yield.

Loan origination fees and certain direct loan origination costs are deferred and
the net amount  amortized as an adjustment  to the related  loan's yield using a
method the result of which  approximates a level yield. The Company is generally
amortizing  these  amounts  over  the  contractual  life of the  related  loans.
Amortization of deferred amounts is suspended when a loan becomes nonaccrual and
does not begin again until the loan is returned to accrual status.

Loans Held for Sale
First  mortgage  loans held for sale in the secondary  market are carried at the
lower of aggregate cost or market value.  Management  estimates the market value
of its portfolio  held for sale based on  outstanding  investor  commitments  or
current  investor  yield  requirements,  whichever  is  more  readily  apparent.
Securitization  of loans  held for sale  results  in the  classification  of the
resultant  securities  as trading  securities.  In the unusual  event it becomes
necessary,  loans are transferred to portfolio at the lower of aggregate cost or
market value at the date of the transfer.

Allowance for Loan Losses
The  allowance for loan losses is  maintained  at a level  believed  adequate by
management  to  absorb  probable  losses  in the  loan  portfolio.  Management's
determination  of the adequacy of the allowance is based on an evaluation of the
portfolio,  past loan loss  experience,  current  economic  conditions,  volume,
growth and composition of the loan portfolio,  and other relevant  factors.  The
allowance  for loan  losses is  increased  through  provisions  for loan  losses
charged against income.  Loans are charged against the allowance when management
has concluded the  collectibility of the loan principal is unlikely.  Recoveries
of amounts previously charged off are credited to the allowance.

Premises and Equipment
Premises  and  equipment  are  carried  at cost  less  accumulated  depreciation
computed generally by the straight-line  method over the estimated useful lives.
Amortization of leasehold improvements is computed on a straight-line basis over
the terms of related leases or the estimated useful lives, whichever is shorter.

Real Estate Owned
Real  estate  owned is  composed  of  properties  acquired  through  foreclosure
proceedings or by acceptance of a deed in lieu of foreclosure. At the time these
properties are foreclosed,  they are recorded at the lower of cost or fair value
less  selling  costs  through a direct  charge  against the  allowance  for loan
losses. Fair value is generally determined by recent appraisals. Losses in value
subsequent to foreclosure are recorded as a provision  (charge)  against income.
Gains and losses from the sale of real estate  owned are recorded in income when
realized.

Goodwill and Identifiable Intangibles
Because of the earning power or other special  values of certain  acquired banks
or bank  branches,  the  Company  paid  amounts  in excess of fair value of core
deposits  assumed and tangible  assets  purchased.  Generally,  such amounts are
being  amortized by  systematic  charges to income over a period no greater than
the  estimated  remaining  life of the  assets  acquired  or not  exceeding  the
estimated average remaining life of the existing deposit base assumed (primarily
for periods from 6 to 15 years).  On an ongoing basis,  management  assesses the
recoverability  of the  intangible  assets.  If an assessment of the  intangible
asset indicates that its  recoverability is impaired,  a charge to the statement
of income is recorded for the amount of impairment.

Loan Servicing
Loan  servicing  fees earned from the servicing of loans for others are recorded
as income when received.  Acquisition  costs of purchased loan servicing  rights
are amortized  over the  estimated  period of servicing  revenue.  The purchased
servicing  right is evaluated  periodically  for  recoverability  and should the
evaluation indicate that  recoverability is impaired,  a charge to the statement
of  income  is  recorded  for the  amount of  impairment.  Amortization  of loan
servicing  rights is recorded as an offset to servicing income received on loans
sold, included in other income.

                                       26

<PAGE>
Income Taxes
The Company files consolidated state and federal income tax returns.

In February 1992, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 109,  "Accounting for Income Taxes." SFAS No. 109 required a change from the
deferred method of accounting for income taxes to the asset and liability method
of accounting for income taxes. Under the asset and liability method of SFAS No.
109,  deferred  tax assets and  liabilities  are  recognized  for the future tax
consequences   attributable  to  differences  between  the  financial  statement
carrying  amounts of existing assets and  liabilities  and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences  are expected to be  recovered  or settled.  Under SFAS No. 109, the
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized in income in the period that includes the enactment date. The Company
adopted  SFAS No.  109 on October 1, 1993 and has  reported  the  benefit of the
cumulative  effect of  $1,273,000  in the statement of income for the year ended
September 30, 1994.

Cash Flows
Cash  and  cash  equivalents  include  cash  and  amounts  due  from  depository
institutions and interest-bearing deposits.

Net Income Per Share
Net income per share is computed by dividing net income by the  weighted-average
common shares and common stock equivalents, if dilutive,  outstanding during the
year  based  on the  treasury  stock  method.  Weighted  average  common  shares
outstanding  used to  calculate  primary  earnings  per  share  were  4,671,482,
4,560,104 and 3,551,488 in 1996, 1995 and 1994,  respectively.  Weighted average
common shares  outstanding  used to calculate  fully diluted  earnings per share
were 4,720,240,  4,614,057 and 3,575,733 in 1996,  1995 and 1994,  respectively.
All share data for all periods  prior to September  30, 1995 have been  adjusted
retroactively  to give effect to a 10% stock dividend to common  shareholders of
record on February 15, 1995.

Reclassification
Certain  1995 and 1994  amounts  have been  reclassified  to conform to the 1996
presentation for comparative purposes.  Such  reclassifications had no effect on
net income.

[2]  Acquisitions and Divestitures
On January 19, 1996, the Bank completed the  acquisition  and assumption of five
branch offices,  related  deposits and certain other assets and liabilities from
Fleet  Bank,  N.A.  and  Shawmut  Bank  Connecticut,  N.A.  (the  "Fleet/Shawmut
transaction").   The  following  assets  and  liabilities   resulting  from  the
transaction were recorded using the purchase method at fair value:

(in thousands)
Cash and amounts due from banks                                $196,785
Loans                                                            35,720
Goodwill                                                         19,914
Other assets, including premises and equipment                    1,681     
                                                               -------- 
  Total                                                        $254,100   
                                                               ========   
Deposits                                                       $253,139
Other liabilities                                                   961
                                                               --------
   Total                                                       $254,100
                                                               ========

The  operating  results  of  this  acquisition  are  included  in the  Company's
statement of income from the date of acquisition.

                                       27
<PAGE>
On June 10, 1994,  Eagle Federal acquired certain assets and assumed all insured
deposits of The Bank of Hartford from the Federal Deposit Insurance  Corporation
("FDIC").  The  acquisition  has been  accounted  for by the purchase  method of
accounting and,  accordingly,  the assets acquired and liabilities  assumed were
recorded  based  on  estimated  fair  values  at the  date of  acquisition.  The
estimated fair value of assets acquired and  liabilities  assumed at the date of
acquisition are summarized as follows:

(in thousands)
Cash and due from banks                                          $4,933
Interest-bearing deposits                                        25,503
Investment and mortgage-backed securities                        72,667
Loans                                                            80,776
Allowance for loan losses                                        (3,500)
Other assets                                                      2,330
Core deposit and other intangibles                               11,276
Deposits                                                       (272,752)
Other liabilities                                                (3,234)
                                                                 -------
Cash received from FDIC                                          $82,001
                                                                 =======

The  operating  results  of  this  acquisition  are  included  in the  Company's
statement of income from the date of acquisition.

In  connection  with the  acquisition,  the  Company  completed  a common  stock
offering  which  resulted in the sale of 862,310  shares at a price of $20.75 in
November  1994.  Net proceeds to the Company were  approximately  $16.7  million
after deducting the underwriting  discount and offering expenses.  Substantially
all of the net proceeds  received  were  contributed  to the Bank as  additional
capital.

On March 1,  1996,  the Bank  completed  the sale of seven  branch  offices  and
related  deposits to Union  Savings  Bank of  Danbury.  Deposits  totaling  $184
million  were  sold in the  transaction.  The Bank  received  a  premium  on the
deposits of 9% that  resulted in a gain of $15.9  million.  Also  included  were
loans receivable of $999,000 and premises and equipment of $713,000.

In addition to the above mentioned branch related transactions, on March 1, 1996
the Bank closed two branch  offices  that were in close  proximity to two of the
branch  offices  acquired  during the  Fleet/Shawmut  transaction.  All accounts
related to the closed branches were transferred to the newly acquired branches.

[3]  Restrictions on Cash and Amounts Due from Depository Institutions
The  Company  was  required  to maintain  certain  average  reserve  balances as
established by the Federal  Reserve Bank. The actual average reserve balance for
the period that includes September 30, 1996 was $1,727,000.

