SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K/A

X               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended September 30, 1997
                                       OR

              TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
             For the transition period from __________ to __________

                         Commission file number 0-15311

                              EAGLE FINANCIAL CORP.
                              ---------------------
             (Exact name of registrant as specified in its charter)

              Delaware                                    06-1194047
          ------------------                             -------------
     (State or other jurisdiction of                    (I.R.S. Employer
   incorporation or organization)                      Identification No.)

  222 Main Street, Bristol, Connecticut                    06010
  -------------------------------------                  ---------
  (Address of principal executive offices)               (Zip Code)

       Registrant's telephone number, including area code: (860) 314-6400.

           Securities registered pursuant to Section 12(b) of the Act:
                                (Not applicable)

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $0.01 par value
                          -----------------------------
                                (Title of class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days      Yes X  No

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained,  to the best of registrant's knowledge, in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.

         Based upon the closing  price of the  registrant's  common  stock as of
December  9,  1997,  the  aggregate  market  value of the  voting  stock held by
non-affiliates of the registrant is $246.6 million.*

          The number of shares outstanding of each of the registrant's
         classes of common stock, as of the latest practicable date is:
                 Class: Common Stock, par value $.01 per share.
               Outstanding at December 9, 1997: 6,501,363 shares.


----------
*    Solely  for  purposes  of this  calculation,  all  executive  officers  and
     directors of the registrant, the registrants' Employee Stock Ownership Plan
     and all shareholders  reporting beneficial ownership of more than 5% of the
     registrant's common stock are considered to be affiliates.



<PAGE>



PART I

     Item 1. Business
            ----------
     GENERAL

     Eagle Financial Corp.  ("Eagle" or the "Company") is the holding company of
Eagle Bank (the "Bank").  Eagle was organized in 1986 under Delaware law for the
purpose of  becoming  the  holding  company of First  Federal  Savings  and Loan
Association of Torrington,  Connecticut  ("Torrington") upon its conversion to a
stock  company in 1987.  In 1988,  BFS  Bancorp,  Inc.,  the holding  company of
Bristol  Federal Savings Bank,  Bristol,  Connecticut  ("Bristol"),  merged into
Eagle in a  combination  structured as a merger of equals and accounted for as a
pooling-of-interests.  Bristol  had  converted  to  a  stock  company  in  1987.
Torrington  and Bristol  have  operated as savings  institutions  since 1919 and
1924, respectively.  In January 1993, Eagle merged Bristol with Torrington under
the new name Eagle Federal Savings Bank. In May 1997,  Eagle changed the name of
the Bank from Eagle Federal Savings Bank to Eagle Bank. Unless otherwise stated,
all  references  herein  to  Eagle or the  Company  include  the Bank and  other
subsidiaries on a consolidated basis.

     At September 30, 1997,  Eagle had total assets of $2.1  billion,  net loans
receivable of $1.1 billion, deposits of $1.4 billion and shareholders' equity of
$144.9 million. Through the Bank, the Company provides consumer banking services
through 26 traditional banking offices and 4 in-store supermarket branch offices
in  Connecticut,  serving the  Torrington,  Bristol,  New Britain,  and Hartford
market regions.  As a community  oriented  savings bank, the Bank focuses on the
financial  needs of its  customer  in these  local  markets,  seeking to develop
long-term deposit and lending relationships. In its lending activities, the Bank
stresses  asset  quality  through its emphasis on 1-4 family  residential  first
mortgage  lending  in  its  local  markets  and  the  use of  conservative  loan
underwriting standards.  Deposit accounts at the Bank are insured by the Federal
Deposit Insurance Corporation (the "FDIC").

     The following table indicates selected ratios for the periods indicated:


                                               For the years ended September 30,
                                               ---------------------------------
                                                 1997        1996        1995
                                                 ----        ----        ----

Return on average assets                         0.39%       0.90%       0.80%
Return on average equity (a)                     5.25%      11.62%       9.98%
Dividend payout ratio                           81.25%      34.07%      38.60%
Average equity to average assets ratio (b)       7.38%       7.72%       7.97%

----------
     (a)  If the  effect  of the  unrealized  gains  and  losses  on  securities
          available for sale had been excluded, the return on equity ratio would
          have been 5.11% and 11.59% for the years ended  September 30, 1997 and
          1996, respectively.

     (b)  If the  effect  of the  unrealized  gains  and  losses  on  securities
          available for sale had been  excluded,  the average  equity to average
          assets  ratio  would  have been  7.37%  and 7.74% for the years  ended
          September 30, 1997 and 1996, respectively.

     Eagle's principal executive office is located at 222 Main Street,  Bristol,
Connecticut 06010 and its telephone number is (860) 314-6400.

     On October 27,  1997,  the Company  announced  the signing of a  definitive
agreement to merge with and into Webster Financial Corp. ("Webster"). The merger
would be  accomplished  by a stock for stock  exchange based on a fixed exchange
ratio of 0.84  shares of Webster  common  stock for each  share of Eagle  common
stock. The transaction is subject to shareholder and regulatory  approval and is
expected to close  during the quarter  ended March 31,  1998.  Webster has total
assets of $6.8 billion,  total deposits of $4.3 billion,  total loans receivable
of $3.7 billion and  shareholders'  equity of $363.6 million as of September 30,
1997.  Webster  conducts  its  business  through 84 banking  offices  throughout
Connecticut.



                                       2
<PAGE>



MERGERS AND  ACQUISITIONS  - On May 31, 1997,  the Company  completed its merger
with MidConn Bank ("MidConn")  through a stock for stock exchange and merged the
operations of MidConn into the operations of the Bank. The  transaction has been
accounted  for as a pooling  of  interests  combination  and,  accordingly,  the
consolidated financial statements for periods prior to the combination have been
restated  to include the  accounts  and results of  operations  of MidConn.  The
acquisition expanded the Company's market area into the New Britain,  Berlin and
Newington  municipalities.  Shortly after completing the merger Eagle closed two
of the ten acquired branch offices that were in close proximity to existing Bank
branches and sold a third  geographically  separate,  smaller office recording a
gain on sale of deposits of $546,000.  The merger with  MidConn  allows Eagle to
serve a broader segment of the Hartford market area.

     In past years, Eagle has also significantly expanded its operations through
three federally assisted  acquisitions in which the Bank acquired certain assets
and  assumed  deposit   liabilities  from  the  FDIC  or  the  Resolution  Trust
Corporation   ("RTC").   Substantially  all  of  the  loans  acquired  in  these
acquisitions  consisted of 1-4 family  residential first mortgage loans and home
equity loans. In the largest assisted  acquisition,  the Bank of Hartford,  Inc.
("Bank  of  Hartford")  acquisition  completed  in June  1994,  Eagle  Bank also
acquired $72.7 million of investment securities, substantially all of which were
U.S.  Treasury and Government agency  obligations,  and loan servicing rights on
$80.5 million of loans with an average loan servicing fee of 0.375%. Fiscal 1994
also includes the  acquisition of The Federal Savings Bank ("FSB") by MidConn in
a stock purchase transaction.

     During 1996, Eagle reshaped the structure of its branch network as a result
of two open market  transactions.  In October 1995, Eagle announced the purchase
of five branch  offices  located in the greater  Hartford  market area 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").  In December
1995,  Eagle  announced the sale of seven branch offices  located in the Danbury
market to Union Savings Bank of Danbury ("Union").  The combination of these two
transactions  demonstrated  Eagle's  commitment to expanding its presence in the
Hartford  market area while at the same time  creating a more  efficient  branch
network made up of larger, more geographically concentrated branch offices.

     Eagle  purchased  five  branch  offices in the  Fleet/Shawmut  transaction,
assumed  deposits  totaling  $253  million  and  acquired  $36 million in loans,
approximately  $24 million of which were  commercial  loans.  As a result of the
premium  paid  on the  deposits  assumed,  along  with  certain  other  purchase
accounting  adjustments,  Eagle Bank  recorded  goodwill  in the amount of $19.9
million.  The  transaction  was completed in January 1996.  Shortly  thereafter,
Eagle Bank closed two branch offices that were in close  proximity to two of the
acquired  branch  offices and  transferred  all  customer  accounts to the newly
acquired branch offices.

     The sale of the  branches  to Union,  which was  completed  in March  1996,
included $184 million of deposits and generated a $15.9 million gain principally
due to the premium received on the deposits. This transaction removes Eagle from
a highly competitive,  geographically  separate market place and allows the Bank
to focus its resources in a more concentrated area of Connecticut.

     Eagle's  expansion  strategy,  initially  reflected in the Bank of Hartford
acquisition and reinforced  through the  Fleet/Shawmut  and Union  transactions,
represents a natural  extension of Eagle's original markets since many residents
of Bristol and Torrington commute to the Hartford area. The Hartford market area
is contiguous to Eagle's original market areas, has a higher population  density
and is generally more affluent than the Bristol and Torrington markets.

     Eagle  believes  that the  operation  of more  geographically  concentrated
branch offices will not only provide for an efficient retail service network but
also allow Eagle to maximize  opportunities  for residential and commercial loan
production, in addition to other services.

     BUSINESS  - As a holding  company,  the  business  operations  of Eagle are
conducted  through the Bank.  The Bank  primarily  is 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.  At September  30, 1997,  89.4%,  or $1.0  billion,  of the
Bank's $1.1 billion total gross loans  receivable was secured by first mortgages
on real estate.  The  remainder of the Bank's loan  portfolio  consists of $19.4
million of non-mortgage commercial loans and $101.2 million of consumer and home
equity loans at September 30, 1997.




                                       3
<PAGE>



     Eagle  has  experienced  fluctuations  in loan  originations,  with  $236.7
million,  $303.1 million and $190.4 million of originations in fiscal 1997, 1996
and 1995, respectively, due in part to the volatility occurring in the long-term
interest rate environment over the past few years.  Commercial loan originations
of $39.4 million in 1997 compared to $28.3  million in 1996  contributed  to the
loan  origination  activity.  Residential  mortgage  lending  has  been and will
continue to be the Bank's main focus,  however,  the Bank is moving forward with
its strategy to diversify  the loan  portfolio by  originating  commercial  real
estate and small  business  loans within its primary market area. The Bank began
the commercial banking initiative in 1996, made significant progress in 1997 and
expects to further  the  expansion  of  commercial  banking in 1998 and into the
future.  Eagle also  intends to  increase  the  emphasis  on its home equity and
consumer  lending  programs.  The marketing of these loans will focus on Eagle's
existing  customer  base,  customers  acquired  as  part  of  the  Fleet/Shawmut
acquisition  and new  relationships  within Eagle's  primary  market areas.  See
"Lending Activities -- General."

     Based on its lending  strategy,  Eagle has been able to maintain high asset
quality.  Total  non-performing  assets of Eagle were $19.6 million at September
30, 1995,  $17.3 million at September 30, 1996 and $8.2 million at September 30,
1997. At those dates,  non-performing assets constituted 1.99%, 1.55%, and 0.72%
respectively,  of total loans receivable and real estate owned. At September 30,
1997,  Eagle's allowance for loan losses totaled $9.8 million,  or 218% of total
non-performing loans.

     The  Bank's  funding  strategy  is focused  primarily  on  developing  core
deposits such as regular  savings and checking  accounts,  and  attracting  term
certificates of deposit.  The Bank  supplements its deposits with other borrowed
money, primarily Federal Home Loan Bank advances.

     Eagle also makes  available to its customers  various  investment  products
through  Liberty  Securities   Corporation,   a  registered   broker-dealer  not
affiliated  with Eagle.  These products  include mutual funds,  unit  investment
trusts and fixed-  and  variable-rate  annuity  contracts,  as well as  discount
brokerage services.

     REGULATION - Eagle, as a unitary thrift holding company, and Eagle Bank, as
its  wholly-owned   subsidiary,   are  subject  to   comprehensive   regulation,
supervision and examination by the Office of Thrift Supervision  ("OTS"), as the
primary federal regulator of the Bank. The FDIC also has significant  regulatory
authority  over the Bank.  The Board of Governors of the Federal  Reserve System
("FRB") has  regulatory  authority as to certain  matters  concerning  the Bank.
Eagle  Bank is a member of the  Federal  Home Loan Bank  ("FHLB")  System.  FHLB
advances are a source of funds for the Bank. See "Regulation."

     LENDING ACTIVITIES

     General. Eagle traditionally has concentrated its lending activities on the
origination  and  purchase  of loans  secured  by first  mortgage  liens for the
purchase, refinancing or construction of residential real property. At September
30, 1997,  mortgage  loans  secured by real estate,  aggregated  $1.0 billion or
89.4% of Eagle's  gross loans  receivable  portfolio.  At September 30, 1996 and
1995, such mortgage loans aggregated $1.0 billion, or 90.4%, and $887.2 million,
or 90.4%,  respectively.  The Bank's real  estate  loans at  September  30, 1997
included   $912.6  million  of  first  mortgage  loans  secured  by  1-4  family
residential real estate (80.1% of total gross loans  receivable),  $60.8 million
of commercial real estate loans (5.3% of total gross loans receivable) and $45.9
million of multi-family,  construction and land loans (4.0% of total gross loans
receivable).  The Bank had total non-mortgage commercial loans of $19.4 million,
or 1.7% of total gross loans  receivable.  The remaining $101.2 million of loans
(9.6% of total gross loans  receivable)  includes  $45.3  million of home equity
lines of credit  (4.0% of total gross  loans  receivable)  and $45.4  million of
second mortgage loans (4.0% of total gross loans  receivable) with the remainder
of the loans being primarily loans secured by deposits and personal loans.



                                       4
<PAGE>



     At September  30, 1997  commercial  real estate loans totaled $60.8 million
and are generally secured by a mix of retail and professional office properties.
This  represents an increase of 16.6% from the amount  outstanding  at September
30,  1996 of $52.1  million.  The  increase  was  principally  the result of the
improved  origination  activity  created from an expanded  group of  experienced
commercial loan officers. Multi-family loans, secured by properties with 5 units
or more,  totaled  $15.9  million as o September  30, 1997.  This amount is down
slightly from the September  30,1996 total of $18.1  million.  Land  development
loans  decreased  to $9.6 million at  September  30, 1997 from $10.7  million at
September 30, 1996.

     Eagle made  significant  progress in 1997 in  implementing  its strategy to
emphasize the  origination of commercial  real estate and small business  loans.
Commercial  related  originations  totaled  $39.4  million  for the  year  ended
September  30, 1997  demonstrating  strong  growth from prior  years.  Eagle has
continued  to expand and  improve  both its  commercial  origination  and credit
administration  resources.  The  origination of commercial  based loans not only
increases  the overall  yield on the  portfolio but adds to the base of interest
rate  sensitive  assets,  as the rate  structures for these loans often call for
annual, quarterly or monthly rate adjustments.

     At September 30, 1997 consumer  loans totaled  $101.2  million  compared to
$96.8 million at September 30, 1995 and $91.4 million at September 30, 1995. The
increase  in  consumer  loans is  attributable  to the  Bank's  emphasis  on the
origination  of home equity  lines of credit  through  various  programs.  Eagle
intends to continue emphasizing home equity lines of credit (4.0% of total gross
loans receivable at September 30, 1997),  using its existing credit programs and
personnel.

     At September  30, 1997,  the  Company's  largest loan  relationship  had an
aggregate  outstanding  balance of $9.6 million.  That  relationship  represents
eight  loans,  of which  $2.1  million  are  secured by  multi-family  apartment
buildings  and $7.5  million  are  secured by  commercial  office or  industrial
properties.  At that date, the next largest lending  relationship's  outstanding
balance  was  $3.3  million,  representing  one  loan  secured  by a  commercial
property.  The Bank has seven  other  lending  relationship  which  exceed  $2.0
million, in aggregate outstanding balance.

     The following  tables set forth the composition of the total loan portfolio
of Eagle,  in dollar  amounts  and in  percentages,  at the dates  shown,  and a
reconciliation of loans receivable, net.