[4]  Investment Securities
The aggregate carrying amounts and market values of investment securities are as
follows:
<TABLE>
<CAPTION>
                                                          Gross     Gross
                                             Amortized  Unrealized  Unrealized    Market
(in thousands)                                    Cost     Gains    Losses         Value
                                                  ----     -----    ------         -----
<S>                                          <C>           <C>      <C>         <C>
September 30, 1996
Investment securities held to maturity:
   Corporate and other securities                 $987      $49     $  --         $1,036
                                                  ====      ===       ===         ======
Investment securities available for sale:
   U.S. Treasury securities                     $5,014      $--     $  54          $4,960
   U.S. Government agency obligations            7,000       17         5           7,012
   Corporate and other securities                1,444       37        --           1,481
                                                 -----       --        --           -----
     Total                                     $13,458      $54       $59         $13,453
                                               =======      ===       ===         =======
September 30, 1995
Investment securities held to maturity:
   U.S. Government agency obligations           $1,500      $2      $  --          $1,502
   Corporate and other securities                  976      65         --           1,041
                                                ------      --        ---           -----
     Total                                      $2,476     $67      $  --          $2,543
                                                ======     ===   ========          ======
Investment securities available for sale:
   U.S. Treasury securities                     $6,303     $22      $  --          $6,325
   U.S. Government agency obligations           20,478      28          5          20,501
   Corporate and other securities               12,296      31        302          12,025
   Mutual funds                                 15,309      --        344          14,965
                                                ------      --        ---          ------
     Total                                     $54,386     $81       $651         $53,816
                                               =======     ===       ====         =======
</TABLE>

                                       28
<PAGE>
The amortized cost and market value of debt securities at September 30, 1996, by
contractual  maturity,  are shown below.  Expected  maturities  will differ from
contractual  maturities  because  issuers  may have the  right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
                                             Held to Maturity           Available for Sale
                                             ----------------           ------------------
                                              Amortized Market        Amortized          Market
(in thousands)                                     Cost  Value             Cost           Value
--------------                                     ----  -----             ----           -----
<S>                                            <C>         <C>             <C>             <C> 
Due in one year or less                        $    --     $--             $ --            $ --
Due after one year through five years               --      --           13,078          13,071
Due after five years through ten years             902     951               72              74
Due after ten years                                 85      85              308             308
                                                  ----   -----           ------          ------
   Total                                          $987  $1,036          $13,458         $13,453
                                                  ====  ======           ======          ======
</TABLE>

Proceeds   from  sales  of  investment   securities   available  for  sale  were
$25,593,000,  $2,210,000  and $2,800,000 in 1996,  1995 and 1994,  respectively.
Gross realized gains on sales of investment  securities  available for sale were
$9,000,  $89,000 and $0 in 1996,  1995 and 1994,  respectively.  Gross  realized
losses on investment  securities available for sale were $664,000,  $194,000 and
$0 in 1996, 1995 and 1994, respectively.

Investment  securities  with a book  value of  $3,735,000  and  $1,319,000  were
pledged as collateral to secure public  deposits at September 30, 1996 and 1995,
respectively.

As required by the Federal  Home Loan Bank,  the Bank must hold FHLB stock equal
to at least 5% of outstanding  advances.  As of September 30, 1996 and 1995, the
Bank was in compliance with the Federal Home Loan Bank stock requirement.

[5]  Mortgage-backed Securities
The aggregate carrying amounts and market values of  mortgage-backed  securities
are as follows:
<TABLE>
<CAPTION>
                                                              Gross           Gross
                                      Amortized             Unrealized       Unrealized       Market
(in thousands)                          Cost                   Gains          Losses           Value
                                        ----                   -----          ------           -----
<S>                                     <C>                 <C>                 <C>            <C> 
September 30, 1996
Held to maturity:   
   GNMA                                 $12,797             $    --             $306           $12,491
   Collateralized mortgage obligations   65,305                 729              552            65,482
                                         ------                 ---              ---            ------
     Total                              $78,102                $729             $858           $77,973
                                        =======                ====             ====           =======
Available for sale:
   FHLMC                               $105,275                $878             $498          $105,655
   FNMA                                  77,639                 255              460            77,434
   GNMA                                  30,282                  18              679            29,621
   Other                                  2,065                  39               --             2,104
   Collateralized mortgage obligations  159,749                 197            2,742           157,204
                                       --------            --------          -------           -------
     Total                             $375,010              $1,387           $4,379          $372,018
                                       ========              ======           ======          ========
September 30, 1995
Held to maturity:
   FHLMC                               $ 70,878              $1,655           $  --            $72,533
   FNMA                                  11,750                 103              56             11,797
   GNMA                                     388                  31              --                419
   Collateralized mortgage obligations   40,609                 325             920             40,014
                                        -------                 ---             ---             ------
     Total                             $123,625              $2,114           $ 976           $124,763
                                       ========              ======           =====           ========
Available for sale:
   FHLMC                               $147,281              $1,513           $ 310           $148,484
   FNMA                                  61,233                 250             402             61,081
   GNMA                                   7,034                  27              --              7,061
   Other                                  2,672                  32              --              2,704
   Collateralized mortgage obligations   12,925                  --              95             12,830
                                       --------                  --              --           --------
     Total                             $231,145              $1,822           $ 807           $232,160
                                       ========              ======           =====           ========
</TABLE>

                                       29
<PAGE>
Mortgage-backed  securities primarily include participation  certificates issued
by the Government National Mortgage Association ("GNMA"),  the Federal Home Loan
Mortgage  Corporation  ("FHLMC") and the Federal National  Mortgage  Association
("FNMA"), and collateralized mortgage obligations.

Proceeds from sales of mortgage-backed  securities classified available for sale
were $155,566,000 and $11,164,000 in 1996 and 1995, respectively. Gross realized
gains on sales of mortgage-backed  securities available for sale were $1,190,000
and $309,000 in 1996 and 1995,  respectively.  Gross realized losses on sales of
mortgage-backed  securities  available for sale were  $1,062,000 and $152,000 in
1996 and 1995, respectively.  There were no sales of mortgage-backed  securities
during 1994.

Proceeds  from sales of  mortgage-backed  securities  classified as trading were
$16,952,000 and $83,909,000 in 1996 and 1995, respectively. Gross realized gains
were  $71,000  and  gross  realized  losses  were  $7,000  in 1996 on  sales  of
mortgage-backed  securities classified as trading.  There were no realized gains
or losses in 1995. These securities were created from securitized loans that had
been classified as held for sale prior to securitization.

During 1995, the Company sold a mortgage-backed  security  classified as held to
maturity  resulting in proceeds of $4.0 million and a realized  loss of $10,000.
The security was sold due to the discovery of a broker error in identifying  the
security's  repricing  characteristics  when  purchased.  The security's  actual
repricing characteristics did not match the asset/liability  parameters outlined
by the Company and, as a result, the security was repurchased by the broker.

In November  1995, the Financial  Accounting  Standards  Board  ("FASB")  issued
"Special  Report, A Guide to  Implementation  of Statement 115 on Accounting for
Certain  Investments  in Debt and Equity  Securities"  that provides  additional
guidance  relating to the  application  of SFAS No. 115. In connection  with the
issuance of this Special Report the FASB allowed all  organizations  the ability
to  review  the  current  portfolio  classification  between  held to  maturity,
available  for  sale  and  trading  and  make  a  one-time  reclassification  of
securities  between  categories  during the period  from  November  15,  1995 to
December 31, 1995.

Effective  December  1,  1995,  the Bank  made a  one-time  reclassification  of
securities  from the held to maturity  classification  to the available for sale
classification  in accordance with the Special Report.  A total of $90.9 million
of mortgage-backed  securities were reclassified resulting in an unrealized gain
of  approximately  $1.3  million,  net of income tax expense of $882,000,  being
recorded as an increase to shareholders' equity.

                                       30
<PAGE>

[6] Loans
Loans consisted of the following:
                                                            September 30,
(in thousands)                                         1996              1995
                                                       ----              ----
Real estate mortgage loans:
  Residential - One-to-four family                   $ 666,815        $ 604,064
  Residential - Multi-family                            15,471           16,694
  Residential - Construction                            14,413           12,014
  Commercial real estate                                39,510           15,025
  Land                                                   8,555            6,804
                                                     ---------        ---------
                                                       744,764          654,601
                                                     ---------        ---------
Other loans:
  Home equity lines of credit                           38,375           37,018
  Second mortgages                                      27,526           21,750
  Commercial                                             6,863              883
  Consumer                                               7,182            7,731
                                                     ---------        ---------
                                                        79,946           67,382
                                                     ---------        ---------
Unearned discounts and premiums                           (350)             137
Deferred loan origination fees                          (1,280)          (1,118)
Allowance for loan losses                               (8,592)          (7,457)
                                                     ---------        ---------
   Total                                             $ 814,488        $ 713,545
                                                     =========        =========

During  1996,  the Company  began an ongoing  program to identify and sell newly
originated  mortgage loans into the secondary  market.  This program resulted in
the sale or securitization and subsequent sale of approximately $35.6 million of
mortgage loans during 1996 with a resulting loss of approximately  $1.5 million.
The Company also transferred  approximately $21.9 million of fixed rate mortgage
loans from held for sale to portfolio  at estimated  market value at the date of
transfer.  The loans were transferred at a discount of  approximately  $610,000.
The  transfer  was  primarily  due to the  determination  that the loans,  after
initial  classification  as held for sale,  were not  underwritten  to secondary
market standards.

In fiscal 1995, the Company securitized  approximately $154.2 million of 30 year
fixed  rate  loans  into  FHLMC   mortgage-backed   securities.   Of  the  total
securitized,  $83.9 million were sold  immediately upon  securitization  under a
forward  commitment.  This  transaction  resulted  in a  gain  of  approximately
$244,000  recorded  in income.  The  securitization  was  completed  in order to
improve the  asset/liability  position of the Bank by  replacing  the fixed rate
loans with adjustable rate mortgage-backed securities.

The Company sold $10 million of 30-year  fixed rate loans to the FHLMC in fiscal
1994. This transaction resulted in a gain of approximately $120,000.

At September 30, 1996,  1995 and 1994,  loans serviced for the benefit of others
approximated $242.6 million, $234.8 million and $95.1 million, respectively.

Changes in the allowance for loan losses were as follows:

                                            Years Ended September 30,
(in thousands)                                  1996         1995        1994
                                                ----         ----        ----
Balance at beginning of year                  $ 7,457      $ 8,311      $ 5,005
Charge-offs                                    (2,863)      (2,476)      (1,506)
Recoveries                                         86          122          112
Provision for loan losses                       2,041        1,500        1,200
Allowance associated with purchase              1,871           --        3,500
                                              -------      -------      -------
Balance at end of year                        $ 8,592      $ 7,457      $ 8,311
                                              =======      =======      =======

                                       31

<PAGE>
Non-performing loans approximated $9.3 million and $11.1 million as of September
30, 1996 and 1995, respectively.  If these loans had been current, in accordance
with their original terms,  additional  interest income would have been recorded
in the amounts of  $601,000,  $577,000  and  $503,000  for 1996,  1995 and 1994,
respectively.

As of October  1,  1995,  the  Company  adopted  SFAS No.  114,  "Accounting  by
Creditors for  Impairment of a Loan" and SFAS No. 118,  "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures." SFAS No. 114 and
SFAS  No.  118  require  that  creditors  evaluate  the  collectibility  of both
contractual interest and principal of all loans when identifying impaired loans.
Impaired loans shall have impairment  measured based on the present value of the
expected future cash flows discounted at the loan's effective interest rate, the
observable  market price of the loan, or the fair value of the collateral if the
loan is  collateral-dependent.  Large groups of  small-balance  homogenous loans
that are collectively  evaluated for impairment such as residential and consumer
loans can be excluded from evaluation as impaired  loans.  The adoption of these
statements had no impact on the results of operations.

At September 30, 1996, the Company had $6.8 million of impaired  loans, of which
$6.2  million had an  impairment  reserve of $407,000  attributed  to them.  The
remaining  $600,000  of  impaired  loans  did  not  have an  impairment  reserve
attributed to them.  The average  balance of impaired loans was $5.4 million for
the year  ended  September  30,  1996.  The  impairment  reserve  represents  an
allocation from the existing allowance for loan losses. 

The Company's  method for  recognition  of interest  income on impaired loans is
consistent  with the method for  recognition  of  interest  income on all loans.
Interest income recognized on impaired loans totaled $249,800 for the year ended
September 30, 1996.

At  September  30,  1996,  the Company had $4.0  million of  restructured  loans
outstanding.  The entire amount of the restructured loans are performing and are
included in the reported amount of impaired loans of $6.8 million.

[7] Loans to Related Parties
The Company has granted  loans to officers  and  directors of the Company and to
their  associates.  Related party loans are made on substantially the same terms
as those  prevailing  at the time for  comparable  transactions  with  unrelated
persons,  except  that prior to fiscal year 1991  officers  and  directors  were
granted a 1% discount on the interest rate for mortgage and property improvement
loans. Management believes that these loans do not involve more than normal risk
of collectibility.

The aggregate  dollar  amount of loans to officers and  directors  (exclusive of
loans to any such persons which in the aggregate did not exceed  $60,000  during
the year) and the activity therein was as follows:

                                          Years Ended September 30,
(in thousands)                            1996             1995
                                          ----             ----
Balance at beginning of year            $ 6,265          $ 5,810
New loans                                    10            1,417
Repayments                                 (469)            (962)
Other changes                              (590)            --
                                        -------          -------
Balance at end of year                  $ 5,216          $ 6,265
                                        =======          =======
Other changes  represent sales of loans to the secondary market,  $310,000,  and
the resignation of an officer from the Bank, $280,000.

[8] Real Estate Owned
Real estate owned consisted of the following:

                                             September 30,
(in thousands)                          1996               1995
                                        ----               ----
Properties acquired through foreclosure  $3,109           $2,617
Valuation allowance                         (59)            (178)
                                           ----            -----
   Total                                 $3,050           $2,439
                                         ======           ======

The following summarizes the activity in the valuation allowance for real estate
owned:

                                            Years Ended September 30,
(in thousands)                          1996          1995         1994
                                        ----          ----         ----
Balance at beginning of year            $ 178        $ 465        $  35
Charge-offs                              (538)        (620)        (245)
Provisions for losses                     419          333          675
                                        -----        -----        -----
Balance at end of year                  $  59        $ 178        $ 465
                                        =====        =====        =====

                                       32

<PAGE>
The net cost of real estate owned operations was as follows:


                                                   Years Ended September 30,
(in thousands)                                 1996          1995          1994
--------------                                 ----          ----          ----
                                      
Net loss (gain) from sales                   $  (259)      $  (125)      $    18
Provisions for losses                            419           333           675
Expenses of holding real estate
   owned, net of rental income                 1,030           536           667
                                             -------       -------       -------
   Total                                     $ 1,190       $   744       $ 1,360
                                             =======       =======       =======

[9] Premises and Equipment
The following is a summary of premises and equipment:

                                                              September 30,
(in thousands)                                              1996        1995
                                                            ----        ----
Land                                                     $    609      $    690
Premises and leasehold improvements                         8,021         6,939
Furniture, fixtures and equipment                           6,639         5,835
                                                         --------      --------
                                                           15,269        13,464
Less accumulated depreciation and amortization             (5,473)       (5,398)
                                                           ------        ------ 
   Total                                                 $  9,796      $  8,066
                                                           ======        ======

The Company leases office space and several branch office sites under  operating
lease  arrangements.  Certain  of the lease  arrangements  provide  for  renewal
options  and rent  escalation  clauses.  Rental  expense  for leased  facilities
included in operating expenses was approximately $604,000, $446,000 and $470,000
for 1996, 1995 and 1994, respectively.

In 1992,  Bristol  Federal  Savings Bank entered into two lease  agreements  for
office space and a branch site with a director-related  corporation.  The leases
were for an initial term of five years and seven years,  respectively,  and have
renewal options which extend for an additional  five years.  Total lease expense
for the office space and branch site was $75,200,  $71,700 and $69,017 for 1996,
1995 and 1994, respectively.

The future minimum rental  commitments for the leased facilities as of September
30, 1996 were as follows:

(in thousands)
1997                                    $792
1998                                     627
1999                                     438
2000                                     254
2001                                     223
thereafter                               532
                                         ---
   Total                              $2,866
                                      ======

[10] Prepaid  Expenses and Other Assets 

A summary of prepaid expenses and other assets follows:

                                           September 30,
(in thousands)                          1996           1995
                                        ----           ----
Core deposit intangibles             $ 1,460          $ 2,527
Goodwill                              25,530            7,342
Mortgage servicing rights                592              716
Deferred tax assets, net               2,636            3,451
Income tax receivable                  7,595             --
Other assets                           4,783            3,924
                                     -------          -------
   Total                             $42,596          $17,960
                                     =======          =======

Goodwill  increased  significantly in 1996 reflecting the  Fleet/Shawmut  branch
acquisition.