<TABLE>
<CAPTION>
                                                              September 30,
                                     -------------------------------------------------------------
                                       1997                              1996
                                      Amount                %           Amount             %
                                    -------------    ------------     -------------   ------------
                                                            (in thousands)
<S>                                 <C>                                               <C>         
Real estate mortgage loans:
   1-4 family residential:
     Permanent                      $     912,432            80.1%    $     904,331           81.7%
     Construction                          17,095             1.5            15,950            1.4
  Multi-family                             15,949             1.4            18,106            1.6
  Commercial real estate                   60,802             5.3            52,132            4.7
  Commercial construction                   3,177             0.3                --             --
  Land  development (a)                     9,594             0.8            10,701            1.0
                                    -------------    ------------     -------------   ------------
    Total conventional loans            1,019,049            89.4         1,001,220           90.4
  FHA/VA mortgage loans                       214              --                39             --
                                    -------------    ------------     -------------   ------------
  Total real estate mortgage            1,019,263            89.4         1,001,259           90.4
                                    -------------    ------------     -------------   ------------
Non-mortgage commercial                    19,376             1.7             9,422            0.9
                                    -------------    ------------     -------------   ------------
Consumer loans:
  Second mortgages                         45,405             4.0            46,389            4.2
  Home equity lines of credit              45,316             4.0            41,992            3.8
  Other consumer                           10,459             0.9             8,444            0.7
                                    -------------    ------------     -------------   ------------
    Total consumer loans                  101,180             8.9            96,825            8.7
                                    -------------    ------------     -------------   ------------
    Total loans receivable
      (before net items)                1,139,819             100%        1,107,506            100%
                                                     =============                    ============
  Add (deduct):
    Unearned discounts and premiums          (609)                             (574)
    Loans in process                           --                                --
    Allowance for loan losses              (9,765)                          (10,507)
    Deferred loan origination feees        (1,064)                           (1,769)
                                    -------------                      ------------
      Total loans receivable        $   1,128,381                      $  1,094,656
                                    =============                      ============
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                     September 30,
                                 -------------------------------------------------------------
                                   1995                  1994                  1993
                                  Amount      %         Amount      %         Amount      %
                                 --------- -------     --------- -------     --------- -------
                                                (in  thousands)

<S>                             <C>          <C>     <C>            <C>    <C>           <C>
Real estate mortgage loans:
   1-4 family residential:
     Permanent                 $   816,754   83.2%   $   932,057   85.8%   $   703,237   84.5%
     Construction                   14,260    1.5         21,471    2.0         21,578    2.6
  Multi-family                      20,143    2.1          8,019    0.7          6,713    0.8
  Commercial real estate            26,623    2.7         21,702    2.0         20,041    2.4
  Commercial construction                -      -              -      -             -       -
  Land  development (a)              9,298    0.9          7,402    0.7          5,774    0.7
                                 --------- ------- --- --------- ------- --- --------- -------
    Total conventional loans       887,078   90.4        990,651   91.2        757,343   91.0
  FHA/VA mortgage loans                 79      -            133      -            227      -
                                 --------- ------- --- --------- ------- --- --------- -------
  Total real estate mortgage       887,157   90.4        990,784   91.2        757,570   91.0
                                 --------- ------- --- --------- ------- --- --------- -------

Non-mortgage commercial              2,677    0.3         2,303     0.2          2,970    0.4
                                 --------- ------- --- --------- ------- --- --------- -------

Consumer loans:
  Second mortgages                  42,075    4.3        41,053     3.8         16,864    2.0
  Home equity lines of credit       37,064    3.8        42,576     3.9         47,899    5.8
  Other consumer                    12,267    1.2         9,092     0.9          6,462    0.8
                                 --------- ------- --- --------- ------- --- --------- -------
    Total consumer loans            91,406    9.3        92,721     8.6         71,225    8.6
                                 --------- ------- --- --------- ------- --- --------- -------

    Total loans receivable
      (before net items)           981,240   100%     1,085,808    100%        831,765   100%
                                            =======               =======               =======
  Add (deduct):
    Unearned discounts and premiums     90                  130                    (39)
    Loans in process                     -                    -                   (600)
    Allowance for loan losses       (9,611)             (10,305)                (6,143)
    Deferred loan originationfees   (1,595)              (2,890)                (2,990)
                                 ---------           ----------             ----------
      Total loans receivable     $ 970,124           $1,072,743             $  821,993
                                 =========           ==========             ==========

</TABLE>
----------
     (a)  Loans for developed building lots, acquisition and development of land
          and unimproved land.


                                       5
<PAGE>


     The following  table sets forth certain  information  at September 30, 1997
regarding the dollar amount of loans maturing in Eagle's loan portfolio based on
scheduled payments to maturity. Demand loans and loans having no stated schedule
of repayments and no stated maturity are reported as due in one year or less.

<TABLE>
<CAPTION>

                                          Due Within       Due 1 to     Due After
                                            1 Year         5 Years        5 Years              Total
                                            --------       --------       --------            --------
                                                                    (in thousands)
<S>                                       <C>           <C>             <C>               <C>        
Residential 1-4 family and land loans     $   1,061     $   5,719       $   915,460       $   922,240
Multi-family, commercial construction
  and commercial real estate loans            4,779         7,013            68,136            79,928
Residential construction loans                   41             -            17,054            17,095
Commercial loans                              9,881         7,367             2,128            19,376
Consumer loans                                5,915        20,616            74,649           101,180
                                            --------     --------         ---------         ---------
Total                                   $    21,677      $ 40,715        $1,077,427       $ 1,139,819
                                            ========     ========         =========         =========
</TABLE>

     The  following  table sets forth as of September 30, 1997 the dollar amount
of all loans of Eagle due after one year which have predetermined interest rates
and floating or adjustable interest rates.

<TABLE>
<CAPTION>

                                    Due 1 to 5 Years              Due After 5 Years                  Total
                             ----------------------------    ---------------------------  -----------------------------
                                              Floating or                   Floating or                     Floating or 
                             Predetermined    Adjustable    Predetermined    Adjustable    Predetermined     Adjustable 
                                Rates           Rates          Rates           Rates           Rates            Rates
                             ------------     ---------     -------------   ------------  --------------   ------------
                                                                         (in thousands)
<S>                              <C>           <C>           <C>             <C>             <C>           <C>      
Residential 1-4 family
  and land loans                 $ 4,625       $  1,094      $295,540        $619,920        $300,165      $ 621,014
Multi-family, commercial
  construction and commercial
  real estate loans                4,469          2,544        25,062          43,074          29,531         45,618
Residential construction loans         -              -            -           17,054               -         17,054
Commercial loans                   3,815          3,552           920           1,208           4,735          4,760
Consumer loans                    13,111          7,505        27,120          47,529          40,231         55,034
                                  -------      ----------   ----------    -----------      ----------     -----------

Total                           $ 26,020       $ 14,695      $348,642        $728,785        $374,662      $ 743,480
                                  =======     ===========   ==========    ===========      ==========     ===========
</TABLE>


     One- to Four-Family  First  Mortgage  Loans.  At September 30, 1997,  first
mortgage loans  (including  construction  loans)  secured by one-to  four-family
homes comprised 81.6% of Eagle's portfolio,  before net items. From time to time
Eagle has experienced more rapid loan prepayments,  primarily during periods of,
and as a result of, a rapid decline in mortgage interest rates.
  
     Federally  chartered  institutions,  such as Eagle Bank,  have  substantial
flexibility in  structuring  the terms of mortgage loans to adjust to changes in
interest  rates.  Federal  regulations  permit  mortgage loans to be written for
varying  maturities  and at adjustable and fixed  interest  rates.  See "Lending
Activities -- Purchase and Sale of Loans and Loan Servicing."

     Eagle  currently  offers a variety of  adjustable  rate loans  including  a
one-year  adjustable  rate loan with a limit on the maximum  change per interest
rate adjustment of 2% and several  adjustable loans that have fixed rates for an
initial period, from 3 to 7 years, and adjust annually thereafter with a maximum
interest rate change of 2% per year. In addition,  Eagle's adjustable rate loans
have limits on the total interest rate  adjustments  during the life of the loan
ranging from 4.0% to 6.0%  depending upon the initial rate and type of the loan.
Interest  rate  adjustments  currently  are  based on  changes  in the  rates on
comparable maturity U.S. Treasury securities.  There are no prepayment penalties
for any of these adjustable rate loans. Origination fees ranging from no fees to
2% of the loan amount are charged on such loans.


                                       6

<PAGE>



     Although  adjustable  rate  mortgage  loans  allow  Eagle to  increase  the
sensitivity of its asset base to changes in interest  rates,  the extent of this
interest-sensitivity  is  limited  by the  interest  rate  "caps"  contained  in
adjustable-rate  loans. The terms of such loans may also increase the likelihood
of delinquencies  in periods of high interest rates,  particularly if such loans
are originated at discounted  interest rates.  Under regulations  adopted by the
Federal Reserve Board,  although no specifi  interest rate limit is set, lenders
are required to impose interest rate caps on all adjustable-rate  mortgage loans
and all  dwelling-secured  consumer  loans,  including home equity loans,  which
provide for interest rate adjustments.

     The rates offered on adjustable  rate mortgage loans are set at levels that
are  intended  to be  competitive  in the  market  areas  served by Eagle and to
produce a yield that  provides an acceptable  first-year  profit margin over the
cost of funds.  Eagle from time to time  offers  mortgage  loans at an  initial,
discounted interest rate (i.e., a rate which is less than the then-current index
plus margin) until the first loan repricing  period,  at which time the interest
rate  generally  is adjusted  to equal the index plus  margin.  Eagle  generally
qualifies  the  borrower  at the rate which  would be in effect  after one year,
assuming the maximum upward adjustment.

     Most of the  fixed  rate  mortgage  loans  originated  by Eagle  include  a
"due-on-sale"  clause,  which is a provision giving Eagle the right to declare a
loan  immediately  due and payable in the event,  among other  things,  that the
borrower  sells or  otherwise  disposes  of the  real  property  subject  to the
mortgage and the loan is not repaid.  Due-on-sale clauses are an important means
of increasing  the rate on existing  fixed rate mortgage loans during periods of
rising interest rates, and Eagle actively enforces such clauses.

     Multi-family and Commercial  Mortgage Loans. Eagle also makes loans secured
by mortgages on multi-family and commercial  properties.  At September 30, 1997,
multi-family  loans totaled $15.9 million,  or 1.4% of the gross loan portfolio,
and commercial real estate loans totaled $60.8 million,  or 5.3% of gross loans.
Eagle also had $3.2 million of  commercial  construction  loans  outstanding  of
September 30, 1997.  Multi-family  loans generally are originated on a one-year,
adjustable rate basis.  Commercial real estate loans, secured by properties such
as office buildings,  are a mix of one-year or three-year  adjustable rate loans
or fixed rate loans,  and the interest rates and fees are often  negotiated with
the borrower.

     Loans secured by commercial and multi-family properties can involve greater
risks than single-family  residential mortgage lending. Such loans generally are
substantially   larger  than  single-family   residential  mortgage  loans,  and
repayment of the loan generally  depends on cash flow generated by the property.
Because  the  payment  experience  on loans  secured by such  property  is often
dependent on  successful  operation  or  management  of the  security  property,
repayment of the loan may be subject to a greater  extent to adverse  conditions
in the real estate market or the economy generally than is the case with one- to
four-family  residential  mortgage loans. The commercial real estate business is
cyclical and subject to downturns,  overbuilding and local economic  conditions.
Eagle seeks to limit these risks in a variety of ways, including,  among others,
limiting  the  size  of its  commercial  and  multi-family  real  estate  loans,
generally requiring a personal guaranty from the borrower, limiting such loans t
a lower maximum  loan-to-value  ratio and  generally  lending on the security of
property  located within its market areas.  On a combined basis at September 30,
1997,  multi-family,  commercial  construction  and commercial real estate loans
comprised 7.0% of the total loan portfolio,  before net items,  compared to 6.3%
at September 30, 1996.

     Construction  Loans.  Eagle makes a limited number of construction loans to
individuals  and,  to a lesser  extent,  to  professional  builders  who wish to
construct  one-to  four-family  residential  properties,  either  as  a  primary
residence or for investment or resale.  The construction loans made by Eagle are
typically construction/permanent loans that automatically convert to a permanent
first mortgage loan at the end of the construction phase. At September 30, 1997,
construction  loans totaled $17.1 million or 1.5% of the total loan portfolio of
Eagle,  before net items,  compared to $16.0  million or 1.4% at  September  30,
1996.


                                        7

<PAGE>



     Consumer Loans. At September 30, 1997, the consumer loan portfolio of Eagle
included loans secured by deposit accounts,  home equity lines of credit, second
mortgages,  education, personal and automobile loans and totaled $101.2 million,
or 8.9% of the total loan  portfolio of Eagle before net items.  The home equity
loans and second mortgage loans are secured by the equity in a borrower's home.

     Loan  Originations.  Residential  loan  originations  principally come from
three separate sources. Originations generated through the retail branch network
account  for  approximately  30% of  total  originations.  Traditional  mortgage
originators that cover the Bank's market area account for  approximately  40% of
total originations.  In addition,  Eagle also obtains approximately 30% of total
originations   through   agreements  with   independent   mortgage   brokers  in
Connecticut.   Multi-family  and  commercial  loan  originations  are  currently
obtained  primarily  from direct  contacts  with  Eagle.  Eagle seeks to attract
consumer loans by direct advertising and solicitation of its customers.

     Loan  originations  (excluding  purchased  loans and  participations)  were
$236.7 million for the year ended  September 30, 1997 compared to $303.1 million
in fiscal 1996.  Residential  mortgage  loan  originations  accounted for $151.2
million of the total originations in fiscal 1997. Of the total, $16.9 million or
11.2%,  represented  originations of fixed rate residential  mortgage loans with
the  remaining  $134.3  million   representing  a  variety  of  adjustable  rate
residential loan products. The composition of originations marked a continuation
of what occurred  during the second half of fiscal 1996 when the  origination of
fixed rate loans dropped off  significantly.  This origination  activity results
from an interest  rate  environment  which has been  prevalent for a majority of
fiscal 1997 that has reduced the incentive for fixed rate mortgage loans.

     The largest category of adjustable rate mortgage  originations for the year
ended September 30, 1997 was 5-1 year product totaling $62.2 million. A 5-1 year
mortgage loan has a fixed  interest rate for the initial five years of the term,
after which it converts to a one year  adjustable  rate loan.  This was the most
popular  adjustable  rate  product  for  the  second  consecutive  fiscal  year.
Originations of 3-1 year and 1 year adjustable  rate mortgage  products  totaled
$47.2 million and $19.6 million,  respectively, for the year ended September 30,
1997.

     Eagle makes  single-family  conventional  first mortgage loans with up to a
95% loan-to-value  ratio. In the case of loans with a higher loan-to-value ratio
than 80%, the policy of Eagle is to require  private  mortgage  insurance  for a
specified  percentage of the amount of the outstanding  principal balance of the
loan. Eagle makes multi-family and commercial real estate loans with up to a 75%
loan-to-value  ratio. See "Lending  Activities -- Purchase and Sale of Loans and
Loan Servicing."

     All property securing real estate loans originated by Eagle is appraised by
one of several professionally qualified appraisers who have been pre-approved by
Eagle. For all real estate loans, Eagle requires the borrower to obtain fire and
extended casualty insurance and, where appropriate,  flood insurance and loss of
rents  coverage.  Eagle also requires  either title insurance or a title opinion
from an attorney experienced with title matters.

     Eagle  issues 30 to 90-day  commitments  to  prospective  borrowers to make
loans subject to various conditions.  Loan commitments  generally are issued for
long-term  loans to finance  residential  properties  and for  construction  and
combined  construction/permanent  loans secured by multi-family  residential and
commercial   properties.   With  respect  to  adjustable   rate,   single-family
residential  loans,  it is the practice of Eagle to make  commitments to lend at
the rate of interest and the loan  origination fee quoted to the borrower at the
time of  application.  The proportion of the total value of commitments  derived
from any  particular  category  of loan  varies from time to time and depends on
market  conditions.  At September 30, 1997 and 1996, loan  commitments of $103.4
million and $81.7 million, respectively, were outstanding. These amounts include
approximately $39.5 million and $38.6 million,  respectively, in unadvanced home
equity credit lines.


                                       8

<PAGE>



     Eagle encounters  certain  environmental  risks in its lending  activities.
Under federal and state  environmental  laws,  lenders may become liable for the
costs of cleaning up hazardous  materials found on secured  properties.  Certain
states may also impose  liens with higher  priorities  than first  mortgages  on
properties  to  recover  funds  used in such  efforts.  Although  the  foregoing
environmental  risks are more usually  associated with industrial and commercial
loans,  environmental  risks may be substantial  for residential  lenders,  like
Eagle Bank, since  environmental  contamination may render the security property
unsuitable for residential use. In addition, the value of residential properties
may become  substantially  diminished by contamination of nearby properties.  In
accordance with the guidelines of FNMA and FHLMC,  appraisals for  single-family
homes on which Eagle Bank lends include comments on environmental influences and
conditions.  Eagle attempts to control its exposure to environmental  risks with
respect to loans secured by larger  properties by training its  underwriters  to
recognize the signs of environmental  problems when they inspect properties;  by
requiring  borrowers to represent and warrant that properties  securing loans do
not contain  hazardous waste,  asbestos or other such  substances;  by requiring
borrowers  to  indemnify  the lending  bank,  with  personal  recourse,  against
environmental  losses and by  obtaining  environmental  reviews and tests on all
loans secured by nonresidential  properties. No assurance can be given, however,
that the value of properties  securing  loans in Eagle's  portfolio  will not be
adversely affected by the presence of hazardous materials or that future changes
in federal or state laws will not increase  Eagle's  exposure to  liability  for
environmental cleanup.