A summary of the activity of mortgage servicing rights was as follows:

                                         Years Ended September 30,
(in thousands)                          1996      1995        1994
                                        ----      ----        ----
Balance at beginning of year        $ 716        $ 839        $ --
Servicing from acquired bank           --           --          880
Amortization                         (124)        (123)         (41)
                                    -----        -----        -----
Balance at end of year              $ 592        $ 716        $ 839
                                    =====        =====        =====

                                       33
<PAGE>
The following table shows activity in goodwill and core deposit intangibles:

                                                      Total Goodwill
                                         Core Deposit & Core Deposit Accumulated
(in thousands)                  Goodwill  Intangibles  Intangibles  Amortization
--------------                  --------  -----------  -----------  ------------
Balance at September 30, 1993    $     --      $1,861    $  1,861    $    788
Intangible assets recorded          7,995       2,402      10,397
Amortization of intangibles          (161)       (586)       (747)        747
                                  --------    --------    --------    --------
Balance at September 30, 1994       7,834       3,677      11,511       1,535
Amortization of intangibles          (492)       (922)     (1,414)      1,414
Other adjustments                    --          (228)       (228)
                                 --------    --------    --------    --------
Balance at September 30, 1995       7,342       2,527       9,869       2,949
Intangible assets recorded         19,914        --        19,914
Write-off due to branch sale         --          (517)       (517)
Amortization of intangibles        (1,726)       (550)     (2,276)      2,276
                                 --------    --------    --------    --------
Balance at September 30, 1996    $ 25,530    $  1,460    $ 26,990    $  5,225
                                 ========    ========    ========    ========

Other  adjustments  represent the  realization of tax benefits due to changes in
tax law related to amortization of intangibles.
<TABLE>
<CAPTION>

[11] Deposits

Deposit balances consisted of the following:

                                                              September 30,
(in thousands)                                    1996                          1995
                                                     Weighted                           Weighted
                                                      Average                            Average
                                          Amount         Rate            Amount             Rate
                                          ------         ----            ------             ----
<S>                                    <C>              <C>           <C>               <C>
Non-interest bearing                   $   30,260         --%          $   27,913            --%
Passbook account                          144,728        2.00             143,271           1.99
NOW accounts                               90,758        0.98              80,625           1.04
Money market accounts                      94,510        2.78             104,428           2.71
                                       ----------        ----          ----------            ----
                                          360,256        1.78             356,237           1.83
                                       ----------        ----          ----------            ----
Certificate accounts with
original maturities of:
   Six months or less                      83,514        4.59              57,383           4.64
   Over six months to one year            289,815        5.14             178,098           5.69
   Over one year to two years              98,986        5.55             145,895           5.57
   Over two years                         226,784        6.05             214,138           6.09
                                       ----------        ----          ----------            ----
                                          699,099        5.43             595,514           5.70
                                       ----------        ----           ----------         ----
   Total                               $1,059,355        4.19%         $  951,751           4.25%
                                       ==========        ====          ==========            ====
</TABLE>

The interest  rates in effect as of  September  30, 1996 were 2.00% for passbook
accounts,  0.50% for NOW  accounts,  2.50% for money market  accounts and ranged
from  2.96%  for a one  month  certificate  account  to  5.84%  for a four  year
certificate account.

Interest on deposits is summarized as follows:
                                     Years Ended September 30,
(in thousands)              1996            1995              1994
--------------              ----            ----              ----
Passbook accounts         $ 2,989         $ 2,992           $ 2,966
NOW accounts                  802             719               777
Money market accounts       2,766           3,313             3,929
Certificate accounts       37,699          29,425            19,976
                          -------         -------           -------
   Total                  $44,256         $36,449           $27,648
                          =======         =======           =======

Interest forfeitures  resulting from early withdrawals from certificate accounts
are credited to interest on deposits.  Interest forfeitures reducing the cost of
interest on deposits  amounted to $145,000,  $198,000 and $95,000 for 1996, 1995
and 1994, respectively.

The total amount of time deposit  accounts of $100,000 or more was $63.3 million
at September 30, 1996.

                                       34
<PAGE>


The  following  table sets forth the  maturities  of time  deposit  accounts  at
September 30, 1996:

(in thousands)                                        Amount
                                                      ------
Under one year                                       $477,260
Between one year and two years                        102,261
Between two years and three years                      59,160
Between three years and four years                     44,943
Between four years and five years                      13,211
More than five years                                    2,264
                                                        -----
  Total                                              $699,099

[12] Federal Home Loan Bank Advances,  Repurchase  Agreements and Other Borrowed
Money 

FHLB advances consisted of the following:

                                        September 30,
(in thousands)                  1996                     1995
                                ----                     ----
                                    Interest                   Interest
                     Balance          Rate      Balance          Rate
                    --------          -----     -------          -----
Short-term advances $ 97,235          5.54%     $46,650          5.97%
                    --------          -----     -------          -----
Long-term advances:
Due 1996                  --            --        7,000          4.89
Due 1997              21,500          5.64        6,000          6.30
Due 1998              46,200          5.57        8,000          6.06
Due 1999              17,427          5.65        2,000          6.10
Due 2000               8,500          5.98        1,000          6.48
Due 2001               4,550          6.76        2,500          7.38
Due 2003               4,762          6.14           --            --
Due 2006               3,881          6.31           --            --
Due 2011               2,953          6.60           --            --
                    --------          -----     -------          ---- 
                     109,773          5.75       26,500          5.94
                    --------          ----     --------          ----
Total               $207,008          5.65%    $ 73,150          5.96%
                    ========          ====     ========          ====

Repurchase agreements and other borrowed money consisted of the following:

                                               September 30,
(in thousands)                         1996                    1995
                                       ----                    ----
                                           Interest                Interest
                               Balance       Rate      Balance       Rate
                               -------     --------    -------     --------
Repurchase agreements,      
due within one year            $14,670      5.22%      $82,223      5.89%
Employee Stock Ownership
Plan debt                           --        --            94      8.68
                               -------      ----       -------      ----
   Total                       $14,670      5.22%      $82,317      5.89%
                               =======      ====       =======      ====

The entire amount of repurchase  agreements at September 30, 1996 of $14,670,000
represents  agreements  to  repurchase  the  same  securities.   The  securities
collateralizing  the  repurchase  agreements,   which  are  being  held  by  the
counterparty to the agreement, consisted of the following:

                                   Amortized       Accrued       Market
(in thousands)                          Cost      Interest        Value
                                        ----      --------        -----
FHLMC mortgage-backed securities      $ 1,661      $    21      $ 1,677
FNMA mortgage-backed securities        11,693           76       11,715
U.S. Treasury notes                     2,682           35        2,654
                                      -------      -------      -------
   Total                              $16,036      $   132      $16,046
                                      =======      =======      =======

                                       35

<PAGE>
The following table summarizes information regarding short-term borrowings:

                                                      Years Ended September 30,
(in thousands)                                   1996       1995         1994
                                                 ----       ----         ----
Short-term FHLB advances:
   Maximum amount outstanding at any month-end  $98,255     $63,665     $10,650
   Average amount outstanding                    72,049      35,343       3,900
   Weighted average interest rate                  5.60%       5.83%       5.26%
Repurchase agreements:
   Maximum amount outstanding at any month-end  $85,200     $84,200     $13,300
   Average amount outstanding                    52,300      44,500       2,446
   Weighted average interest rate                  5.88%       6.26%       4.16%

In accordance with an agreement with the FHLB of Boston, the Bank is required to
maintain  qualified  collateral,  as defined in the FHLB of Boston  Statement of
Credit Policy, free and clear of liens, pledges and encumbrances,  as collateral
for the advances.  The FHLB of Boston  Statement of Credit Policy grants members
the ability to borrow up to the value of the member's qualified  collateral that
has not been  pledged to outside  sources.  Members  whose  total  indebtedness,
including borrowings from outside sources, exceeds 30% of assets are required to
list and  segregate  collateral  in a  sufficient  amount to cover the amount of
advances  outstanding.  Advances  are secured by the Bank's  investment  in FHLB
stock and a blanket  security  agreement.  The Bank has a capacity  to borrow an
additional  $481 million in advances from the FHLB of Boston as of September 30,
1996. The Bank has a preapproved line of credit up to 2% of total assets.

In connection  with its purchase of the Company's  common stock during 1987, the
Employee Stock Ownership Plan ( "ESOP")  borrowed  $1,163,000  under a term note
maturing in 1997 with interest due  quarterly at 82.5% of the lender's  floating
prime rate. In 1991, the ESOP borrowed $759,000 to purchase additional shares of
the Company's  common stock under a term note maturing in 1997 with interest due
quarterly at the lender's  floating prime rate plus .25%.  The Company  reflects
the ESOP debt as borrowed  money and as a  reduction  of  shareholders'  equity.
During  1996,  the  Company  repaid  all  amounts  due under the  aforementioned
borrowings.

[13] Income Taxes
As  discussed  in note  1,  the  Company  has  adopted  Statement  of  Financial
Accounting  Standards  No. 109,  "Accounting  for Income Taxes" as of October 1,
1993. The cumulative  effect of this change in accounting for income taxes was a
benefit of $1,273,000  and is a component of the amount shown as the  cumulative
effect of accounting changes in the statement of income for fiscal 1994.

Charges for income taxes in the Consolidated  Statements of Income comprised the
following:

                                                   Years Ended September 30,
(in thousands)                                   1996         1995       1994
                                                 ----         ----       ----
Current:
   Federal                                       $5,554     $5,540      $4,968
   State                                          1,561      1,831       1,708
                                                  -----      -----       -----
                                                  7,115      7,371       6,676
                                                  -----      -----       -----
Deferred:
   Federal                                        1,666        212       (998)
   State                                            558        104       (325)
                                                    ---        ---       -----
                                                  2,224        316     (1,323)
                                                  -----        ---     -------
Total:
   Federal                                        7,220      5,752       3,970
   State                                          2,119      1,935       1,383
                                                  -----      -----       -----
                                                 $9,339     $7,687      $5,353
                                                 ======     ======      ======

The  actual  income  tax  expense  for  1996,  1995  and 1994  differs  from the
"expected"  income tax expense for those years  (computed  by applying  the U.S.
federal statutory corporate tax rate of 35%) as follows:

                                                       Years Ended September 30,
(in thousands)                                           1996     1995     1994
                                                         ----     ----     ----
Expected income tax on income before income taxes        $8,042  $6,531  $4,532
Increase (decrease) in income taxes resulting from:
  State income taxes, net of federal income tax benefit   1,377   1,258     898
  Other, net                                                (80)   (102)    (77)
                                                          -----   -----    ----
   Total                                                  $9,339 $7,687   $5,353
                                                          ------ ------   ------

                                       36
<PAGE>

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:

                                                                  September 30,
(in thousands)                                                  1996        1995
                                                                ----        ----
Deferred tax assets:
   Deferred loan fees                                        $    --    $   462
   Post-retirement benefits                                    1,484      1,006
   Deferred compensation                                         239        428
   Loans receivable, principally due to allowance for
      loan losses                                              2,368      2,738
   Intangibles                                                   406        700
   Unrealized loss on securities available for sale            1,228         --
   Other miscellaneous                                           320        466
                                                             -------    -------
Total gross deferred assets                                    6,045      5,800
                                                             -------    -------
Deferred tax liabilities:
   Premises and equipment, principally due to differences
      in depreciation                                         (1,155)    (1,156)
   Tax discount on acquired loans                             (1,698)    (1,013)
   Deferred loan fees                                           (556)        --
Unrealized gain on securities available for sale                  --       (180)
                                                             -------    -------
Total gross deferred tax liabilities                          (3,409)    (2,349)
                                                             -------    -------
Net deferred tax asset                                       $ 2,636    $ 3,451
                                                             =======    =======

The  valuation  allowance  for deferred tax assets as of September  30, 1996 and
1995 was $0.  There was no change in the  valuation  allowance  during the years
ended September 30, 1996 and 1995.

In order to fully  realize the net deferred tax asset,  the Company will need to
either  generate  tax losses to carryback to recover  taxes  previously  paid or
generate future taxable income.  Based upon the Company's historical and current
pre-tax  earnings,  management  believes  it is more  likely  than  not that the
Company will realize the gross deferred tax assets.

The Company has not  provided  deferred  income  taxes for the Bank's tax return
reserve for bad debts that arose in tax years  beginning  before  September  30,
1988  because  it is not  expected  that this  difference  will  reverse  in the
foreseeable  future. The cumulative net amount of temporary  differences related
to the reserve for bad debts for which deferred taxes have not been provided was
approximately  $8.9 million at September  30, 1996. If the Company does not meet
the  remaining  income tax  requirements  of IRC section  593, as amended by The
Small  Business Job Protection Act of 1996, the Bank could incur a tax liability
for the  previously  deducted  tax return  loan losses in the year in which such
requirements are not met. This potential  liability for which no deferred income
taxes have been  provided was  approximately  $3.7  million as of September  30,
1996.

                                       37
<PAGE>

[14] Stock Option Plans
At  September  30, 1996,  1995 and 1994,  683,991,  733,171 and 300,587  shares,
respectively,  were  reserved  for issuance in  connection  with  incentive  and
non-incentive  stock  option  plans for the benefit of  directors,  officers and
other full-time employees.

Under the Company's  stock option plans,  options have been granted for terms up
to ten years at not less than the fair value of the shares at the dates of grant
and are exercisable at date of grant.

                                                  Shares under      Option price
                                                  stock option    plan per share
                                                  ------------    --------------
Outstanding and exercisable at September 30, 1991      270,656    $6.36 -- 10.46
   Exercised                                           (37,721)    6.36 -- 10.13
   Granted                                              69,326    10.13 -- 15.38
                                                      --------    --------------
Outstanding and exercisable at September 30, 1992      302,261     6.36 -- 15.38
   Stock dividend                                       30,226
   Exercised                                           (79,483)    5.78 -- 13.98
   Granted                                              41,953    15.34 -- 18.18
   Canceled                                                (10)
                                                      --------    --------------
Outstanding and exercisable at September 30, 1993      294,947    5.78  -- 18.18
   Exercised                                           (48,226)   5.78  -- 15.34
   Granted                                              46,750    19.375-- 23.00
                                                      --------    --------------
Outstanding and exercisable at September 30, 1994      293,471     5.78 -- 23.00
   Stock dividend                                       29,347
   Exercised                                           (37,473)    5.25 --  8.41
   Granted                                             162,800    18.18
                                                      --------    --------------
Outstanding and exercisable at September 30, 1995      448,145     5.25 -- 20.91
   Exercised                                           (49,180)    5.25 -- 18.41
                                                      --------    --------------
Outstanding and exercisable at September 30, 1996      398,965    $5.25 -- 20.91
                                                      ========    ==============

At September 30, 1996,  40,600 options were  outstanding but not yet exercisable
at option  prices  from  $23.00 to $25.75.  The options  become  exercisable  as
follows: 2,000 in fiscal 1997, 2,000 in fiscal 1998, 4,200 in fiscal 1999, 2,200
in fiscal 2000 and 30,200 in fiscal 2001.

                                       38

<PAGE>

[15] Restriction on Subsidiary Dividends
The  Company's  ability  to  pay  dividends  to  shareholders  is  substantially
dependent on funds received from the Bank.  Regulations governing the payment of
dividends  by savings  institutions,  as set forth by the OTS,  establish  three
tiers of  institutions  for purposes of determining  the level of dividends that
can be paid.  Under these rules,  the Bank is able to pay dividends in an amount
equal to one-half of their surplus capital at the beginning of the year plus all
net income for the calendar year. The OTS regulations permit the OTS to prohibit
capital distributions in certain circumstances.

[16]  Regulatory Matters
The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate certain mandatory,  and possibly additional  discretionary,  actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Bank's consolidated financial statements.  Under capital adequacy guidelines and
the  regulatory  framework  for  prompt  corrective  action,  the Bank must meet
specific  capital  guidelines that involve  quantitative  measures of the Bank's
assets,  liabilities,  and certain  off-balance-sheet  items as calculated under
regulatory accounting  practices.  The Bank's capital amounts and classification
are also subject to qualitative  judgments by the regulators  about  components,
risk weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Bank to maintain  minimum amounts and ratios (set forth in the table
below) of total capital (as defined in the regulations) to risk-weighted  assets
(as defined),  and tangible and core capital (as defined) to tangible assets (as
defined).  Management believes that as of September 30, 1996, the Bank meets all
capital adequacy requirements to which it is subject.

As of September 30, 1996, the most recent  notification from the OTS categorized
the  Bank  as  well  capitalized  under  the  regulatory  framework  for  prompt
corrective  action. To be categorized as well capitalized the Bank must maintain
minimum risk-based,  tangible and core capital ratios as set forth in the table.
There are no  conditions  or events  since  that  notification  that  management
believes have changed the institution's category.

The Bank's  actual  capital  amounts and ratios are  presented in the  following
table in addition  to the  minimum  capital  requirements  and  well-capitalized
capital requirements.
<TABLE>
<CAPTION>

                                                                                                                To Be Well
                                                                                                             Capitalized Under
                                                                      For Capital                            Prompt Corrective
(in thousands)                       Actual                        Adequacy   Purposes                       Action Provisions
                                  Amount  Ratio                 Amount                Ratio              Amount                Ratio
<S>                               <C>      <C>                 <C>                    <C>               <C>                    <C> 
As of September 30, 1996:
   Tangible capital requirement  $74,566   5.42%  greater than $20,641  greater than  1.5% greater than  $68,805  greater than  5.0%
   Core capital requirement       74,566   5.42   greater than  41,283  greater than  3.0  greater than   68,805  greater than  5.0
   Risk-based capital requirement 81,953  13.89   greater than  47,186  greater than  8.0  greater than   58,982  greater than 10.0

As of September 30, 1995:
   Tangible capital requirement   $80,751   6.59% greater than $18,385  greater than  1.5% greater than  $61,285  greater than  5.0%
   Core capital requirement        80,751   6.59  greater than  36,787  greater than  3.0  greater than   61,285  greater than  5.0
   Risk-based capital requirement  86,196  15.31  greater than  44,743  greater than  8.0  greater than   55,928  greater than 10.0
</TABLE>

[17] Employee Benefit Plans
The Bank  maintains a  noncontributory  trustee  defined  benefit  pension  plan
through the Financial  Institutions  Retirement  Fund (the "Fund")  covering all
eligible  employees.  The plan is part of a multi-employer plan in which details
as to the Bank's  relative  positions are not readily  determinable.  Therefore,
information  relating  to the value of vested  and  nonvested  accumulated  plan
benefits  and  assumed  rates of return used in  determining  such values is not
disclosed.  Employer  contributions  to the  Fund in 1996,  1995  and 1994  were
$396,000, $123,000 and $394,000, respectively, and these amounts are expensed to
operations in the year  contributed.  The 1995  contribution  amount is net of a
one-time credit received from the Fund of $221,000.