     Purchase and Sale of Loans and Loan Servicing.  From time to time Eagle may
purchase mortgage loans and loan participations secured by properties outside of
Connecticut,  however no  significant  activity has  occurred in several  years.
Eagle  purchased  $3.3 million,  $36.1 million and $8.1 million during the years
ended  September  30, 1997,  1996 and 1995,  respectively,  of loans  secured by
properties in Connecticut.

     In addition  to  servicing  its own loans,  Eagle  services  loans owned by
others, which loans had a balance at September 30, 1997, 1996 and 1995 of $246.5
million,  $261.4 million and $256.1 million,  respectively.  Servicing fees have
not historically  been a significant  source of income for Eagle but will become
an area of focus for increasing revenue in the future.

     During fiscal 1995, Eagle completed the securitization of $154.2 million of
fixed rate loans into FHLMC mortgage-backed securities and subsequently sold $95
million of the  securities.  The  remainder of the  securities  were sold in the
first quarter of fiscal 1996. This  securitization  and sale allowed the Company
to  eliminate  a portion of the  long-term  interest  rate risk  inherent in the
balance sheet by replacing fixed rate assets with adjustable rate assets.

     During  fiscal  1996,  Eagle  changed its  approach  to holding  fixed rate
residential  mortgage loans currently being originated in order to better manage
the  interest  rate risk  inherent in the balance  sheet.  Prior to 1996,  Eagle
retained all fixed rate  originations  in portfolio,  contributing to the Bank's
level of interest rate risk in rising rate  environments.  In order to eliminate
placing  additional  risk on the  balance  sheet,  Eagle began  identifying  the
majority of its newly originated  fixed rate residential  mortgage loans as held
for sale and then selling the loans into the secondary  market.  This  strategy,
along with the  securitization  of certain fixed rate  mortgage  loans in fiscal
1995 and  resultant  sale of the  securities  created,  has  improved and should
continue  to  improve  Eagle's  ability to manage its  interest  rate risk.  The
servicing created should also increase other income in the future.

     Eagle has selected the following types of fixed rate  residential  mortgage
originations  for  identification  as held for sale:  all 30-year term loans and
15-year  term  loans  based on monthly  pay  amortization.  Mortgage  loans with
15-year terms but based on bi-weekly pay  amortization are retained in portfolio
as  the  expected  life  of  these  loans  falls  within  the  tolerance  levels
established  by  the  Bank's   Asset/Liability   Committee  (the  "ALCO").   The
identification  of mortgage  loans as held for sale is subject to future  change
based on assessments by ALCO regarding the acceptable  level of risk that may be
maintained on the balance sheet.


                                       9

<PAGE>



     For the year ended September 30, 1996, Eagle sold or securitized a total of
$35.6 million in mortgage loans and transferred  $21.9 million of mortgage loans
originally  classified  as held for sale back into the  portfolio.  The mortgage
loans were  transferred at their estimated  market value at the date of transfer
and the transfer was primarily the result of the determination that the mortgage
loans,  after initially being identified as held for sale, were not underwritten
to secondary market standards.  As a result of the mortgage banking  activities,
Eagle recorded a loss of $1.5 million for the year ended September 30, 1996. The
loss is principally  the result of a decline in the market value of the loans in
the second quarter of fiscal 1996.

     Eagle has  continued  this  approach  with its  fixed  rate  mortgage  loan
originations  and sold $13.7 million  during fiscal 1997.  The mortgage  banking
activities resulted in a gain for the year ended September 30, 1997 of $124,000.

     The table below shows  Eagle's  mortgage  loan  activities  for the periods
indicated.


<TABLE>
<CAPTION>
                                                                                Years Ended September 30,
                                                            -----------------------------------------------------
                                                                 1997                  1996                  1995
                                                            --------------        --------------        --------------
                                                                                  (In thousands)
<S>                                                         <C>                   <C>                   <C>         
MORTGAGE LOAN ORIGINATIONS AND PURCHASES:
  Loan originations:
    Permanent:
     1-4 family units                                       $     100,089         $     169,985         $     98,704
     Multi-family units                                               580                    43                  729
     Commercial real estate                                        10,685                11,961                2,780
     Land                                                           5,082                 4,546                2,502
                                                            --------------        --------------        --------------
     Total permanent loans                                        116,436               186,535              104,715
                                                            --------------        --------------        --------------
    Refinancing*                                                   16,056                23,748               23,806
                                                            --------------        --------------        --------------
    Construction:
      1-4 family units                                             34,509                35,019               28,980
      Commercial                                                    7,965                     -                    -
                                                            --------------        --------------        --------------
        Total construction loans                                   42,474                35,019               28,980
                                                            --------------        --------------        --------------
       Total mortgage loan originations                           174,966               245,302              157,501
                                                            --------------        --------------        --------------
  Loan purchases:
    Participations                                                      -                     -                  130
    Whole loans                                                     3,263                36,142                7,932
    Loans purchased through acquisition                                 -                22,233                    -
                                                            --------------        --------------        --------------
      Total loan purchases                                          3,263                58,375                8,062
                                                            --------------        --------------        --------------
      Total mortgage loan originations and purchases              178,229               303,677              165,563
                                                            --------------        --------------        --------------
MORTGAGE LOAN SALES, SECURITIZATION AND PRINCIPAL
   REPAYMENTS:
    Loan sales                                                     28,106                27,532                1,059
    Loan securitization                                                 -                16,971              154,194
    Principal repayments                                          132,119               145,072              113,577
                                                            --------------        --------------        --------------
    Total mortgage loan sales, securitization and
      principal repayments                                        160,225               189,575              268,830
                                                            --------------        --------------        --------------
Increase (decrease) in mortgage loans receivable
     (before net items)                                     $      18,004         $     114,102         $   (103,267)
                                                            ==============        ==============        ==============
</TABLE>

*    Consists of loans originated in connection with the refinancing of existing
     loans  from  Eagle.  The  corresponding  pay-off  of the  original  loan is
     included in the table under "principal repayments."


                                       10

<PAGE>



The table below shows Eagle's  non-mortgage  commercial  loan activities for the
periods indicated.

<TABLE>
<CAPTION>
                                                             Years Ended September 30,
                                              ------------------------------------------------------
                                                   1997                 1996                 1995
                                              -------------        --------------       ------------
                                                                  (in thousands)
<S>                                           <C>                  <C>                  <C>        
LOAN ORIGINATIONS AND PURCHASES
  Loan originations                           $     22,434         $     14,291         $     4,150
  Loans purchased through acquisition                    -                2,025                   -
                                              -------------        --------------       ------------
  Total loan originations & purchases               22,434               16,316               4,150
                                              -------------        --------------       ------------

LOAN SALES AND PRINCIPAL REPAYMENTS
  Principal repayments                               9,124                9,571               3,776
  Loan sales                                         3,356                    -                   -
                                              -------------        --------------       ------------
  Total loan sales & principal repayments           12,480                9,571               3,776
                                              -------------        --------------       ------------

Increase in commercial loans                  $      9,954         $      6,745         $       374
                                              =============        ==============       ============
</TABLE>

     The  following  table shows the consumer  loan  activities of Eagle for the
periods indicated.

<TABLE>
<CAPTION>
                                                                  Years Ended September 30,
                                               ----------------------------------------------------------
                                                    1997                  1996                  1995
                                               --------------        --------------       ---------------
                                                                    (In thousands)
<S>                                           <C>                   <C>                   <C>        
LOAN ORIGINATIONS AND PURCHASES:
  Secured by deposits                         $      3,329          $      3,317          $     4,565
  Home improvement                                     101                   249                  283
  Home equity                                       27,754                19,473               10,331
  Automobile and personal                            8,082                 6,906                6,718
                                               --------------        --------------       ---------------
    Total originations                              39,266                29,945               21,897
  Loan purchases through acquisition                     -                13,169                    -
                                               --------------        --------------       ---------------
    Total loan originations and purchases           39,266                43,114               21,897
                                               --------------        --------------       ---------------

LOAN SALES AND PRINCIPAL REPAYMENTS:
  Principal repayments                              34,911                36,696               23,212
  Loan sales                                             -                   999                    -
                                               --------------        --------------       ---------------
  Total loan sales and principal
    repayments                                      34,911                37,695               23,212
                                               --------------        --------------       ---------------

Increase (decrease) in consumer loans         $      4,355          $      5,419          $    (1,315)
                                               ==============        ==============       ===============
</TABLE>

     Fee Income from Lending  Activities.  Currently,  Eagle charges origination
fees ranging from no fee to 2% of the amount of the loan,  depending on the type
of loan involved.  Higher fees may be charged for construction  financing or for
loans  secured  by  properties  which  are not  owner-occupied.  Fees  for  loan
modifications,  late  payments,  changes of property  ownership  and for related
miscellaneous  services are also charged.  Income realized from these activities
can vary significantly with the volume and type of loans in the portfolio and in
response to competitive factors.

     Loan origination  fees and certain direct loan origination  costs are being
deferred and the net amount  amortized as an  adjustment  to the related  loan's
yield.  This amount is  generally  amortized  over the  contractual  life of the
related loans.  At September 30, 1997,  Eagle had deferred net loan fees of $1.1
million.

     Usury Limitations.  Federal legislation first enacted in 1980 has preempted
all state usury laws  concerning  residential  first  mortgage  loans unless the
state  legislature  acted to  override  the  preemption  by April 1,  1983.  The
Connecticut  State  Legislature did not act to override the federal  preemption.
Connecticut  law  imposes  no ceiling  on  interest  rates on the types of loans
originated by the Bank.

                                       11

<PAGE>



     NON-PERFORMING ASSETS

     All loans  generally  are  placed  on a  non-accrual  basis  when a loan is
contractually delinquent for more than three complete calendar months, when full
collection is in doubt or when legal action has been instituted.  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.

     At September 30, 1997, the Company's total non-performing assets, including
non-performing  (or non-accrual)  loans and real estate owned, was $8.2 million,
or 0.39% of total  assets.  This  compares  to  non-performing  assets  of $17.3
million,  or 0.98% of total assets, at September 30, 1996 and $19.6 million,  or
1.23% of total assets, at September 30, 1995.

     The following table sets forth information regarding Eagle's non-performing
assets at the dates indicated.

<TABLE>
<CAPTION>
                                                                 September 30,
                                              ----------------------------------------------------
                                               1997       1996       1995       1994       1993
                                             -------    -------    -------    -------    -------
                                                                (in thousands)
<S>                                          <C>        <C>        <C>        <C>        <C>    
Non-performing Loans:
  Mortgage loans:
    One-to-four family residential           $ 2,989    $ 8,508    $10,973    $ 9,545    $ 6,858
    Multi-family and commercial                  638      1,730      1,012      1,277        196
  Non-mortgage commercial loans                   28        400        216        219          2
  Home equity lines of credit and
    second mortgages                             815      1,185      1,310      1,487        962
  Other consumer loans                             8         47         20         17         18
Real estate owned                              3,754      5,384      6,105     10,016      9,680
                                             -------    -------    -------    -------    -------
Total                                        $ 8,232    $17,254    $19,636    $22,561    $17,716
                                             =======    =======    =======    =======    =======
Impaired loans:
  Performing                                 $ 2,917    $ 4,799    $    --    $    --    $    --
  Non-performing                                 433      6,134         --         --         --
                                             =======    =======    =======    =======    =======
  Non-performing assets to loans
   receivable, gross and real estate owned      0.72%      1.55%      1.99%      2.06%      2.11%
  Non-performing assets to total assets         0.39%      0.98%      1.23%      1.57%      1.73%
</TABLE>

     Non-performing  loans decreased $9.0 million,  or 52.3%, from September 30,
1996 to September 30, 1997. This decrease is primarily  attributable to the sale
of $17.7 million of troubled  loans,  including  $9.7 million of  non-performing
loans, during fiscal 1997. In this context,  troubled loans are considered to be
either  non-performing  loans,  other  delinquent  loans or loans  with  poor or
inconsistent  payment  histories.  The  remaining  troubled  loans  include $4.6
million of loans delinquent  between 30-90 days and $3.4 million of loans with a
current payment status.

     As a result of managing  non-performing loans,  management expects a number
of the  non-performing  loans to become real estate owned.  The overall level of
real estate owned will depend on the number of loans which can be resolved prior
to foreclosure  and the ability of Eagle to sell  properties  which it owns. The
Company  strives to aggressively  market  properties and has been able to reduce
the level of real estate owned by approximately 61% since September 30, 1993.


                                       12

<PAGE>



     With respect to mortgage  loans,  when a borrower  fails to make a required
payment  by the 15th day  after  payment  is due,  Eagle  attempts  to cause the
deficiency to be cured by  corresponding  with the borrower.  If the  deficiency
continues,  Eagle  corresponds  further with the borrower and, through telephone
calls  and  letters,   attempts  to  determine  the  reason  for  and  cure  the
delinquency.  If the  deficiency  cannot be cured,  Eagle  generally  institutes
appropriate legal action through an approved  collection  attorney.  Real estate
acquired through  foreclosure or by deed in lieu of foreclosure is placed on the
books at the lower of the carrying value of the loan or the fair market value of
the real  estate  based  upon a  current  appraisal,  less  selling  costs.  Any
reduction  below the value  previously  recorded on the books is charged against
income or  against a  valuation  reserve.  Any loss in excess of the  reserve is
charged against income.  With respect to consumer loans,  the borrower  receives
correspondence  from  Eagle  after  the loan is 10 to 15 days  past  due.  If it
appears,  after further  communications with the borrower,  that the delinquency
cannot be cured, legal action is instituted. These procedures may be accelerated
further in certain cases, such as chronic delinquencies or unsecured loans.

     In addition to  non-performing  loans,  Eagle has $2.4  million of loans at
September 30, 1997 which were  classified as  restructured  loans.  Restructured
loans  are the  result  of term  modifications  with  borrowers  that  meet  the
following criteria; loan terms,  particularly interest rate, that are consistent
with those terms on newly originated loans,  standard underwriting criteria such
as income  guidelines and loan-to-value  ratios and consistent,  on-time monthly
payments.  Based  on  the  borrowers  meeting  the  above  criteria,  management
considers it appropriate to continue the accrual of interest on these loans. The
majority of these borrowers have had short-term  financial  difficulties  and do
not represent  chronically  delinquent or  slow-paying  customers.  During 1997,
Eagle restructured loans totaling $3.7 million.

     Beginning in 1996, Eagle began reporting  impaired loans in accordance with
the requirements of SFAS No. 114. Loans are considered  impaired when management
has  concluded  that it is probable  that the Bank will be unable to collect all
amounts due in accordance with the contractual terms of the loan agreement.  All
amounts due include both  principal and interest.  In addition all  restructured
loans that have been modified have been classified as impaired. At September 30,
1997, impaired loans totaled $3.4 million, $2.9 million of which were classified
as performing and $433,000  million of which were classified as  non-performing.
Performing and non-performing impaired loans were $4.8 million and $6.1 million,
respectively,  at September 30, 1996  totaling  $10.9  million.  The decrease in
impaired  loans from 1996 to 1997 is a result of the  troubled  loan  sale.  The
non-performing impaired loans are included in total non-performing loans.

     At  September   30,  1997,   the   Company's   non-performing   assets  are
predominately  residential  in nature with $5.6 million  secured by  one-to-four
residential properties,  including $815,000 of non-performing home equity loans,
and $1.8  million  secured  by  multi-family,  land or  commercial  real  estate
properties.

     ALLOWANCE FOR LOAN LOSSES

     At  September  30, 1997,  Eagle's  allowance  for loan losses  totaled $9.8
million,  compared to $10.5 million at September  30, 1996,  and $9.6 million at
September 30, 1995.  Eagle added $9.0 million in  provisions  for loan losses to
the allowance during fiscal 1997 compared to provisions of $3.3 million and $4.1
million during the years ended  September 30, 1996 and 1995,  respectively.  The
provision for loan losses of $9.0 million for the year ended  September 30, 1997
includes  $2.7  million  related to the merger with MidConn that was recorded in
order to consistently apply Eagle's loan loss allowance calculation  methodology
to the MidConn loan  portfolio  and $3.4 million  taken in order to complete the
sale of troubled loans.

                                       13

<PAGE>



     The following is a summary of activity in the allowance for loan losses for
the periods indicated.

<TABLE>
<CAPTION>
                                                                         Years Ended September 30,
                                                 -------------------------------------------------------------
                                                   1997         1996         1995         1994         1993
                                                 --------     --------     --------     --------     --------
                                                                           (in thousands)
<S>                                              <C>          <C>          <C>          <C>          <C>     
Balance at beginning of period                   $ 10,507     $  9,611     $ 10,305     $  6,143     $  5,139

Charge-offs:
  One-to-four family mortgage loans                (6,007)      (3,179)      (3,247)      (1,477)        (352)
  Multi-family, commercial and
    land development loans                         (2,794)        (866)      (1,348)        (770)        (526)
  Consumer and home equity loans                   (1,077)        (295)        (366)         (76)        (168)
                                                 --------     --------     --------     --------     --------
                                                   (9,878)      (4,340)      (4,961)      (2,323)      (1,046)
                                                 --------     --------     --------     --------     --------
Recoveries:
  One-to-four family mortgage loans                   136           91           94          109          224
  Multi-family, commercial and land
    development loans                                   1            5           34            3            8
  Consumer and home equity loans                       21            3            1            5           14
                                                 --------     --------     --------     --------     --------
                                                      158           99          129          117          246
                                                 --------     --------     --------     --------     --------
    Net charge-offs                                (9,720)      (4,241)      (4,832)      (2,206)        (800)

Allowance associated with purchases                     -        1,871            -        4,828            -
Provision for loan losses                           8,978        3,266        4,138        1,540        1,804
                                                 --------     --------     --------     --------     --------
Balance at end of period                         $  9,765     $ 10,507     $  9,611     $ 10,305     $  6,143
                                                 ========     ========     ========     ========     ========
Ratio of net charge-offs to
average loans outstanding, net                       0.86%        0.41%        0.44%        0.24%        0.10%
</TABLE>

     At  September  30,  1997,  Eagle had $9.8  million  in loan  loss  reserves
established  for commercial real estate  mortgage  loans,  residential  mortgage
loans,  commercial  loans and consumer  loans.  This reserve 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 at a
particular  time is based on an  evaluation  of the  portfolio,  past  loan loss
experience,  then-current economic conditions,  volume growth and composition of
the loan portfolio,  and other relevant  factors.  The allowance is increased by
provisions for loan losses charged against income.

     Management  monitors  the  adequacy  of the  allowance  for loan losses and
periodically  makes  additions in the form of  provisions  for loan losses based
upon an ongoing assessment of the loan portfolio.  These provisions are based on
an evaluation of the loan portfolio,  past loan loss experience,  current market
and economic conditions,  volume,  growth and composition of the loan portfolio,
and other relevant  factors.  The provisions are computed  quarterly  based on a
review of the loan  portfolio.  The  additional  $1.9  million  in 1996 and $4.8
million in 1994 of allowance  for loan losses that were  recorded as part of the
Fleet/Shawmut  and Bank of Hartford and The Federal  Savings Bank  transactions,
respectively,  were based on  management's  evaluation of the loans  acquired in
these  transactions.  Such  evaluation  included  an analysis of the loss of all
delinquent  loans  as well as the  risk of the  remaining  loans  acquired.  The
additional  allowances were accounted for as purchase accounting  adjustments to
the  premiums  paid by  Eagle in the  Fleet/Shawmut,  Bank of  Hartford  and The
Federal Savings Bank transactions.

                                       14

<PAGE>



     The following  table  presents an allocation of Eagle's  allowance for loan
losses by loan  category and  presents the percent of each loan  category to the
total loan portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                               September 30,
                                           ---------------------------------------------------
                                              1997       1996       1995       1994       1993
                                           -------    -------    -------    -------    -------
                                                               (in thousands)
<S>                                        <C>        <C>        <C>        <C>        <C>    
Balance at end of period applicable to:
  One-to-four family mortgage loans        $ 4,713    $ 5,689    $ 6,873    $ 7,464    $ 4,991
                                              81.6%      83.1%      84.7%      87.8%      87.1%
  Multi-family, commercial real estate
  and land development loans               $ 2,448    $ 3,311    $ 1,185    $ 1,010    $   602
                                               7.9%       7.3%       5.7%       3.4%       3.9%
  Consumer and home equity loans           $ 1,319    $ 1,235    $   901    $ 1,287    $   285
                                               8.9%       8.7%       9.3%       8.6%       8.6%
  Non-mortgage commercial loans            $   628    $   142    $   113    $    25    $    30
                                               1.7%       0.9%       0.3%       0.2%       0.4%
  Unallocated                              $   657    $   130    $   539    $   519    $   235
                                           -------    -------    -------    -------    -------

Total allowance for loan losses            $ 9,765    $10,507    $ 9,611    $10,305    $ 6,143
                                           =======    =======    =======    =======    =======
</TABLE>

     The ratio of allowance  for loan losses to  non-performing  loans was 218%,
89%, and 71% at September 30, 1997, 1996 and 1995,  respectively.  This coverage
ratio  will  vary  from  time  to  time  based  upon  the  composition  of,  and
management's  analysis of, the risk elements in the loan  portfolio,  as well as
the composition of problem loans.  The allowance for loan losses is not based on
a percentage of non-performing  loans, but on the total portfolio  classified by
risk group plus estimated  losses on individual  problem loans.  The increase in
1997 in the ratio of allowance  for loan losses to  non-performing  loans is due
primarily  to the  reduction  in  non-performing  loans  caused  by the  sale of
troubled loans during the year.

     The  following  table sets forth the amount of  accruing  loans  delinquent
60-89  days,  the amount of  non-accrual  loans,  the  balance of the  Company's
allowance for loan losses and the coverage  ratio of such allowance to the total
of loans at the dates indicated.

                                                Years Ended September 30,
                                             ------------------------------
                                               1997       1996       1995
                                             -------    -------    -------
                                                     (in thousands)

Accruing loans delinquent 60-89 days         $   604    $ 5,177    $ 5,379
                                             -------    -------    -------
Nonaccrual loans                               4,478     11,870     13,531
                                             -------    -------    -------
    Total                                    $ 5,082    $17,047    $18,910
                                             =======    =======    =======
Allowance for Loan losses                    $ 9,765    $10,507    $ 9,611
                                             =======    =======    =======
Coverage ratio                                 192.1%      61.6%      50.8%

     The decrease in accruing loans delinquent 60-89 days and non-accrual  loans
from September 30, 1996 to September 30, 1997 is  principally  the result of the
sale of $17.7 million of troubled loans in 1997.

     Various  regulatory  agencies,  as an  integral  part of their  examination
process,  periodically  review the Bank's allowance for losses on loans and real
estate owned.  Such agencies may require the Bank to recognize  additions to the
allowances  based on their  judgments  of  information  available to them at the
examination.  The OTS completed a regularly  scheduled  examination  of the Bank
during 1997 and no changes to the  allowance  for loan  losses were  required at
that time.

     At September 30, 1997,  Eagle had $22.4 million of potential  problem loans
with $4.6 million  classified as special mention and $17.8 million classified as
watch.  Commercial  real estate and land loans  comprised  $18.9  million of the
total.

                                       15

<PAGE>



     INVESTMENT ACTIVITIES

     Federally  chartered  savings  institutions  have  authority  to  invest in
various types of liquid assets,  including  United States Treasury  obligations,
securities of federal  agencies,  certificates  of deposit of federally  insured
banks and savings institutions,  bankers' acceptances and federal funds. Subject
to various  restrictions,  federally  chartered  savings  institutions  may also
invest a portion of their assets in commercial paper, corporate debt securities,
and mutual  funds  whose  assets  conform to the  investments  that a  federally
chartered savings institution is otherwise authorized to make directly.  Federal
laws and regulations also require savings institutions to maintain liquid assets
at minimum  levels  which  vary from time to time.  See  "Regulation  -- Savings
Institution Regulation -- Liquidity."

     Eagle,  as a Delaware  corporation,  has authority to invest in any type of
investment  permitted under Delaware law. As a savings and loan holding company,
however,  Eagle's  investments  are subject to certain  regulatory  restrictions
described  under  "Regulation -- Savings and Loan Holding  Company  Regulation."
Eagle  maintains  an  investment  portfolio  that  provides not only a source of
income but also a source of liquidity to meet lending  demands and  fluctuations
in deposit flows. The relative mix of investment  securities in these investment
portfolios is dependent upon  management's  judgment from time to time as to the
attractiveness   of  yields   available  on  loans  as  compared  to  investment
securities.  Neither  Eagle,  nor Eagle Bank  invest in  below-investment  grade
corporate bonds and notes.

     The Company's total holdings of mortgage-backed  and investment  securities
increased  to $797.0  million  at  September  30,  1997 from  $514.4  million at
September 30, 1997.  The Bank's  portfolio is almost  entirely made up of agency
issued mortgage-backed  securities and collateralized mortgage obligations which
collectively  total  $742.5  million,  or 93.2%  of the  total  portfolio.  This
represents an increase from $460.2 million at September 30, 1996.  Agency issued
mortgage-backed  securities  increased to $282.2  million at September  30, 1997
from  $237.7  million  at  September  30,  1996  while  collateralized  mortgage
obligations  increased  from  $222.5  million at  September  30,  1996 to $460.3
million at September 30, 1997.

     The  Company's  security  portfolio  at  September  30, 1997 was  comprised
primarily of mortgage-backed securities and collateralized mortgage obligations.
Mortgage-backed  securities  are  investments  secured by pools of fixed rate or
adjustable  rate  mortgage  loans.  Agency  issued  mortgage-backed   securities
represent  35.4% of the security  portfolio with $139.9 million secured by pools
of  adjustable  rate  loans and  $142.3  million  secured by pools of fixed rate
loans. The payments of interest and principa on such loans are passed through to
the  securities  holders  after  deducting a servicing  fee. The  collateralized
mortgage  obligation  portion of the  investment  portfolio,  57.8% of the total
portfolio,  contains no derivative  investment  securities such as interest only
tranches,  principal  only  tranches  or strips.  There were  $140.7  million of
adjustable or floating rate collateralized  mortgage obligations  outstanding at
September 30, 1997. The mortgage-backed  securities and collateralized  mortgage
obligations  held by Eagle are subject to  interest  rate and  prepayment  risks
customarily  associated  with such  securities.  The  weighted  average  life of
mortgage-backed  securities and collateralized  mortgage obligations will differ
from contractual maturities,  depending upon the rate of prepayments.  Borrowers
on the  underlying  mortgages  may have the right to prepay  their loans with or
without prepayment  penalties.  In a declining  interest rate environment,  more
borrowers than would  otherwise be anticipated  may choose to prepay their loans
in order to refinance the loans at lower rates. As a result, the actual yield on
mortgage-backed  securities  may  differ  from the  expected  yields  based upon
prepayment experience.

During fiscal 1997,  the Company  substantially  grew the  investment  portfolio
through the purchase of both agency and private  issue  collaterilized  mortgage
obligations   and,  to  a  lesser   extent,   the  purchase  of  agency   issued
mortgage-backed  securities.  This  growth  was  done in order  to  utilize  the
proceeds  received from the issuance of trust  preferred  capital  securities as
well  as  to  increase  Eagle's  net  interest  income.  These  objectives  were
accomplished through the execution of two separate investment programs.

The first program,  which was completed  during the quarter ended June 30, 1997,
involved the purchase of  approximately  $180 million of  investment  securities
needed  to cover the  dividend  cost  related  to the  trust  preferred  capital
securities. The investment securities,  which were funded both with the proceeds
of the trust  preferred  offering and borrowed money,  consisted  primarily of a
combination of fixed and adjustable rate collateralized mortgage obligations and
mortgage-backed  securities. The borrowed money included long term floating rate
advances and short term fixed rate advances.

The  second  growth  program,  which was  completed  during  the  quarter  ended
September 30, 1997, was implemented to add to the Company's net interest income.
The  assets  purchased  were  primarily  fixed  rate   collateralized   mortgage
obligations  and  mortgage-backed  securities.  The assets were  funded  using a
combination of short term advances and a long term repurchase agreement. As part
of the program, the Company also purchased an interest rate cap with a five year
term to protect its funding costs in the event of rising rates.


                                       16

<PAGE>



     At September 30, 1997,  the  following  details  investments  in any issuer
where the aggregate book value exceeded 10% of Eagle's shareholder's equity.

                                                    Aggregate        Aggregate
                                                   Book Value       Market Value
                                                ---------------  ---------------
                                                         (in thousands)

FNMA                                            $   221,167       $  224,164
FHLMC                                               208,555          210,814
Residential Funding Mortgage Securities, Inc.        58,280           58,486
GNMA                                                 55,925           55,965
G.E.  Capital Mortgage Services, Inc.                46,411           46,966
Norwest Asset Securities Corporation                 33,365           34,097
Prudential Home Mortgage Securities                  30,723           30,641
PNC Mortgage Securities Corp.                        26,409           26,727
Structured Mortgage Asset Residential Trust          17,640           17,605
Countrywide Home Loans                               14,627           15,105
                                                -------------   --------------
                                                $   713,102       $  720,570
                                                =============   ==============

     All  securities  included  above  represent  agency issued  mortgage-backed
securities,  agency  issued  collateralized  mortgage  obligations  or privately
issued collateralized mortgage obligations.

     The following table sets forth the  composition of Eagle's  mortgage-backed
and investment portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                                September 30,
                                        ------------------------------------------------------------------------------------
                                                 1997                         1996                          1995
                                        -----------------------      -------------------------     -------------------------
                                        Carrying       % of          Carrying         % of         Carrying         % of
                                         Value       Portfolio        Value         Portfolio       Value         Portfolio
                                        ----------   ----------      ----------    -----------     -----------    ----------
                                                                                (in thousands)
<S>                                    <C>             <C>           <C>              <C>           <C>              <C> 
U.S. Treasury securities               $  13,016       1.6%          $  12,013        2.3%          $  16,447        3.4%
U.S. Government agency                                                                             
  obligations                              8,019       1.0              24,956        4.8              36,927        7.6
Other bonds and notes                     17,945       2.2               6,539        1.3              19,680        4.1
Mutual fund and equity securities         14,081       1.8               8,555        1.7              39,560        8.2
Mortgage-backed securities:                                                                        
  Agency                                 282,155      35.4             237,695       46.2             313,654       65.0
  Other                                    1,453       0.2               2,104        0.4               2,704        0.6
  Collateralized mortgage                                                                          
     obligations                         460,335      57.8             222,509       43.3              53,698       11.1
                                        ----------   ----------      ----------    -----------     -----------    ----------
  Total carrying value of portfolio    $ 797,004       100%         $  514,371        100%         $  482,670        100%
                                         =========   ==========      ==========    ===========     ===========    ==========

  Total market value of portfolio      $ 797,004                    $  514,217                     $  484,197
                                        ==========                   ==========                     ==========
</TABLE>

                                       17

<PAGE>



     The following  table sets forth the  maturities of Eagle's  mortgage-backed
and investment  securities at September 30, 1997 and the weighted average yields
of such securities.  Expected maturities will differ from contractual maturities
because  borrowers  may have the  right to call or  prepay  obligations  with or
without  call  or   prepayment   penalties.   Mortgage-backed   securities   and
collateralized  mortgage  obligations  are presented in accordance  with date of
final maturity without  consideration  of scheduled  amortization or anticipated
prepayments.

<TABLE>
<CAPTION>
                            Within One Year    One to Five Years     Five to 10 Years     After 10 Years           Total
                                    Weighted             Weighted             Weighted            Weighted              Weighted
                                    Average              Average              Average             Average               Average 
                          Amount     Yield      Amount    Yield     Amount     Yield    Amount     Yield      Amount     Yield  
                         --------   --------   --------  --------  --------   -------- --------   --------   --------   --------
                                                                      (in thousands)
<S>                      <C>            <C>    <C>        <C>      <C>         <C>     <C>         <C>       <C>        <C>
U.S. Treasury
  securities             $  7,508       5.55%  $  5,508   5.96%    $      -       -%   $      -       -%     $ 13,016   5.72%
U.S. Government                                                                                              
  agency obligations            -          -      2,019   7.34        6,000    7.41           -       -         8,019   7.39
Other bonds and                                                                                              
  notes                       878       6.96      2,315   7.06           52    8.82      14,700    5.36        17,945   5.66
Mortgage-backed                                                                                              
  securities:                                                                                                
    Agency                    323       7.00     19,536   6.66        7,273    7.22     255,023    7.59       282,155   7.52
    Other                       -          -          -      -            -       -       1,453    7.85         1,453   7.85
    Collateralized                                                                                           
      mortgage                                                                                               
      obligations               -          -        661   6.51            -       -     459,674    7.14       460,335   7.13
                         --------   --------   --------   ----     --------    ----    --------    ----      --------   ----
Total                    $  8,709       5.75%  $ 30,039   6.60%    $ 13,325    7.31%   $730,850    7.26%     $782,923   7.22%
                         ========   ========   ========   ====     ========    ====    ========    ====      ========   ====
</TABLE>

     SOURCES OF FUNDS

     General.  Deposits  are the primary  source of funds for use in the lending
and  investment  activities of Eagle.  In addition,  funds are derived from loan
payments  (including  interest,  amortization  of  principal  and  prepayments),
earnings on investments,  amortization of investments,  maturing investments and
FHL Bank  advances.  Historically,  Eagle  has not  relied on sales of loans and
investment  securities  as  sources  of funds.  Loan and  investment  repayments
fluctuate significantly based on prevailing interest rates while deposit inflows
and  outflows are  significantly  influenced  by  prevailing  interest  rates on
alternative products and general economic conditions.  Borrowings may be used on
a short-term basis to compensate for reductions in normal sources of funds or on
a longer term basis to support expanded lending or investing activities.