                                       39
<PAGE>
The Company sponsors an ESOP that covers  substantially all full-time employees.
The  Company  makes  annual  contributions  to the ESOP equal to the ESOP's debt
service.  The Company may, from time to time, also  contribute  funds that allow
for the  purchase  of  shares  by the ESOP on the  open  market.  All  dividends
received by the ESOP are allocated to employees' accounts.  The ESOP shares were
initially pledged as collateral against the debt. As the debt is repaid,  shares
are released from  collateral  and allocated to active  employees,  based on the
proportion  of debt service paid during the year.  Accordingly,  the debt of the
ESOP is recorded as debt and the shares  pledged as collateral are reported as a
reduction of shareholders'  equity in the consolidated  balance sheets. The ESOP
shares were as follows:
                                                              September 30,
                                                          1996            1995
                                                          ----            ----
Allocated shares                                         229,564         194,734
Shares released for allocation                            19,993          35,369
 Unreleased shares                                            --           7,509
                                                         -------         -------
    Total ESOP shares                                    249,557         237,612
                                                         =======         =======

A summary of the  components  of ESOP  contribution  expense by the  Company for
1996, 1995 and 1994 is as follows:

(in thousands)                                       1996        1995       1994
                                                     ----        ----       ----
Principal component                                   $ 94       $373       $285
Interest component                                      10         31         42
Purchase of shares on open market                      309         --         --
                                                      ----       ----       ----
     Total contribution expense                       $413       $404       $327
                                                      ====       ====       ====

Effective in the first quarter of fiscal 1995, the Bank  established an employee
savings  plan under  Section  401(k) of the  Internal  Revenue  Code.  Under the
savings  plan,  the Bank will  match  $0.25 for  every  $1.00 of the  employee's
contribution which is not in excess of 4% of the employee's total  compensation.
The Bank  recorded  an  expense  related  to the  savings  plan in the amount of
$94,000  and  $41,000  for  the  years  ended   September  30,  1996  and  1995,
respectively.  Included in the 1996 expense is an additional  match of $0.25 for
every $1.00 of the amount contributed by employees in 1995.

Included in the fiscal 1994 results of operations is a one-time  pre-tax  charge
of $740,000 related to the retirement of two senior officers.

[18] Other Postretirement Benefit Plans
In addition to the  Company's  defined  benefit  pension  plan,  Eagle  provides
medical and dental insurance programs to its retirees.  The retiree programs are
first available at age 60 with 25 years of service or at age 65 with 10 years of
service.  All covered  retirees are required to  contribute to the cost of their
coverage and the provisions may be changed at the discretion of the Company.

In fiscal 1994,  the Company  adopted SFAS No. 106,  "Employers'  Accounting for
Postretirement   Benefits  Other  Than  Pensions,"  and  elected  the  immediate
recognition of the transition obligation.  Upon adoption, the Company recognized
the accumulated postretirement benefit obligation of $2,194,000 which, net of an
income tax benefit of $891,000, decreased 1994 net income by $1,303,000 and is a
component of the amount shown as the cumulative effect of accounting  changes in
the consolidated statement of income.

The following  table sets forth the plans' funded status and amounts  recognized
in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
                                                                                        September 30,
(in thousands)                                                                          1996     1995
<S>                                                                                  <C>        <C>
Accumulated postretirement benefit obligation:
   Retirees                                                                          $  (988)   $  (967)
   Fully eligible active plan participants                                              (103)      (315)
   Other active plan participants                                                       (222)      (309)
                                                                                     -------    -------
   Accumulated postretirement benefit obligation                                      (1,313)    (1,591)
Plan assets at fair value                                                                 --         --
                                                                                     -------    -------
Accumulated postretirement benefit obligation in excess of
   plan assets                                                                        (1,313)    (1,591)
Unrecognized prior service cost                                                         (374)      (615)
Unrecognized net loss                                                                   (349)      (124)
                                                                                     -------    -------
Net postretirement benefit liability included in other liabilities                   $(2,036)   $(2,330)
                                                                                    ========   ========
</TABLE>

                                       40

<PAGE>
Assumptions   used  in   determining   the   actuarial   present  value  of  the
postretirement benefit obligation are as follows:

                                                Years Ended September 30,
                                                1996      1995      1994
                                                ----      ----      ----
Discount rate                                   7.75%     7.5%        8%
Rate of increase on health care costs
   Initial                                         9%      10%       13%
   Ultimate                                        5%       6%        6%
                                                ====      ====      ===-
                                                
The  resulting  net periodic  postretirement  benefit  expense  consisted of the
following components:

                                                     Years Ended September 30,
(in thousands)                                     1996        1995        1994
                                                  -----       -----       -----
Service cost--
  benefits earned during the period               $  33       $  32       $  56
Interest cost on accumulated
  postretirement benefit obligation                 119         115         118
Actual return on plan assets                         --          --          --
Net amortization                                    (43)        (45)        (32)
                                                  -----       -----       -----
   Net postretirement benefit expense             $ 109       $ 102       $ 142
                                                  =====       =====       =====

The  weighted-average  annual assumed rate of increase in the per capita cost of
covered  benefits is 9% for 1996 and is assumed to decrease by 1% annually to 5%
in 2001 and remain at that level  thereafter.  This  health care cost trend rate
assumption  has a significant  effect on the amounts  reported.  To  illustrate,
increasing the assumed  health care cost trend rates by one percentage  point in
each year would increase the accumulated postretirement benefit obligation as of
September  30, 1996 by 9%, and the  aggregate of the service and  interest  cost
components of net periodic postretirement benefit costs for 1996 by 9%.

[19] Commitments and Contingencies
The Company is a party to financial  instruments with off-balance  sheet risk in
the normal  course of business  to meet the  financing  needs of its  customers.
These  instruments  expose the  Company  to credit  risk in excess of the amount
recognized in the balance sheet.

The  Company's  exposure  to credit loss in the event of  nonperformance  by the
other party to the  financial  instrument  for  commitments  to extend credit is
represented by the contractual amount of those instruments. The Company uses the
same credit policies in making  commitments  and  conditional  obligations as it
does for  on-balance-sheet  instruments.  Total credit exposure related to these
items is summarized below:

                                                            September 30,
(in thousands)                                             1996      1995
                                                         -------   -------
Loan commitments:
   Approved loan commitments                             $20,252   $15,821
   Commitments to sell loans                               1,843        --
   Unadvanced portion of construction loans                9,501    10,048
   Unadvanced portion of home equity lines of credit      31,926    23,523
   Unadvanced portion of commercial lines of credit        5,240        33

Loan  commitments  to extend credit are agreements to lend to a customer as long
as there is no violation of any  condition  established  in the  contract.  Loan
commitments  generally have fixed expiration dates or other termination  clauses
and  may  require  payment  of a fee.  The  Company  evaluates  each  customer's
creditworthiness  on a case-by-case  basis. The amount of collateral obtained if
deemed   necessary  by  the  Company  upon  extension  of  credit  is  based  on
management's credit evaluation of the counterparty. Collateral held is primarily
residential  property.  Interest rates on approved loan commitments and lines of
credit are a  combination  of fixed and variable.  Interest  rates on unadvanced
portions of  construction  loans are  adjustable  rates which  generally  mature
within nine to twelve months.

Commitments  outstanding  at September 30, 1996 consist of adjustable  and fixed
rate loans of $13,629,000 and $4,856,000, respectively, at rates ranging from 5%
to 10.25%. An additional  $1,767,000 of commitments  outstanding are represented
by loans  whose  interest  rates  will be  determined  at a  future  date at the
discretion  of the  borrower.  Commitments  outstanding  at  September  30, 1995
consist  of  adjustable  and fixed  rate  loans of  $7,281,000  and  $8,540,000,
respectively,  at rates  ranging from 5.75% to 9.00%.  Commitments  to originate
loans generally expire within 60 days.

                                       41

<PAGE>

[20] Significant Group Concentrations of Credit Risk

The Company primarily grants residential and consumer loans to customers located
within its primary market area in the State of Connecticut.  The majority of the
Company's loan portfolio is comprised of residential mortgages. At September 30,
1996,  residential  mortgage loans,  including  residential  construction loans,
totaled $697  million,  excluding  off-balance-sheet  items.  All such loans are
collateralized  by  real  estate,  of  which  approximately  95% is  located  in
Connecticut.

[21] Fair Value of Financial Investments

The Company is required to provide  supplemental  financial  disclosures  on the
estimated fair value of its financial  instruments  in accordance  with SFAS No.
107,  "Disclosures  about  Fair  Value  of  Financial   Instruments."  Financial
instruments  as  defined  in SFAS No.  107  include  cash and cash  equivalents,
mortgage-backed securities,  loans, deposits, borrowings and certain off-balance
sheet items.  Other assets that are not considered  financial  instruments under
SFAS No. 107 are excluded from fair value  disclosures such as real estate owned
and premises and equipment.