     Deposits  decreased  to $1.35  billion  at  September  30,  1997 from $1.37
billion at  September  30,  1996, a decrease of $15.4  million,  or 1.1%.  Total
borrowings  increased by $289.6 million to $521.4 million at September 30, 1997.
The  increase in  borrowings  is  principally  a result of funding  purchases of
securities as part of Eagle's balance sheet management strategies.

     Deposit  Activities.  Eagle has  developed  a variety of  deposit  products
ranging in maturity from demand-type accounts to certificates with maturities of
up to five years.  Deposits  are  primarily  derived from the areas in which the
offices of Eagle Bank are  located.  Eagle does not  actively  solicit  deposits
outside the State of Connecticut or use brokers to obtain  deposits.  Eagle does
occasionally use premiums and promotions to attract deposits.

     The  deregulation  of various  federal  controls  on insured  deposits  has
allowed Eagle to be more  competitive in the acquisition and retention of funds,
but has also resulted in a more volatile cost of funds.  Federal  regulations no
longer  require  Eagle to impose  interest  penalties  for early  withdrawal  of
deposits.  However,  to assist in maintaining the maturity and cost structure of
their deposits,  Eagle continues to impose such penalties.  The deposit accounts
offered  by Eagle  are  reviewed  on a  systematic  basis in order to  determine
whether such accounts continue to meet  asset/liability  management goals. Eagle
attempts to control the flow of funds in its deposit  accounts  according to the
need for funds and the cost of alternative  sources of funds.  The flow of funds
is  controlled  primarily by the pricing of deposits,  which is  influenced to a
large extent by competitive  factors in the market area.  Interest rates paid by
Eagle generally are competitive  with the rates offered by other  institution in
its primary market areas.  Eagle has maintained a strong liquidity  position and
has generally  maintained  its deposit base,  but has not actively  competed for
deposits when funds were available from other sources or when its existing funds
were sufficient to meet their liquidity needs.

                                       18

<PAGE>



     The  following  table  describes the deposit  accounts  offered by Eagle at
September 30, 1997.


                                               
                                               
                                                    Minimum    
                                  Minimum         Deposit to          Annual
                              Deposit to Open    Obtain Annual      Percentage
                                   Account     Percentage Yield       Yield
                              --------------   -----------------    ----------

Passbook                         $   10            $  100               2.00%
NOW                                  50               500                .25
Money market accounts             1,000             1,000               2.00

Market-rate certificates:                                         
  31 day                          5,000             5,000               3.00
  91 day                            500               500               3.75
  Six month                         500               500               4.30
  Six month liquid                  500               500               5.00
  Seven month                       500               500               4.65
  Nine month                        500               500               4.65
  Nine month bump                   500               500               5.00
  Nine month liquid                 500               500               5.00
  One Year                          500               500               4.75
  One Year Bump                     500               500               5.30
  Fifteen month                     500               500               5.00
  Fifteen month bump                500               500               5.10
  Eighteen month                    500               500               5.10
  Two year                          500               500               5.05
  Two and one-half year             500               500               5.70
  Two and one-half year bump        500               500               6.00
  Three year                        500               500               5.40
  Three and one-half year           500               500               5.00
  Four year                         500               500               5.70
  Five year                         500               500               5.75

IRA certificates:                                                 
  Eighteen month variable rate       50                50               4.30
  Eighteen month fixed rate         500               500               5.10
  Four and one-half year                                          
    (fixed rate)                    500               500               5.70

     Eagle prices its deposits to take advantage of opportunities for profitable
investment  of the funds through  regular  lending  activities,  and to a lesser
amount to encourage  deposits in longer term accounts.  Annual percentage yields
are primarily based on prevailing market conditions,  the need for funds and the
ability to pay.

                                       19

<PAGE>



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

<TABLE>
<CAPTION>
                                                            Years Ended September 30,
                                                -----------------------------------------------
                                                   1997               1996              1995
                                                -----------       -----------      ------------
                                                                (In thousands)
<S>                                             <C>               <C>              <C>      
Deposits acquired through acquisitions          $       -         $ 253,139        $       -
Deposits sold through dispositions                      -          (184,410)               -
Net withdrawals                                   (70,417)          (18,992)         (46,148)
                                                ---------         ---------        ---------
Net cash inflow (outflow)                         (70,417)           49,737          (46,148)
Interest credited                                  54,988            55,856           46,315
                                                ---------         ---------        ---------

Net increase (decrease) in deposits             $ (15,429)        $ 105,593        $     167
                                                =========         =========        =========
</TABLE>

     The following table provides detail  regarding the Bank's deposit  accounts
for the periods indicated.

<TABLE>
<CAPTION>
                                                                 Years Ended September 30,
                                  -------------------------------------------------------------------------------------
                                             1997                         1996                         1995
                                  -------------------------     -------------------------   ---------------------------
                                      Average                       Average                     Average                
                                      Amount         Rate           Amount         Rate         Amount         Rate    
                                  ------------- -----------     ------------- -----------   ------------- -------------
                                                                    (In thousands)
<S>                               <C>                             <C>                            <C>                   
Non interest-bearing
  demand accounts                 $ 53,416            -%          $ 49,155            -%         $ 38,593            -%
Interest-bearing                                                                              
  demand  accounts                  94,688         1.11            101,626         0.99            93,016         1.00
Passbook accounts                  245,397         1.99            256,625         2.01           269,680         1.98
Money market accounts              111,360         2.31            120,129         2.61           143,881         2.60
Certificate accounts               858,986         5.40            832,222         5.53           710,957         5.11
</TABLE>

     The  following  table sets forth the  deposit  accounts  of Eagle in dollar
amounts and as percentages of total deposits at the dates indicated.

<TABLE>
<CAPTION>
                                                                         September 30,
                               ----------------------------------------------------------------------------------------------------
                                               1997                            1996                             1995
                               -------------------------------- --------------------------------  --------------------------------
                                Weighted                  % of   Weighted                  % of    Weighted                  % of 
                                Average                 total    Average                 total     Average                 total  
                                  Rate       Amount    deposits    Rate       Amount    deposits     Rate       Amount    deposits
                               ---------- ------------ -------- ---------- ------------ --------  ---------- ------------ --------
                                                                   (in thousands)
<S>                              <C>      <C>               <C>    <C>       <C>           <C>     <C>      <C>              <C> 
Balance by account type:
  Non-interest bearing           0.00%    $   52,970        3.9%   0.00%     $   41,435    3.0%    0.00%    $   43,089       3.4%
  Regular savings                1.98        233,267       17.2    2.00         250,718   18.3     1.99        252,559      20.0
  NOW accounts                   0.53        110,769        8.2    0.99         112,698    8.3     1.03         97,490       7.7
  Money market accounts          2.49        107,008        7.9    2.68         110,756    8.1     2.61        123,433       9.8
                                          ----------------------             ------------------             ---------------------
                                             504,014       37.2                 515,607   37.7                 516,571      40.9
                                          ----------------------             ------------------             ---------------------
Certificate accounts with                                                                                   
 original maturities of:                                                                                    
  Six months or less             4.65        149,411       11.0    4.69         124,073    9.1     4.68         96,374       7.6
  Over six months to one year    5.09        283,748       21.0    5.18         362,929   26.5     5.75        247,519      19.6
  Over one year to two year      5.33        142,173       10.5    5.54         111,024    8.1     5.53        159,393      12.6
  Over two years                 5.99        273,928       20.3    6.04         255,070   18.6     6.06        243,253      19.3
                                          ----------------------             ------------------             ---------------------
                                                                             
                                             849,260       62.8                 853,096   62.3                 746,539      59.1
                                          ----------------------             ------------------             ---------------------
                                          $1,353,274      100.0%             $1,368,703  100.0%             $1,263,110     100.0%
                                          ======================             ==================             =====================
</TABLE>

                                       20

<PAGE>



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

<TABLE>
<CAPTION>
                                                      September 30,
                                        ----------------------------------------

                                          1997            1996            1995
                                        --------        --------        --------
                                                     (in thousands)

<S>                                     <C>             <C>             <C>     
Less than 4.01%                         $ 12,239        $ 21,397        $ 20,943
4.01 - 6.00%                             746,356         705,252         465,699
Greater than 6.01%                        90,665         126,447         259,897
                                        --------        --------        --------

                                        $849,260        $853,096        $746,539
                                        ========        ========        ========
</TABLE>

     The  following  table sets forth the amount  and  remaining  maturities  by
interest rate of time deposits at September 30, 1997.

                               Less Than   One to Three  After Three
                               One Year       Years         Years       Total
                               --------     --------     --------     --------
                                                (in thousands)

Less than 4.01%                $ 12,239     $      -     $      -     $ 12,239
4.01 - 6.00%                    575,199      162,728        8,429      746,356
Greater than 6.01%               24,047       64,109        2,509       90,665
                               --------     --------     --------     --------

    Total                      $611,485     $226,837     $ 10,938     $849,260
                               ========     ========     ========     ========

     Certain information  regarding time deposit accounts at Eagle in amounts of
$100,000 or more at September 30, 1997 is shown in the table below.

<TABLE>
<CAPTION>
Total Time
Deposits of                      Over Three       Over Six Months 
$100,000 or   Three Months or    Months through     through One                    % of Total
    more           Less          Six Months             Year      Over One Year    Deposits
----------   ----------------   ----------------   ------------   --------------   ---------
                             (in thousands)
<S>          <C>                <C>                <C>            <C>                <C> 
$   69,329   $         13,665   $         22,064   $     10,521   $       23,079     5.1%
</TABLE>

     Borrowings.  The FHL Bank System functions in a reserve credit capacity for
savings institutions and certain other home financing  institutions.  Members of
the FHL Bank System are required to own capital  stock in the FHL Bank.  Members
are  authorized  to apply for advances on the security of such stock and certain
of their home  mortgages  and other  assets  (principally  securities  which are
obligations  of,  or  guaranteed  by,  the  United  States)   provided   certain
creditworthiness  standards have been met. See  "Regulation -- Federal Home Loan
Bank System." Under its current credit  policies,  the FHL Bank limits  advances
based on the value of a member's qualified  collateral that has not been pledged
to outside sources. Historically, Eagle Bank has not relied on FHL Bank advances
and other borrowings to any significant extent as a source of funds, although in
recent years the Bank has increased the  utilization  of advances as part of its
balance  sheet  management  strategies.  At September  30, 1997,  Eagle Bank had
authority  to borrow up to $919  million  from the FHL Bank of Boston,  and will
continue to use this source of funds to take advantage of lending and investment
opportunities.  Outstanding  FHL Bank  advances at  September  30, 1997  totaled
$445.0  million  compared  to $217.0  million at  September  30,  1996 and $83.2
million at September 30, 1995.  The weighted  average  interest rate on FHL Bank
advances  outstanding at September 30, 1997, 1996 and 1995 was 5.78%,  5.63% and
5.90%, respectively.

                                       21

<PAGE>



     On a  consolidated  basis,  Eagle had other borrowed money in the amount of
$76.4  million at September  30, 1997 compared to $14.8 million at September 30,
1996. Repurchase agreements constitute 99.8% and 99% of the other borrowed money
total at  September  30,  1997 and  1996,  respectively.  The  weighted  average
interest rate on other borrowed money at September 30, 1997,  1996, and 1995 was
6.01%, 5.21%, and 5.89%, respectively.

     ASSET/LIABILITY MANAGEMENT AND MARKET RISK

     The Bank's earnings are largely  dependent on its net interest income which
is the difference between the yield on  interest-earning  assets and the cost of
interest-bearing  liabilities.  The  Company  seeks to reduce  its  exposure  to
changes in  interest  rates,  or market  risk,  through  active  monitoring  and
management of its interest rate risk exposure.

     Market risk is the risk of loss from adverse  changes in market  prices and
rates.  The Bank's market risk arises primarily from interest rate risk inherent
in its lending and deposit taking activities.

     The Bank's primary  objective in managing interest rate risk is to minimize
the  adverse  impact of changes  in  interest  rates on the Bank's net  interest
income and capital,  while  adjusting  the Bank's  asset/liability  structure to
obtain  the  maximum  yield-cost  spread  on that  structure.  The  Bank  relies
primarily  on its  asset/liability  structure  to  control  interest  rate risk.
However,  a sudden and  substantial  increase  in interest  rates may  adversely
impact the Bank's earnings to the extent that the interest rates borne by assets
and liabilities do not change at the same speed,  to the same extent,  or on the
same basis.

     A method used to measure the interest  rate risk  exposure of the Company's
balance sheet is the interest rate  sensitivity  "gap",  which is the difference
between  rate  sensitive  assets and rate  sensitive  liabilities  repricing  or
maturing  within  specific time periods.  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.

     The following table shows the estimated maturity/repricing structure of the
interest  sensitive  assets  and  interest  sensitive  liabilities  of  Eagle at
September 30, 1997:

<TABLE>
<CAPTION>
                                                                               Repricing    Repricing    Repricing     Repricing 
                                                                   Percent of  Within 0-3   Within 4-    Within 1-3      Over 3
                                                         Amount      Total       Months      12 Months      Years        Years
                                                      -----------  ----------  -----------  -----------  -----------  -----------
                                                                                (in thousands)
<S>                                                   <C>                <C>   <C>          <C>          <C>          <C>        
Interest-sensitive assets
  Loans receivable , net (a)                          $ 1,135,498        57.0% $   191,337  $   346,872  $   250,727  $   346,562
  Mortgage-backed securities                              736,150        36.9      215,390      129,551      131,691      259,518
  Investment securities (b)                                76,374         3.8       19,548        3,463        7,233       46,130
  Interest-bearing deposits                                46,600         2.3       46,600            -            -            -
                                                      -----------  ----------  -----------  ----------- -----------  -----------

Total interest sensitive assets                       $ 1,994,622       100.0%     472,875      479,886      389,651      652,210
                                                      ===========  ==========  -----------  -----------  -----------  -----------
Interest sensitive liabilities
  Passbook accounts                                   $   233,267        12.8%      12,109       28,605       65,424      127,129
  Certificate accounts                                    849,260        46.6      170,471      441,013      211,906       25,870
  NOW accounts                                            110,769         6.1        7,359       13,911       25,011       64,488
  Money market accounts                                   107,008         5.9       12,329       12,560       22,582       59,537
  FHLB advances                                           445,014        24.4      267,457       85,838       74,921       16,798
  Other borrowings                                         76,409         4.2       76,259            -            -          150
                                                      -----------  ----------  -----------  -----------  -----------  -----------
  Total interest sensitive liabilities                $ 1,821,727       100.0%     545,984      581,927      399,844      293,972
                                                      ===========  ==========  -----------  -----------  -----------  -----------
Periodic repricing difference (cumulative gap)                                 $   (73,109) $  (102,041) $   (10,193) $   358,238
                                                                               ===========  ===========  ===========  ===========
Cumulative repricing difference (cumulative gap)                               $   (73,109) $  (175,150) $  (185,343) $   172,895
                                                                               ===========  ===========  ===========  ===========
Cumulative gap to total assets                                                        (3.5%)       (8.4%)       (8.9%)        8.2%
</TABLE>

----------------
(a)  Loans are net of  non-performing  loans,  undisbursed  portion of loans due
     borrowers and unearned discounts and premiums.

(b)  Investment  securities include investment securities available for sale and
     FHL Bank stock.

                                       22

<PAGE>



The following  assumptions were determined by management in order to prepare the
gap table set forth above. Non-amortizing investment securities are shown in the
period in which they contractually mature. Prepayment rates on loans, amortizing
investment  securities  and  mortgage-backed  securities  are based upon  market
consensus.  Estimated  decay rates on all deposit  accounts are based  primarily
upon historical experience.

The interest rate sensitivity of the Company's assets and liabilities could vary
substantially if different assumptions were used or if actual experience differs
from the assumptions used. For example, if all passbook deposits were assumed to
reprice in one year or less,  the  Company's  one-year  cumulative  gap to total
assets would be negative 17.5%.

Another measure, required to be performed by OTS-regulated institutions,  is the
test  specified  by OTS Thrift  Bulletin No. 13  "Interest  Rate Risk  Exposure:
Guidelines  on Director and Officer  Responsibilities".  Under this  regulation,
institutions  are require to establish  limits on the  sensitivity  of their net
interest  income and net  portfolio  value to changes in  interest  rates.  Such
changes in interest rates are defined an instantaneous  and sustained  movements
in interest  rates in 100 basis point  increments.  Following  are the estimated
impacts of a parallel shift in interest rates at September 30, 1997,  calculated
in a manner consistent with the requirements of Thrift Bulletin No. 13:


                                                  Percentage Change In
                                        ----------------------------------------
       Change In Interest Rates           Net Interest           Market Value
           (In Basis Points)               Income (1)        Portfolio Equity(2)
-----------------------------------     ----------------    --------------------
                +200                         -2%                     -31%
                +100                          4%                     -14%
                -100                         -5%                       8%
                -200                         -4%                      16%

---------------
(1)  The percentage  change in this column represents Net Interest Income for 12
     months in a stable interest rate environment versus the Net Interest Income
     in the various rate scenarios.

(2)  The  percentage  change in this column  represents  Market Value  Portfolio
     Equity of the Bank in a stable interest rate environment  versus the Market
     Value  Portfolio  Equity in the  various  rate  scenarios.  The OTS defines
     Market  Value  Portfolio  Equity as the present  value of expected net cash
     flows from  existing  assets  minus the present  value of expected net cash
     flows from existing liabilities plus the present value of expected net cash
     inflows from existing off-balance sheet contracts.

                                       23

<PAGE>



     The  following  table  shows  the  Bank's  financial  instruments  that are
sensitive to changes in interest rates,  categorized by expected  maturity,  and
the  instruments'  fair values at  September  30,  1997.  Market risk  sensitive
instruments  are generally  defined as on and off balance sheet  derivatives and
other financial instruments.

<TABLE>
<CAPTION>
                                                        Expected Maturity Date at September 30, 1997 (1)
                                                                                                  There-      Total         Fair
                                    1998        1999         2000         2001       2002          after     Balance        Value
                                  ---------   ---------    ---------    --------   ---------    ---------    --------    -----------
<S>                              <C>          <C>          <C>             <C>        <C>          <C>       <C>         <C>
INTEREST-SENSITIVE ASSETS:
Loans receivable:

Real estate mortgage              $152,221    $137,664     $120,069     $103,875   $  73,622    $430,139     $1,017,590   $1,013,324
  Average interest rate               7.84%       7.83%        7.67%        7.72%       7.68%       7.75%          7.76%

Consumer and non-mortgage
  commercial                        65,982      11,638        9,894        7,121       6,117      19,804        120,556      122,255
  Average interest rate               9.11%       9.21%        8.92%        9.01%       8.90%       8.22%          8.94%

Mortgage-backed securities         130,926     102,323       79,908       57,067      44,295     321,631        736,150      743,943
  Average interest rate               7.43%       7.30%        7.21%        7.20%       7.11%       7.27%          7.28%

Investment securities                8,389         325        6,986        2,000         505      35,399         53,604       53,061
  Average interest rate               5.70%       5.91%        6.32%        7.34%       6.00%       5.48%          5.70%

Interest-bearing deposits           46,600           -            -            -           -           -         46,600       46,600
  Average interest rate               5.25%          -            -            -           -           -           5.25%            

Mortgage servicing assets              133         108           88           71          57         107            564          571
                                  --------    --------     --------     --------   ---------    --------     ----------   ----------

Total interest-sensitive assets   $404,251    $252,058     $216,945     $170,134   $ 124,596    $867,080     $1,975,084   $1,979,754
                                  ========    ========     ========     ========   =========    ========     ==========   ==========

INTEREST-SENSITIVE LIABILITIES:

Deposits:
  NOW                             $ 21,270    $ 13,528    $  11,483    $   9,747   $   8,274    $ 46,467     $  110,769   $  110,769
   Average interest rate               .53%        .53%         .53%         .53%        .53%        .53%           .53%

  Passbook                          40,714      36,095       29,329       23,831      19,364      83,934        233,267      233,267
    Average interest rate             1.48%       1.48%        1.48%        1.48%       1.48%       1.48%          1.48%

  Money-market                      19,205      12,129       10,453        9,009       7,765      48,447        107,008      107,008
    Average interest rate             2.49%       2.49%        2.49%        2.49%       2.49%       2.49%          2.49%

  Certificates                     611,484     131,816       80,090       14,932      10,651         287        849,260      850,532
    Average interest rate             5.14%       5.70%        6.21%        5.71%       5.86%       6.49%          5.34%

Borrowings:
  FHLB                             268,320      56,462       18,150        6,845       2,000      93,237        445,014      445,424
    Average interest rate             5.64%       5.77%        6.06%        6.66%       6.87%       6.07%          5.78%

  Other                              1,259           -            -       75,000         150           -         76,409       76,587
    Average interest rate             4.50%          -            -         6.04%       4.00%          -           6.01%
                                  --------    --------    ---------    ---------    --------    --------     ----------   ----------
Total interest-sensitive
 liabilities                      $962,252    $250,030    $ 149,505    $ 139,364    $ 48,204    $272,372     $1,821,727   $1,823,587
                                  ========    ========    =========    =========    ========    ========     ==========   ==========
</TABLE>

-------------------
(1)  Expected maturities are contractual  maturities adjusted for prepayments of
     principal.  The Bank uses certain  assumptions  to estimate fair values and
     expected  maturities.  For  assets,  expected  maturities  are  based  upon
     contractual  maturity,  projected  repayments and prepayments of principal.
     The prepayment  experience  reflected herein is based on market  consensus.
     For deposit liabilities,  in accordance with standard industry practice and
     the Bank's own historical  experience,  "decay  factors",  used to estimate
     deposit  runoff,  have  been  applied.   The  actual  maturities  of  these
     instruments could vary  substantially if future prepayments differ from the
     Bank's historical experience.

                                       24

<PAGE>



     SERVICE CORPORATION ACTIVITIES

     Federal  regulations  permit a federally  chartered savings  institution to
invest an  amount up to 2% of its  assets in the  stock,  paid-in  surplus,  and
unsecured  obligations  of subsidiary  service  corporations  engaged in certain
activities,  and an  additional 1% of its assets when the  additional  funds are
used  primarily  for  community or  inner-city  development  or  investment.  In
addition,  federal regulations  generally authorize such institutions which meet
minimum  regulatory  capital  requirements  to  invest  up to 50% of  regulatory
capital in conforming first mortgage loans to service corporations. At September
30,  1997,  Eagle  Bank's  direct  investment  (capital  stock)  in its  service
corporation,  Eagle Service Corp., was $ 1,000. Eagle Service Corp.  administers
the securities  brokerage and investment services made available to Eagle Bank's
customers.

     EMPLOYEES

     At September  30, 1997,  Eagle had 458 employees  (including  101 part-time
employees),  all of whom are employed by Eagle Bank. None of these employees are
represented by a collective  bargaining  group.  Employee benefits for full-time
employees  include  reimbursement  of  approved,   business-related  educational
expenses,  a pension plan, an ESOP, a 401K plan and life,  health and disability
insurance.

MARKET AREA AND COMPETITION

     The Bank is  headquartered  in Bristol,  Connecticut and conducts  business
from four offices in Bristol,  three offices in Hartford and Berlin, two offices
in West  Hartford and New Britain,  and one office each in  Bloomfield,  Canton,
Manchester,  Newington, Plainville, Rocky Hill and Simsbury (all of which are in
Hartford  County),  two offices in  Torrington,  one office each in  Litchfield,
Terryville  and Winsted (all of which are in Litchfield  County).  The Bank also
operates  supermarket branch offices in Bloomfield,  East Hartford,  Glastonbury
and Avon.

     Hartford,  the capital of  Connecticut,  has a population of  approximately
140,000 and is the  governmental  and  economic  center of Central  Connecticut.
Bristol,  located in central Connecticut 18 miles west of Hartford, is a city of
approximately 60,000 people with a broad-based  economy.  Over 100 manufacturing
firms of all sizes operate in or near Bristol. The city of Torrington is located
27 miles west of Hartford at the northern end of the Route 8 corridor which runs
from the  northwest  corner  of  Connecticut  to the New  Haven  and  Bridgeport
metropolitan areas.  Torrington has an estimated population of 30,000 and is the
largest city in Litchfield County.

     The Bank faces  substantial  competition for deposits and loans  throughout
its market  area.  The primary  factors  stressed by the Bank in  competing  for
deposits are interest  rates,  personalized  services,  the quality and range of
financial   services,   convenience  of  office   locations  and  office  hours.
Competition  for  deposits  comes  primarily  from other  savings  institutions,
commercial  banks,  credit  unions,  money  market  funds and  other  investment
alternatives.  The primary  factors in competing  for loans are interest  rates,
loan   origination   fees,  the  quality  and  range  of  lending  services  and
personalized service.  Competition for origination of first mortgage loans comes
primarily from other savings  institutions,  mortgage banking firms,  commercial
banks and insurance companies.

     Connecticut law now permits Connecticut bank holding companies to engage in
stock  acquisitions of depository  institutions in other New England states with
reciprocal  legislation.  All New  England  states  currently  have some form of
reciprocal  legislation.  As a result,  bank holding companies from any state in
New England can establish non-bank offices  (including loan production  offices)
in Connecticut on a limited basis. The impact may be to  significantly  increase
the competition  faced by Eagle.  The Connecticut  legislature  also has enacted
legislation   which   reduces   the   home   office   protection    enjoyed   by
Connecticut-chartered  savings institutions and commercial banks. This and other
legislative  and  regulatory  changes  may  increase  the  size  of the  banking
institutions competing in the general market area of Eagle.

                                       25

<PAGE>



     Effective  September  29,  1995,  the  Riegle-Neal  Interstate  Banking and
Branching Efficiency Act of 1994 ("IBBEA"), amended the Bank Holding Company Act
of 1956 (the "BHCA") to permit a bank holding  company to acquire a bank located
in any state,  provided that the acquisition does not result in the bank holding
company  controlling more than 10% of the deposits in the United States,  or 30%
of deposits in the state in which the bank to be acquired is located (unless the
state waives the 30% deposit  limitation).  Individual  states are  permitted to
restrict the ability of an out-of-state  bank holding company or bank to acquire
an  in-state  bank that has been in  existence  for less than five  years and to
establish a state  concentration  limit of less than 30% if such  reduced  limit
does not discriminate against out-of-state bank holding companies or banks.

     Effective June 1, 1997, an "adequately capitalized" bank, with the approval
of the appropriate  federal banking  agency,  may merge with another  adequately
capitalized bank in any state that has not opted out of interstate branching and
operate the target's  offices as branches if certain  conditions  are satisfied.
The same  national  (10%) and state (30%) deposit  concentration  limits and any
applicable  state  minimum-existence  restrictions  (up to a maximum of 5 years)
apply to interstate  mergers as to interstate  acquisitions.  The applicant also
must comply with any nondiscriminatory host state filing and notice requirements
and  demonstrate  a record  of  compliance  with  applicable  federal  and state
community  reinvestment  laws.  A state may opt out of  interstate  branching by
enacting a law between September 29, 1994 and June 1, 1997 expressly prohibiting
interstate merger transactions.

     The  resulting  bank to an  interstate  merger  may  establish  or  acquire
additional  branches at any location in a state where any of the banks  involved
in the  merger  could have  established  or  acquired a branch.  A bank also may
acquire one or more  branches of an  out-of-state  bank  without  acquiring  the
target  out-of-state  bank if the law of the target's  home state permits such a
transaction. In addition, a bank may establish a de novo branch in another state
if the host state by statute expressly permits de novo interstate branching.

     Furthermore,  a bank  subsidiary of a bank holding  company is permitted to
act as agent for other depository institutions owned by the same holding company
for purposes of receiving deposits, renewing time deposits, closing or servicing
loans, and receiving loan payments effective as of September 29, 1995. A savings
association  may perform  similar agency  services for  affiliated  banks to the
extent that the savings  association  was affiliated with a bank on July 1, 1994
and satisfies certain additional requirements.

     The OTS also has adopted a statement  of policy on  branching  by federally
chartered savings institutions providing that the OTS will generally permit such
institutions to branch or merge across state lines to the same extent  permitted
under  state law to a  state-chartered  provided  that the  federal  institution
continues  to meet  the  domestic  building  and loan  test as set  forth in the
Internal  Revenue  Code.  See  "Regulation  - Savings and Loan  Holding  Company
Regulation."

     The  foregoing  provisions  are  expected to further  increase  competition
within Eagle's existing market area.

REGULATION

GENERAL

     The  Company,  as a savings  and loan  holding  company,  and the  Bank,  a
federally   chartered  savings  bank,  are  subject  to  extensive   regulation,
supervision and examination by the OTS as their primary federal  regulator.  The
Bank also is subject to regulation,  supervision and examination by the FDIC and
as to certain  matters by the Board of Governors of the Federal  Reserve  System
(the "Federal Reserve Board"),  See  "Management's  Discussion and Analysis" and
"Notes to Consolidated  Financial  Statements" as to the impact of certain laws,
rules and  regulations  on the operations of the Company and the Bank. Set forth
below is a description of certain recent regulatory developments.

                                       26

<PAGE>



     In September  1996,  legislation  (the "1996  legislation")  was enacted to
address the  undercapitalization  of the Savings Association Insurance Fund (the
"SAIF"), of which the Bank is a member. As a result of the 1996 legislation, the
Federal Deposit  Insurance  Corporation  (the "FDIC") imposed a one-time special
assessment of .657% on deposits  insured by SAIF as of March 31, 1995.  The Bank
incurred a one-time charge of $5.4 million (before taxes) to pay for the special
assessment  based upon on its level of SAIF deposits as of March 31, 1995. After
the SAIF was deemed to be recapitalized,  the Bank's deposit insurance  premiums
to the SAIF were  reduced as of September  30,  1996.  The Bank expects that its
future deposit insurance premiums will continue to be lower than the premiums it
paid prior to the recapitalization.

     The 1996 legislation also contemplates the merger of the SAIF with the Bank
Insurance Fund (the "BIF"),  which  generally  insures  deposits in national and
state-chartered banks. The combined deposit insurance fund, to formally be known
as the  Depository  Insurance  Fund (the  "DIF),  to be formed no  earlier  than
January  1,  1999,  will  insure   deposits  at  all  FDIC  insured   depository
institutions.  As a condition to the formation of the DIF,  however,  no insured
depository  institution  can be  chartered  as a  savings  association.  Several
proposals for abolishing the federal thrift charter were  introduced in Congress
during 1997 in bills addressing  financial services  modernization,  including a
proposal from the Treasury Department  developed pursuant to requirements of the
1996  legislation.  While no  legislation  was passed in 1997, it is anticipated
that the issue will be taken up again by Congress  in 1998.  If  legislation  is
passed  abolishing  the  federal  thrift  charter,  the Bank may be  required to
convert its federal  charter to either a national  bank  charter,  a new federal
type of  bank  charter  or to a state  depository  institution  charter.  Future
legislation  also may result in the Company  becoming  regulated  at the holding
company level by the Federal Reserve Board rather than by the OTS. Regulation by
the Federal Reserve Board could subject the Company 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.  The Company and the Bank are
unable to predict whether such legislation will be enacted.

     Various proposals were introduced in Congress in 1997 to permit the payment
of interest on required reserve balances, and to permit savings institutions and
other  regulated  financial  institutions  to pay  interest on  business  demand
accounts.  While this  legislation  appears  to have  strong  support  from many
constituencies,  the  Company  and the Bank are unable to predict  whether  such
legislation will be enacted.


                                       27

<PAGE>




SAVINGS AND LOAN HOLDING COMPANY REGULATION

     Under the Home Owners Loan Act (the  "HOLA"),  the  Director of the OTS has
regulatory  jurisdiction  over savings and loan holding  companies.  Eagle, as a
savings and loan holding  company  within the meaning of the HOLA, is subject to
regulation,  supervision and examination by, and the reporting  requirements of,
the Director of the OTS.

     As a unitary holding company, the Company generally is not restricted under
existing  laws as to the types of  business  activities  in which it may engage,
provided  that Eagle Bank  continues  to qualify as a  qualified  thrift  lender
("QTL").  Eagle could be  prohibited  from  engaging in any activity  (including
those otherwise permitted under the HOLA) not allowed for bank holding companies
if Eagle fails to constitute a QTL or if Eagle  subsequently  becomes a multiple
savings  and loan  holding  company.  See  "Regulation  --  Savings  Institution
Regulation -- Qualified Thrift Lender Requirement."