Fair  value  estimates  are made at a  specific  point in time  based on  market
information,  where available,  or other more subjective information if a market
for the  financial  instrument  does  not  exist.  These  estimates  incorporate
assumptions and other matters of judgment and may not reflect the true financial
impact  that could  result  from  selling  the entire  portfolio  of a financial
instrument on one date, including any income tax consequences.

The following table presents fair value information on the Company's  investment
and mortgage-backed security portfolios:

                                                 September 30,
                                         1996                    1995
                                         ----                    ----
                                 Carrying    Estimated     Carrying    Estimated
(in thousands)                    Amount     Fair Value     Amount    Fair Value
--------------                    ------     ----------     ------    ----------
Investment securities            $ 14,440     $ 14,489     $ 56,292     $ 56,359
Mortgage-backed
 securities                       450,120      449,991      355,785      356,923
                                 --------     --------     --------     --------
   Total                         $464,560     $464,480     $412,077     $413,282
                                 ========     ========     ========     ========

The  fair  value  of  investment  and  mortgage-backed  securities  is  based on
available market quotes.

The  following  table  represents  fair value  information  for the Bank's  loan
portfolio:

                                                    September 30, 1996
                                               Allowance
                                   Principal   and Other   Carrying   Estimated
(in thousands)                       Value    Adjustments   Amount    Fair Value
--------------                       -----    -----------   ------    ----------
Real estate mortgage loans          $744,764    $  7,763    $737,001    $734,110
Consumer and commercial
 loans                                79,946       2,459      77,487      78,471
                                    --------    --------    --------    --------
   Total                            $824,710    $ 10,222    $814,488    $812,581
                                    ========    ========    ========    ========

                                               September 30, 1995
                                             Allowance
                                Principal    and Other   Carrying   Estimated
(in thousands)                    Value     Adjustments   Amount    Fair Value
--------------                    -----     -----------   ------    ----------
Real estate mortgage loans       $654,266    $  7,548    $646,718    $643,241
Consumer and commercial
 loans                             67,717         890      66,827      67,522
                                   ------         ---      ------      ------
   Total                         $721,983    $  8,438    $713,545    $710,763
                                 ========    ========    ========    ========

In developing  the estimated  fair values above,  the Bank's loan  portfolio was
segregated  by type of loan,  performing  status  and  interest  rate  (fixed or
variable).  In general, fair value was estimated by discounting contractual cash
flows adjusted for repayment  estimates  using  discount rates  developed by the
secondary market.

Assumptions  have been made in developing  these fair values based on historical
experience and market conditions.  Because there is no immediate market for many
of the above  loans,  there is no basis for  determining  whether the fair value
presented above would be indicative of the value negotiated in an actual sale.

                                       42

<PAGE>

The estimated fair value of the Bank's deposit portfolio is as follows:

                                                  September 30,
                                         1996                       1995
                                Carrying    Estimated     Carrying     Estimated
(in thousands)                   Amount    Fair  Value     Amount     Fair Value
--------------                   ------    -----------     ------     ----------
Non-interest bearing           $   30,260   $   30,260   $   27,913   $   27,913
Passbook accounts                 144,728      144,728      143,271      143,271
NOW accounts                       90,758       90,758       80,625       80,625
Money market accounts              94,510       94,510      104,428      104,428
Certificate accounts              699,099      701,747      595,514      596,969
                               ----------   ----------   ----------   ----------
   Total                       $1,059,355   $1,062,003   $  951,751   $  953,206
                               ==========   ==========   ==========   ==========

The fair value of deposits with no stated  maturity,  such as passbook,  NOW and
money market accounts, is assumed to be equal to the amount payable on demand on
September  30,  1996 and 1995.  The fair value of time  deposits is based on the
discounted value of contractual cash flows, using rates offered at September 30,
1996 and 1995 for deposits with similar remaining maturities.

The fair value of FHLB advances,  estimated  using rates  available at September
30, 1996 and 1995 for debt of similar  terms and remaining  maturities  was $208
million and $73 million at September 30, 1996 and 1995,  respectively.  The fair
value of repurchase agreements, estimated using rates available at September 30,
1996 and 1995 for debt of similar terms and maturities,  was $15 million and $83
million at  September  30, 1996 and 1995,  respectively.  The fair value of FHLB
stock,   accrued  interest   receivable,   accrued  interest  payable  and  loan
commitments approximate the carrying value at September 30, 1996 and 1995.

[22] Recent Accounting Pronouncements
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed  of," was issued in March 1995 and is effective for fiscal
years  beginning  after December 15, 1995. SFAS No. 121 requires that long-lived
assets be reviewed for impairment  whenever  events or changes in  circumstances
indicate the carrying amount of an asset may not be recoverable. Management does
not  anticipate  the  adoption of SFAS No. 121 to have a material  effect on the
Company's consolidated financial statements.

SFAS No. 122, "Accounting for Mortgage Servicing Rights," was issued in May 1995
and is effective for fiscal years  beginning  after December 15, 1995.  SFAS No.
122 requires the  capitalization  of mortgage  servicing rights acquired through
either   purchase  of  mortgage  loan  servicing  or  origination  and  sale  or
securitization of mortgage loans with retention of servicing.  SFAS No. 122 also
requires the analysis of  capitalized  mortgage  servicing  rights for potential
impairment  based on the fair value of the rights.  The Company adopted SFAS No.
122 effective  October 1, 1996.  The effect of adoption on the Company will vary
based on the extent of mortgage  servicing  rights  existing  upon  adoption and
mortgage servicing rights acquired  subsequent to adoption,  but is not expected
to have a material effect on the Company's consolidated financial statements.

SFAS No. 123,  "Accounting for Stock-Based  Compensation," was issued in October
1995 and is effective for fiscal years  beginning  after December 15, 1995. SFAS
No. 123  establishes  a fair value based method of  accounting  for  stock-based
compensation   plans.   This  statement  also  establishes  fair  value  as  the
measurement basis for transactions in which an entity acquires goods or services
from  non-employees  in  exchange  for equity  instruments.  The  effects on the
consolidated financial statements of this statement will be disclosure only.

                                       43

<PAGE>

[23] Eagle Financial Corp. (Parent Company Only) Condensed Financial Information
Balance Sheets                                                  September 30,
(in thousands)                                                 1996         1995
                                                               ----         ----
Assets:
   Cash                                                    $     --     $     87
   Interest-bearing deposits                                    805          954
                                                           --------     --------
     Cash and cash equivalents                                  805        1,041
   Investment securities held to maturity                        85           85
   Investment in Bank subsidiary                            101,489       90,560
   Dividend receivable                                          900         --
   Receivable from Bank subsidiary                              347          877
   Other assets                                                 178          133
                                                           --------     --------
     Total assets                                          $103,804     $ 92,696
                                                           ========     ========
Liabilities and Shareholders' Equity:
   Payable to Bank subsidiary                              $    638     $     29
   Accrued expenses and other liabilities                       249          378
   Borrowed money                                                --           94
   Shareholders' equity                                     102,917       92,195
                                                           --------     --------
     Total liabilities and shareholders' equity            $103,804     $ 92,696
                                                           ========     ========
<TABLE>
<CAPTION>
Statements of Income                                      Years Ended September 30,
(in thousands)                                          1996        1995        1994
--------------                                          ----        ----        ----
<S>                                                   <C>         <C>         <C>     
Interest on investments                               $     28    $     71    $     31
Dividends from Bank subsidiary                           3,200       2,000       1,000
Other expenses                                            (872)       (909)       (857)
Income before income taxes and
  equity in undistributed earnings of
   Bank subsidiary                                       2,356       1,162         174
Income tax benefit                                         353         364         323
                                                      --------    --------    --------
Income before equity in undistributed
  earnings of Bank subsidiary                            2,709       1,526         497
Equity in undistributed earnings of Bank subsidiary     10,929       9,446       7,069
                                                      --------    --------    --------
     Net income                                       $ 13,638    $ 10,972    $  7,566
                                                      ========    ========    ========
</TABLE>
<TABLE>
<CAPTION>
Statements of Cash Flows                                          Years Ended September 30,
(in thousands)                                                 1996         1995         1994
--------------                                                 ----         ----         ----
<S>                                                          <C>       <C>         <C>     
Operating activities:
   Net income                                               $ 13,638    $ 10,972    $  7,566
   Adjustments to reconcile net income
     to net cash provided by operating activities:
Equity in undistributed earnings of Bank subsidiary          (10,929)     (9,446)     (7,069)
   Decrease (increase) in other assets                          (945)        103        (136)
   Increase (decrease) in accrued expenses
   and other liabilities                                        (129)        837        (261)
                                                             --------    --------    --------
Net cash provided by operating activities                      1,635       2,466         100
                                                             --------    --------    --------
Investing activities:
  