                                       28

<PAGE>



SAVINGS INSTITUTION REGULATION

     General. As a federally chartered savings institution,  the Bank is subject
to supervision  and regulation by the Director of the OTS and by the FDIC in its
capacity  as  administrator  of the  SAIF.  Under OTS  regulations,  the Bank is
required  to  obtain  audits by an  independent  accountant  and to be  examined
periodically by the Director of the OTS.  Examinations must be conducted no less
frequently  than every 12 months.  The Bank is subject to assessments by the OTS
and FDIC to cover the costs of such examinations.  The OTS may revalue assets of
the Bank,  based upon  appraisals,  and  require the  establishment  of specific
reserves in amounts equal to the  difference  between such  revaluation  and the
book  value  of the  assets.  The  Director  of the OTS  also is  authorized  to
promulgate  regulations  to ensure  the safe and  sound  operations  of  savings
institutions  and  may  impose  various  requirements  and  restrictions  on the
activities  of  savings  institutions.  See  "Regulation  - Savings  Institution
Regulation  -  Safet  and  Soundness  Guidelines."  See  "Regulation  -  Savings
Institution Regulation - Insurance of Deposits".

     Capital  Requirements.   The  Bank  is  subject  to  the  capital  adequacy
regulations  adopted by the OTS.  The Bank's  ability  to pay  dividends  to the
Company and expand its business  can be  restricted  if its capital  falls below
levels established by the OTS. Pursuant to OTS regulations, savings associations
are required to maintain (i) "leverage capital" in an amount not less than 3% of
total assets,  (ii) "tangible  capital" in an amount not less than 1.5% of total
assets, and (iii) risk-based capital equal to 8.00% of risk-weighted assets. The
capital standards established by the OTS for savings institutions must generally
be no less stringent than those applicable to national banks.

     The following is a  reconciliation  of the Bank's equity capital under GAAP
to regulatory capital at September 30, 1997.

<TABLE>
<CAPTION>
                                                                                                         Tier 1        Total
                                                                                                         Risk-         Risk-
                                                                             Core        Tangible        based         based
                                                                           ---------     ---------     ---------     ---------
                                                                                               (in thousands)

<S>                                                                        <C>           <C>           <C>           <C>      
GAAP Capital                                                               $ 190,648     $ 190,648     $ 190,648     $ 190,648
Less:  Goodwill and other intangible assets                                  (29,504)      (29,504)      (29,504)      (29,504)
Less:  Excess qualifying purchased mortgage loan servicing                       (57)          (57)          (57)          (57)
Less:  Unrealized gain in certain available for sale securities(4,537)        (4,537)       (4,537)       (4,537)       (4,537)
Add:  General loan and lease valuation allowances                                  -             -             -         9,118
                                                                           ---------     ---------     ---------     ---------
Regulatory capital                                                         $ 156,550     $ 156,550     $ 156,550     $ 165,668
                                                                           =========     =========     =========     =========
</TABLE>

     The Bank's equity capital under GAAP indicated  above exceeds the Company's
shareholders' equity reported on the consolidated balance sheet at September 30,
1997 due to the  proceeds  received  by Eagle  from the  issuance  of the  trust
preferred  securities  having been invested by the Holding  Company in the Bank.
The resulting invested funds qualify for treatment as capital at the Bank level.

     Prompt Corrective  Action. The federal banking agencies have established by
regulation, for each capital measure, the levels at which an insured institution
is well capitalized,  adequately  capitalized,  undercapitalized,  significantly
undercapitalized and critically undercapitalized,  and to take prompt corrective
action with respect to insured  institutions  which fall below  minimum  capital
standards. The degree of regulatory intervention mandated by federal legislation
is tied to an insured institution's  capital category,  with increasing scrutiny
and more  stringent  restrictions  being  imposed  as an  institution's  capital
declines.  Any  insured  depository  institution  which  falls below the minimum
capital  standards  must submit a capital  restoration  plan.  Any company  that
controls  an  under  capitalized   institution  must,  in  connection  with  the
submission of a capital restoration plan by the savings  institution,  guarantee
that  the  institution  will  comply  with  the  plan  and  provide  appropriate
assurances of  performance.  As of September 30, 1997, the Bank was deemed to be
well-capitalized.  See "Regulation - Savings Institution  Regulation - Insurance
of Deposits."

                                       29

<PAGE>



     Safety and  Soundness  Regulations.  The OTS,  along with the other federal
banking agencies,  adopted safety and soundness guidelines in July 1995 relating
to (i) internal controls,  information systems, and internal audit systems; (ii)
loan documentation;  (iii) credit underwriting; (iv) interest rate exposure; (v)
asset  growth;  and  (vi)  compensation  and  benefit  standards  for  officers,
directors,  employees  and  principal  shareholders.  The HOLA requires that all
regulations  and  policies  of the  Director of the OTS for the safe  and  sound
operations  of  savings  institutions  are to be no less  stringent  than  those
established by the OCC for national banks. The foregoing operational, managerial
and compensation issues are set out in the safety and soundness  guidelines that
the  federal  banking  agencies  issued to  identify  and  address  problems  at
institutions before capital becomes impaired.

     Qualified Thrift Lender Requirement. The Bank must maintain its status as a
"qualified  thrift  lender"  ("QTL") in order to exercise the powers  granted to
federally  chartered  savings  institutions and maintain full access to FHL Bank
advances.  The  Bank  will  remain  a QTL if its  qualified  thrift  investments
continue to equal or exceed 65% of the savings association's portfolio assets on
a monthly average basis in 9 out of every 12 months,  as defined by HOLA and the
rules and  regulations  of the OTS. At  September  30,  1997,  qualified  thrift
investments  as a  percentage  of portfolio  assets for the Bank was 94.2%.  The
qualified  thrift  investments  of  the  Bank  equaled  or  exceeded  65% of its
portfolio  assets on a monthly  average  basis for at least 9 months  during the
fiscal year ended September 30, 1997.

     The failure to maintain QTL status would require that the Bank convert to a
bank  charter  and  will  result  in a  limitation  in  future  investments  and
activities including branching and payment of dividends.  The Bank also would be
required  to  repay  all  outstanding  FHL  Bank  advances  and  dispose  of  or
discontinue  any  preexisting  investments  or activities not permitted for both
savings institutions and national banks. Further, within one year of the loss of
QTL status,  the holding company of a savings  institution that does not convert
to a bank charter must register as a bank holding company and will be subject to
all statutes applicable to bank holding companies.

     Liquidity.  Under applicable federal regulations,  savings institutions are
required  to  maintain  sufficient  liquidity  to  ensure  their  safe and sound
operation.  The OTS regulations  specifically require that a savings institution
maintain a minimum  average  daily  balance of liquid  assets  (including  cash,
certain time deposits,  certain bankers' acceptances,  certain  mortgage-related
securities and mortgage  loans,  certain  corporate  debt  securities and highly
rated commercial paper,  securities of certain mutual funds and specified United
States government, state or federal agency obligations) in each calendar quarter
equal to not less than a  specified  percentage  of  either  the  average  daily
balance of the savings  institution's net withdrawable  accounts plus short-term
borrowings  during the preceding  quarter or the amount of the institution's net
withdrawable  accounts  plus  short-term  borrowings at the end of the preceding
calendar quarter. Under the HOLA, this liquidity requirement may be changed from
time to time by the Director of the OTS to any amount  within the range of 4% to
10%  depending  upon  economic  conditions  and  the  deposit  flows  of  member
institutions,  and currently is 5%. As of November 24, 1997, the OTS has lowered
the liquidity requirements from 5% to 4%. At September 30, 1997, the Bank was in
compliance with these liquidity requirements.

     Restrictions  on Dividends  and Other  Capital  Distributions.  The Bank is
subject  to  limitations  on the extent to which it may pay  dividends.  Savings
institution  subsidiaries of holding companies generally are required to provide
their OTS Regional  Director with not less than 30 days'  advance  notice of any
proposed declaration of a dividend on the institution's stock.

     Applicable OTS regulations impose limitations on all capital  distributions
by savings  associations  (including  dividends,  stock repurchases and cash-out
mergers) based upon an institution's level of regulatory capital both before and
after giving effect to a proposed capital distribution.  The FDIA also prohibits
an insured depository institution from declaring any dividend,  making any other
capital  distribution,  or paying a management  fee to a controlling  person if,
following the  distribution or payment,  the institution  would be classified as
undercapitalized, significantly undercapitalized or critically undercapitalized.

                                       30

<PAGE>



     Insurance  of  Deposits.  Deposits  in the Bank are insured to a maximum of
$100,000 for each insured depositor by the FDIC. Although the Bank is considered
a SAIF-insured  institution,  as of September 30, 1997, approximately 46% of its
deposits were BIF-insured.

FEDERAL HOME LOAN BANK SYSTEM

     The Federal Home Loan Bank System  consists of 12 regional FHL Banks,  each
subject to supervision  and regulation by the Federal Housing Finance Board (the
"FHFB").  The FHL Banks  provide a central  credit  facility for member  savings
institutions.  The Bank,  as a member of the FHL Bank of Boston,  is required to
own shares of capital  stock in that FHL Bank in an amount at least  equal to 1%
of the aggregate  principal amount of their unpaid  residential  mortgage loans,
home purchase contracts and simila obligations at the beginning of each year, or
1/20 of their advances (borrowings) from the FHL Bank, whichever is greater. The
Bank is in compliance  with this  requirement.  The maximum amount which the FHL
Bank of Boston will  advance  fluctuates  from time to time in  accordance  with
changes  in  policies  of the FHFB and the FHL Bank of Boston,  and the  maximum
amount  generally is reduced by borrowings  from any other source.  In addition,
the amount of FHL Bank  advances that a savings  institution  may obtain will be
restricted  in the  event  the  institution  fails  to  constitute  a  QTL.  See
"Regulation  --  Savings  Institution  Regulation  --  Qualified  Thrift  Lender
Requirement."

FEDERAL RESERVE SYSTEM

     The Federal  Reserve  Board has adopted  regulations  that require  savings
institutions to maintain nonearning reserves against their transaction  accounts
(primarily  NOW and regular  checking  accounts) and  nonpersonal  time deposits
(those which are  transferable  or held by a person other than a natural person)
with an original  maturity of less than 1 1/2 years.  At September 30, 1997, the
Bank was in compliance  with these  requirements.  These reserves may be used to
satisfy  liquidity  requirements  imposed by the  Director  of the OTS.  Because
required   reserves  must  be  maintained  in  the  form  of  vault  cash  or  a
non-interest-bearing  account  at a Federal  Reserve  Bank,  the  effect of this
reserve   requirement   is  to   reduce   the   amount   of  the   institution's
interest-earning assets.

     Savings  institutions  also have the  authority  to borrow from the Federal
Reserve "discount window." Federal Reserve Board regulations,  however,  require
savings  institutions  to exhaust all FHL Bank sources  before  borrowing from a
Federal  Reserve Bank. A Federal  Reserve Bank's  ability to extend  advances to
undercapitalized  and critically  undercapitalized  depository  institutions  is
limited.  A Federal Reserve Bank generally may not have advances  outstanding to
an undercapitalized institution for more than 60 days in a 120-day period.

TAXATION

     Federal. Eagle, on behalf of itself and its subsidiaries, files a September
30 tax year consolidated  federal income tax return.  Eagle and its subsidiaries
report their income and expenses using the accrual method of accounting.

     The Small Business Job  Protection  Act of 1996,  signed into law on August
20,  1996,  repealed  the special  thrift bad debt  deduction  provisions.  This
legislation  eliminates  the use of the percentage of taxable income method as a
means of calculating  deductions for bad debts, allows banks greater flexibility
in   diversifying   their  loan  and  investment   portfolios  and   establishes
requirements   for  the  recapture  of  previously   untaxed  bad  debt  reserve
accumulations.

     Bad debt  reserve  accumulations  prior to 1988 are exempt  from  recapture
unless the Bank liquidates, pays a dividend in excess of earnings and profits or
redeems stock. Post 1987 bad debt reserve  accumulations  will be taxed in equal
amounts over six years  beginning in 1996.  The Bank may defer the recapture tax
in 1996 or 1997 if it originates  the same  principal  amount of mortgage  loans
that it had  originated  in the six years before 1996.  The Bank does not expect
the post  1987  recapture  tax to have a  material  effect  on the  consolidated
financial statements.

                                       31

<PAGE>



     The  federal  income  tax  returns  for  the  Bank's  predecessor   savings
institutions  have been examined and audited or closed  without audit by the IRS
for tax years through September 30, 1989.

     Savings  institutions  are also  entitled to limited  special tax treatment
with  respect to the  deductibility  of  interest  expense  relating  to certain
tax-exempt  obligations.  Savings  institutions  are  entitled to deduct 100% of
their  interest  expense  allocable  to the  purchase or carrying of  tax-exempt
obligations  acquired  before 1983. The deduction is reduced to 80% with respect
to obligations acquired after 1982. For taxable years after 1986, the Tax Reform
Act of 1986 eliminates the deduction  entirely for  obligations  purchased after
August 7, 1986 (except for certain issues by small municipal issuers).

     Depending on the composition of its items of income and expense,  a savings
institution  may be  subject  to the  alternative  minimum  tax.  For tax  years
beginning after 1986, a savings  institution must pay an alternative minimum tax
equal to the amount (if any) by which 20% of alternative  minimum taxable income
("AMTI"),  as reduced by an exemption varying with AMTI, exceeds the regular tax
due.  AMTI equals  regular  taxable  income  increased  or  decreased by certain
adjustments   and  increased  by  certain  tax   preferences.   Adjustments  and
preferences  include  depreciation  deductions in excess of those  allowable for
alternative  minimum tax purposes,  tax-exempt interest on most private activity
bonds  issued  after  August 7, 1986  (reduced by any related  interest  expense
disallowed  for  regular  tax  purposes),  the  amount  of the bad debt  reserve
deduction claimed in excess of the deduction based on the experience method and,
for 1990 and succeeding  years,  75% of the excess of adjusted  current earnings
("ACE")  over AMTI.  ACE  equals  pre-adjustment  AMTI  ("PAMTI")  increased  or
decreased  by certain ACE  adjustments,  which  include  tax-exempt  interest on
municipal  bonds for tax  purposes,  depreciation  deductions in excess of those
allowable  for ACE purposes and the dividend  received  deduction.  PAMTI equals
AMTI  computed  with all the  preferences  and  adjustments  other  than the ACE
adjustment and the alternative minimum tax net operating loss (AMTNOL). AMTI may
be reduced  only up to 90% by AMTNOL  carryovers.  The  payment  of  alternative
minimum tax will give rise to a minimum tax credit which will be available  with
an indefinite  carry forward period  available to reduce federal income taxes of
the institution in future years (but not below the level of alternative  minimum
tax arising in each of the carry forward years).

     State. State income taxation is in accordance with the corporate income tax
laws of Connecticut. As a thrift, the Bank is required to pay taxes equal to the
larger of $250,  10.75% (scheduled to decrease in increments to 7.5% by 2001) of
the year's taxable income (which, with certain  exceptions,  is equal to taxable
income  for  federal  purposes)  or an  amount  equal to 4% for each year of the
amount  of  interest  or  dividends  credited  by them on  savings  accounts  of
depositors or account  holders  during the taxable year  preceding that in which
the tax becomes due,  provided  that, in  determining  such amount,  interest or
dividends  credited to the savings  account of a depositor or account holder are
deemed to be the lesser of the actual  interest  or  dividends  credited  or the
interest or dividend  that would have been  credited if it had been computed and
credited at the rate of one-eighth of 1% per annum.

     Item 2. Properties

     Eagle's  twenty-six  traditional branch offices and four supermarket branch
offices  are located in  Hartford  and  Litchfield  counties.  Automated  teller
machines ("ATM") are located in all twenty-six  traditional offices and all four
supermarket  branches.  Eagle also operates  three free standing ATM  locations.
Eagle's ATM's  participate  in the "NYCE" ATM network  which  permits  access to
funds at  approximately  13,200 locations and 57,000  "point-of-sale"  terminals
throughout the  Northeast.  Data  processing  services for Eagle are provided by
Connecticut  On-Line Computer Center, a data processing company jointly owned by
a number of New England savings institutions including the Bank.

                                       32

<PAGE>



     The following table sets forth certain information  concerning the business
offices of Eagle at September 30, 1997.