   Purchase of  investment  securities                            --          --      (1,000)
   Proceeds from maturity of investment  security                 --          --       1,000
   Decrease (increase) in receivable from Bank subsidiary        530      (1,081)         --   
   Investment in Bank subsidiary                                  --     (14,700)         --
                                                             --------    --------    --------
Net cash provided (used) by investing activities                 530     (15,781)         --
                                                            --------    --------    --------
Financing activities:
   Cash dividends                                             (4,132)     (3,627)     (2,355)
   Proceeds from exercise of stock options and other           1,122         873       1,052
   Payment of fractional shares from stock dividend               --          (8)         --
   Proceeds from sale of common stock                             --      16,657          --
   Increase in payable to Bank subsidiary                        609           2           4
                                                            --------    --------    --------
Net cash provided (used) by financing activities              (2,401)     13,897      (1,299)
                                                            --------    --------    -------- 
Increase (decrease) in cash and cash equivalents                (236)        582      (1,199)
Cash and cash equivalents at beginning of year                 1,041         459       1,658
                                                            --------    --------    --------
     Cash and cash equivalents at end of year               $    805    $  1,041    $    459
                                                            ========    ========    ========
</TABLE>

                                       44
<PAGE>

[24] Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
(in thousands, except per share data)                                 Three Months Ended
Fiscal 1996                                        12/31/95    3/31/96     6/30/96     9/30/96       Total
                                                   --------   --------    --------    --------    --------
<S>                                                <C>        <C>         <C>         <C>         <C>     
Interest income                                    $ 22,149   $ 24,020    $ 24,781    $ 24,651    $ 95,601
Interest expense                                     12,748     14,579      14,282      14,233      55,842
                                                   --------   --------    --------    --------    --------
   Net interest income                                9,401      9,441      10,499      10,418      39,759
Provision for loan losses                               225      1,366         225         225       2,041
Net gain (loss) on sale of securities                   631     (1,163)         64           5        (463)
Net gain (loss) from mortgage banking activities          6     (1,740)        255          (5)     (1,484)
Gain on sale of deposits                                 --     15,904          --          --      15,904
Other income                                          1,266      1,163       1,270       1,252       4,951
Other expenses                                        5,982      8,909       6,956      11,802      33,649
                                                   --------   --------    --------    --------    --------
   Income (loss) before income taxes                  5,097     13,330       4,907        (357)     22,977
Income tax provision (benefit)                        2,173      5,290       1,989        (113)      9,339
                                                   --------   --------    --------    --------    --------
   Net income (loss)                               $  2,924   $  8,040    $  2,918    $   (244)   $ 13,638
                                                   ========   ========    ========    ========    ========
Net income (loss) per share:
   Primary                                         $   0.63   $   1.72    $   0.62    $  (0.05)   $   2.92
   Fully diluted                                   $   0.62   $   1.72    $   0.62    $  (0.05)   $   2.89
</TABLE>

During the quarter ended March 31, 1996, the Company's  operations were effected
by several  non-recurring  items that resulted in a substantial  increase in net
income.  The most  significant  was a $15.9 million gain from the sale of branch
offices and related  deposits.  Several  charges were recorded  which  partially
offset the gain  including:  a $1.2 million loss on the sale of  securities as a
result of an approximate $100 million restructuring of the security portfolio, a
$1.7  million loss from the  valuation  of loans held for sale,  $1.2 million of
non-recurring  expenses  principally  related to marketing and consulting and an
increased  loan loss  provision  that  recognized  a recent trend of higher loan
charge-off to loan balance ratios for certain loan categories.

The quarter ended  September 30, 1996 includes a $4.7 million  charge related to
an assessment to recapitalize the SAIF.
<TABLE>
<CAPTION>

(in thousands, except per share data)                          Three Months Ended
Fiscal 1995                                 12/31/94     3/31/95    6/30/95     9/30/95      Total
                                            --------    --------   --------    --------   --------
<S>                                         <C>         <C>        <C>         <C>        <C>     
Interest income                             $ 18,750    $ 20,342   $ 21,659    $ 22,146   $ 82,897
Interest expense                               8,888      10,108     11,551      12,333     42,880
                                            --------    --------   --------    --------   --------
   Net interest income                         9,862      10,234     10,108       9,813     40,017
Provision for loan losses                        225         225        525         525      1,500
Net gain (loss) on sale of securities           (104)         --        (10)         72        (42)

Net gain from mortgage banking activities         --          --         --         244        244
Other income                                   1,081       1,016      1,063       1,039      4,199
Other expenses                                 5,694       6,152      6,393       6,020     24,259
                                            --------    --------   --------    --------   --------
   Income before income taxes                  4,920       4,873      4,243       4,623     18,659
Income tax provision                           2,040       2,027      1,728       1,892      7,687
                                            --------    --------   --------    --------   --------
   Net income                               $  2,880    $  2,846   $  2,515    $  2,731   $ 10,972
                                            ========    ========   ========    ========   ========
Net income per share:
   Primary                                  $   0.64    $   0.63   $   0.55    $   0.59   $   2.41
   Fully diluted                            $   0.63    $   0.62   $   0.54    $   0.59   $   2.38
</TABLE>

Note:  All per share data for all periods and dates prior to September  30, 1995
have been  adjusted  retroactively  to give  effect to a 10% stock  dividend  to
common shareholders of record on February 15, 1995.

                                       45

<PAGE>


Independent Auditors' Report

The Board of Directors and Shareholders

Eagle Financial Corp.:

We have audited the accompanying  consolidated balance sheets of Eagle Financial
Corp.  and  subsidiaries  as of  September  30,  1996 and 1995,  and the related
consolidated statements of income,  shareholders' equity and cash flows for each
of  the  years  in  the  three-year  period  ended  September  30,  1996.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated  financial statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Eagle  Financial
Corp.  and  subsidiaries  as of September 30, 1996 and 1995,  and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended September 30, 1996 in conformity with generally accepted accounting
principles.

As discussed in the notes to the consolidated financial statements,  the Company
changed its method of accounting  for  investment  securities  in 1995,  and its
methods of accounting for postretirement benefits other than pensions and income
taxes in 1994.


KPMG Peat Marwick LLP



Hartford, Connecticut
October 17, 1996



                                       46


<PAGE>


ADDITIONAL INFORMATION

Annual Meeting
Tuesday, January 28, 1997
11:00 am
Radisson Inn
42 Century Drive
Bristol, CT  06010

Executive Offices
Eagle Financial Corp.
222 Main Street
P.O. Box 1157
Bristol, CT  06010
(860) 314-6400

Independent Auditors
KPMG Peat Marwick LLP
City Place II
Hartford, CT  06103-4103

Registrar and Transfer Agent
Boston EquiServe, L.P
Shareholder Services
Mail Stop: 45-02-64
P.O. Box 8040, Boston, MA  02266-8040
(617) 575-3170
(800) 730-4001 Outside MA

Legal Counsel
Hogan & Hartson
Columbia Square
555 Thirteenth Street NW
Washington, DC  20004-1109

Anderson, Alden, Hayes & Ziogas LLC
238 Main Street
Bristol, CT  06010

Form 10-K
A Copy of Eagle Financial Corp.'s 
annual report on Form 10-K (without  exhibits)
filed  with the  Securities  and  Exchange  
Commission  for  fiscal  1996 
may be obtained from the Company 
without charge. Please send a written request to: 
Mark J. Blum 
Vice President,  Secretary 
Chief Financial Officer 
Eagle Financial Corp.
222 Main Street 
Bristol, CT 06010

Common Stock Information
Eagle  Financial  Corp.  common  stock is listed on the NASDAQ  National  Market
System under the symbol  "EGFC." As of September  30, 1996 there were  4,581,440
shares of common stock  outstanding,  including  47,373 shares held in treasury,
and approximately 1,800 shareholders of record.


<PAGE>

QUARTERLY STOCK QUOTATIONS AND STOCK INFORMATION

                                                                   Cash
                                                              Dividends
Quarter                                                        Paid Per
Ended                  High                  Low              Share (a)
                       ----                  ---              ---------
Dec. 31, 1992         $17.375              $15.000               $.140
Mar. 31, 1993          20.250               16.750                .140
Jun. 30, 1993          19.250               16.250                .140
Sep. 30, 1993          19.875               16.625                .155
Dec. 31, 1993          21.625               18.750                .173
Mar. 31, 1994          20.625               19.125                .173
Jun. 30, 1994          23.625               19.125                .173
Sep. 30, 1994          23.625               19.875                .173
Dec. 31, 1994          21.000               18.250                .191
Mar. 31, 1995          21.250               17.750                .210
Jun. 30, 1995          22.250               19.000                .210
Sep. 30, 1995          24.500               21.250                .210
Dec. 31, 1995          27.750               25.250                .230
Mar. 31, 1996          26.250               22.750                .230
Jun. 30, 1996          26.375               22.250                .230
Sep. 30, 1996          27.250               23.750                .230


(a) All cash dividends paid have been adjusted  retroactively  to give effect to
10% stock dividends paid in September 1993 and March 1995.

Eagle Financial Corp.
222 Main Street
Bristol, CT 06010
860  314-6400