<TABLE>
<CAPTION>
                                          Percent                            Lease
                                          of Total        Owned or        Expiration         Lease Renewal
                                          Deposit          Leased            Date                Option
                                       -------------- -----------------  -------------- --------------------
<S>                                         <C>          <C>                  <C>          <C>
Torrington Main
50 Litchfield Street
Torrington, CT                              8.6%            Owned              -                    -

East Main Street - Torrington
1180 East Main Street
Torrington, CT                              3.0%            Owned              -                    -

Litchfield
311 West Street
Litchfield, CT                              2.5%            Owned              -                    -

Canton
Canton Village Route 44
Canton, CT                                  2.5%           Leased             2001          One 5-year option

Winsted
Shops at Ledgebrook Plaza Route 44
Winsted, CT                                              Land Lease
                                            2.6%            Only              2006         Seven 5-year options

Bristol Main Office
222 Main Street
Bristol, CT                                11.6%            Owned              -                    -

Commons - Bristol
99 Farmington Avenue
Bristol, CT                                 2.5%           Leased             2004          No renewal option

Farms - Bristol
1235 Farmington Avenue                                   Land Lease
Bristol, CT                                 3.7%            Only              1998          One 5-year option

Forestville
785 Pine Street
Forestville, CT                             1.5%           Leased             2001          No renewal option

Terryville
123 Main Street
Plymouth, CT                                2.1%           Leased             1999          No renewal option

Hartford Main Office
108 Farmington Avenue
Hartford, CT                                3.3%            Owned              -                    -

Franklin Avenue - Hartford
324 Franklin Avenue
Hartford, CT                                4.2%            Owned              -                    -
</TABLE>

                                       33

<PAGE>


<TABLE>
<CAPTION>
                                          Percent                            Lease
                                          of Total        Owned or        Expiration         Lease Renewal
                                          Deposit          Leased            Date                Option
                                       -------------- -----------------  -------------- --------------------
<S>                                         <C>            <C>                <C>          <C>               
State House Square - Hartford
50 State House Square
Hartford, CT                                4.1%           Leased             2002          One 5-year option

West Hartford
75 Park Road
West Hartford, CT                           4.9%            Owned              -                    -

Bishops Corner - West Hartford
774 North Main Street
West Hartford, CT                           3.4%           Leased             2012                  -

Rocky Hill
53 New Britain Avenue
Rocky Hill, CT                              6.2%           Leased             2000          One 5-year option

Manchester
Burr Corners
1147 Tolland Turnpike
Manchester, CT                              3.3%           Leased             2002          Two 5-year options

Bloomfield
782 Park Avenue
Bloomfield, CT                              6.0%           Leased             1998          No renewal option

Simsbury
530 Bushey Hill Road
Simsbury, CT                                3.8%           Leased             1999          Two 5-year options

Avon - Supermarket
Big Y, West Main Street
Avon, CT                                    0.3%           Leased             1999          No renewal option

Bloomfield - Supermarket
Super Stop & Shop
20-22 Mountain Avenue
Bloomfield, CT                              0.2%           Leased             1999          No renewal option

East Hartford - Supermarket
Big Y, 265 Ellington Road
East Hartford, CT                           0.3%           Leased             1999          No renewal option

Glastonbury - Supermarket
Super Stop & Shop
215 Glastonbury Boulevard
Glastonbury, CT                             0.3%           Leased             1999          No renewal option
</TABLE>

                                       34

<PAGE>



<TABLE>
<CAPTION>
                                          Percent                            Lease
                                          of Total        Owned or        Expiration         Lease Renewal
                                          Deposit          Leased            Date                Option
                                       -------------- -----------------  -------------- --------------------
<S>                                         <C>             <C>               <C>          <C>           
Kensington Main
346 Main Street
Kensington, CT                              5.3%             Own               -                    -

Webster Mill
1 Webster Square Road
Berlin, CT                                  2.5%             Own               -                    -

Ferndale Plaza
51 Chamberlin Highway
Kensington, CT                              2.6%            Lease             2007          No renewal option

Plainville
63 East Main Street
Plainville, CT                              1.5%             Own               -                    -

Newington
1120 Main Street
Newington, CT                               2.5%             Own               -                    -

New Britain
747 Farmington Avenue
New Britain, CT                             1.6%            Lease             1998         Three 5-year options

Liberty Square
1 Liberty Square
New Britain, CT                             3.1%            Lease             2003          No renewal option
</TABLE>

     The total net book value of properties  owned and used for offices by Eagle
at September 30, 1997 and the aggregate net book value of leasehold improvements
on properties used for offices was $7.9 million.

     Item 3. Legal Proceedings

     As of September 30, 1997, there were no material pending legal  proceedings
to which Eagle, the Bank,  Eagle Financial  Capital Trust I, Eagle Funding Corp.
or  Eagle  Service  Corp.  was a party or to which  any of  their  property  was
subject.

     Item 4. Submission of Matters to a Vote of Security Holders

     No matters were submitted to a vote of Eagle shareholders during the fourth
quarter of the fiscal year ended September 30, 1997.

                                       35

<PAGE>



PART II

     Item 5.  Market  for  Registrant's  Common  Stock and  Related  Stockholder
Matters

Eagle  Financial  Corp.  common  stock is listed on the NASDAQ  National  Market
System under the symbol  "EGFC." As of September  30, 1997 there were  6,363,410
shares of common stock  outstanding,  including  47,373 shares held in treasury,
and approximately 1,800 shareholders of record.

QUARTERLY STOCK QUOTATIONS AND STOCK INFORMATION


                                                                       Cash
                                                                       Dividends
Quarter                                                                Paid Per
Ended                             High               Low               Share (a)
-------------                     ----               ---               ---------
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                     24.250             21.250             .210
Dec. 31, 1995                     27.750             22.250             .230
Mar. 31, 1996                     26.250             22.750             .230
Jun. 30, 1996                     25.750             22.250             .230
Sep. 30, 1996                     27.250             23.750             .230
Dec. 31, 1996                     30.500             26.500             .230
Mar. 31, 1997                     30.750             28.250             .230
Jun. 30, 1997                     30.750             26.750             .230
Sep. 30, 1997                     40.250             30.750             .250

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

                                       36

<PAGE>



     Item 6. Selected Financial Data

The following tables summarize the Company's financial condition, operating date
and significant statistical data for the past five fiscal years:


<TABLE>
<CAPTION>

FINANCIAL CONDITION DATA                                               AT SEPTEMBER 30,
(in thousands)                                    1997        1996(a)         1995         1994(b)         1993
-------------------------------------------  -------------  -----------  -------------  -------------  -------------
<S>                                           <C>           <C>           <C>           <C>             <C>       
Total Assets                                  $2,091,096    $1,761,731    $1,596,165    $1,436,754      $1,022,121
Investment portfolio (c)                         122,431        96,686       168,114       182,374          91,102
Mortgage-backed securities                       743,943       462,308       370,056        85,684          62,837
Loans receivable, net                          1,128,381     1,094,656       970,124     1,072,743         821,994
Allowance for loan losses                          9,765        10,507         9,611        10,305           6,143
Deposits                                       1,353,274     1,368,703     1,263,110     1,262,943         891,495
FHLB advances and borrowed money                 521,423       231,828       165,617        54,821          26,252
Shareholders' equity                             144,906       135,992       126,211        99,708          92,525


OPERATING DATA                                                         FOR THE YEARS ENDED SEPTEMBER 30,
(in thousands, except for per share data)        1997          1996          1995         1994(b)          1993
-------------------------------------------  -------------  -----------  -------------  -------------  -------------
Net interest income                           $   59,125    $   53,081    $   53,315    $   41,488      $   35,643
Net income                                         7,315        15,493        12,046         9,548           7,727
Loan originations                                236,666       303,125       190,392       281,756         295,158
Cash dividends declared per share (e)               0.94          0.92          0.82          0.69            0.57
Net income per share: (e)
  Primary                                           1.13          2.44          1.94          1.84            1.53
  Fully diluted                                     1.12          2.42          1.92          1.83            1.52

SIGNIFICANT STATISTICAL DATA                     1997          1996          1995         1994(b)          1993
-------------------------------------------  -------------  -----------  -------------  -------------  -------------
For the period:
  Return on average assets                          0.39%         0.90%         0.80%         0.81%           0.77%
  Return on average shareholders' equity            5.25%        11.62%         9.98%         9.95%           8.68%
  Average interest rate spread                      2.88%         2.97%         3.44%         3.43%           3.42%
  Net interest margin                               3.28%         3.26%         3.71%         3.70%           3.69%
  Operating expenses to average assets              2.28%         2.23%         2.25%         2.36%           2.33%
  Operating expenses to average assets              2.18%         2.14%         2.16%         2.19%           2.06%
  (excluding real estate owned expense)                                                 
  Net interest income to operating expenses         1.37x         1.38x         1.56x         1.50x           1.52x
  Efficiency ratio                                    63%           51%           56%           57%             52%

AT END OF PERIOD:
  Shareholders' equity to total assets              6.93%         7.72%         7.91%         6.94%           9.05%
  Common shares outstanding
    (net of treasury) (d)                      6,316,037     6,199,029     6,093,446     4,758,004       4,669,079
  Book value per share (e)                    $    22.94    $    21.94    $    20.71    $    19.66      $    18.60
  Non-performing assets to total assets             0.39%         0.98%         1.23%         1.57%           1.73%
  Allowance for loan losses to non-
    performing loans                                 218%           89%           71%           82%             76%
  Tangible capital ratio                            7.59%         6.01%         6.87%         5.74%           8.75%
</TABLE>

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

(b)  Fiscal 1994 data reflects the impact of the government-assisted acquisition
     of the Bank of Hartford and the acquisition of The Federal Savings Bank.

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

(d)  1997, 1996, 1995, 1994 and 1993 common shares  outstanding  exclude 47,373,
     47,373, 47,373, 43,066, and 43,066 shares,  respectively,  held in treasury
     at year end.

(e)  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.

                                       37

<PAGE>



Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

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 Bank ("Eagle" 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  26
traditional  branch offices and 4 supermarket branch offices located in Hartford
and eastern Litchfield counties.

The  Company  has been an active  acquirer of other  financial  institutions  in
recent years beginning with two government assisted  acquisitions in the greater
Danbury  market in fiscal 1992 and the  government  assisted  acquisition of the
Bank of Hartford in fiscal  1994. A decision in 1996 to focus  strategically  on
the greater  Hartford  market  resulted in the  purchase in January 1996 of five
large  branch  offices  in  Hartford  county,  the  simultaneous  closing of two
existing  Eagle  branches  that were in close  proximity  to the newly  acquired
offices,  and the sale in March 1996 of seven relatively  small,  geographically
separate branch offices in northern Fairfield county. Later in fiscal 1996 Eagle
added four  supermarket  branches and three  off-site  ATM's,  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.

Most recently in May 1997 Eagle added additional market share in Hartford county
when it  completed a merger with  MidConn  Bank,  a financial  institution  with
approximately  $300  million of total  deposits and ten branch  offices  located
primarily  in Hartford  county.  The  transaction  has been  accounted  for as a
pooling of interests  combination and, accordingly,  the consolidated  financial
statements  for periods prior to the  combination  have been restated to include
the accounts and results of  operations  of MidConn.  Shortly  after the MidConn
merger,  Eagle  closed two of the  purchased  branches  that were  located  near
existing  Eagle  branches  and sold a third  MidConn  branch  that was small and
outside Eagle's primary market area.

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,  Eagle has
implemented  strategies  in the last  several  years  that  have  put  increased
emphasis on originating  commercial  real estate and small business loans within
its  primary  market  area.  The  marketing  of these  loans has  focused on the
existing customer base, customers from recent branch and bank acquisitions,  and
new relationships within the Company's primary market area.

On October 27, 1997, the Company announced the signing of a definitive agreement
to merge with and into Webster Financial Corp. ("Webster").  The merger would be
accomplished  by a stock for stock  exchange  based on a fixed exchange ratio of
0.84 shares of Webster  common stock for each share of Eagle common  stock.  The
transaction is subject to shareholder and regulatory approval and is expected to
close during the quarter ended March 31, 1998.  Webster has total assets of $6.8
billion,  total deposits of $4.3 billion, total loan receivables of $3.7 billion
and  shareholders'  equity of $363.6  million as of September 30, 1997.  Webster
conducts its business through 84 banking offices throughout Connecticut.

Eagle  Financial  Corp. had net income of $7.3 million,  or $1.12 per share on a
fully  diluted  basis,  for the year ended  September  30, 1997  compared to net
income of $15.5 million,  or $2.42 per share,  in fiscal 1996.  Results for both
years were impacted by a number of unusual items.  Fiscal 1996 results benefited
from a large gain on the sale of branch  offices in the Danbury market that more
than offset a one-time Savings  Association  Insurance Fund ("SAIF")  assessment
and several other relatively large non-recurring charges.  Results for 1997 were
reduced  by  charges  from a bulk sale of problem  loans and  one-time  expenses
relating to the merger with MidConn Bank.

                                       38

<PAGE>



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. Net interest income
grew  by  $6.0  million,   or  11.4%,  in  fiscal  1997  and  has  increased  by
approximately  14% on  average  over  the past  four  fiscal  years.  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, 1997, the Company had total assets of $2.09 billion compared
to $1.76  billion  at the  start of the  fiscal  year.  Net  growth  in the loan
portfolio  for the  year was  $33.7  million,  while  the  investment  portfolio
increased  by $307.4  million  during the year.  The  balance  sheet  growth was
largely funded by borrowed money, which increased by $289.6 million.

Like any other  company,  advances  and  changes  in  available  technology  can
significantly  impact the business and operations of the Company. For example, a
challenging  problem exists as many computer  systems  worldwide do not have the
capability  of  recognizing  the  year  2000  or  years   thereafter.   No  easy
technological  "quick fix" has yet been developed for this problem.  The Company
is expending  resources to assure that its computer  systems are reprogrammed in
time to effectively  deal with  transactions  in the year 2000 and beyond.  This
"Year 2000  Computer  Problem"  creates  risk for the  Company  from  unforeseen
problems  in its own  computer  systems  and from  third  parties  with whom the
Company  deals on financial  transactions.  The Company  relies to a significant
degree on a third party to process a majority of its financial transactions and,
as a result,  has been in close  contact with this third party to monitor  their
progress in addressing this  challenging  problem.  Such failures of the Company
and/or  third  parties'  computer  systems  could have a material  impact on the
Company's ability to conduct its business, and especially to process and account
for the transfer of funds electronically.

LIQUIDITY AND CAPITAL RESOURCES

On April 1, 1997 the Company  completed a $50 million  private  placement of 10%
capital securities due March 15, 2027. The securities were issued by the Holding
Company's recently formed  subsidiary,  Eagle Financial Capital Trust I, and are
fully and unconditionally  guaranteed by the Holding Company.  Proceeds from the
issue were invested by Eagle  Financial  Capital Trust I in Junior  Subordinated
Debentures  issued by the Holding Company and which represent the sole assets of
Eagle  Financial  Capital  Trust I. The Junior  Subordinated  Debentures  have a
principal  amount of $50 million,  bear  interest at 10%, and mature on April 1,
2027.  Net  proceeds  from  the  sale of  debentures  will be used  for  general
corporate purposes, including capital contributions to the Bank. During the year
ended September 30, 1997, the Holding Company  contributed  $44.5 million of the
proceeds from the  debentures to the Bank,  as a capital  infusion.  The capital
contribution served to increase the regulatory capital base of the Bank

The Bank's core capital  ratio  increased  from 6.01% at  September  30, 1996 to
7.59% at fiscal year end,  reflecting the additional capital  contributed by the
Holding Company. 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 4% of its  withdrawable  deposits plus  short-term
borrowings.  At September 30, 1997,  the Bank was in  compliance  with Office of
Thrift Supervision ("OTS") liquidity requirements, having a ratio of 6.08%.

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 in  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 


                                       39

<PAGE>


30,  1997,  the  Bank  had  approximately   $103  million  in  loan  commitments
outstanding including $39.5 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 $919  million in advances
from the FHLB of Boston. At September 30, 1997, FHLB advances and borrowed money
totaled $521 million  versus $232 million at September 30, 1996.  The additional
borrowed money was used to fund the growth in loans and securities.

During fiscal 1997,  the Company  substantially  grew the  investment  portfolio
through the purchase of both agency and private  issue  collateralized  mortgage
obligations   and,  to  a  lesser   extent,   the  purchase  of  agency   issued
mortgage-backed  securities.  This  growth  was  done in order  to  utilize  the
proceeds  received from the issuance of trust  preferred  capital  securities as
well  as  to  increase  Eagle's  net  interest  income.  These  objectives  were
accomplished through the execution of two separate investment programs.

The first program,  which was completed  during the quarter ended June 30, 1997,
involved the purchase of  approximately  $180 million of  investment  securities
needed  to cover the  dividend  cost  related  to the  trust  preferred  capital
securities. The investment securities,  which were funded both with the proceeds
of the trust  preferred  offering and borrowed money,  consisted  primarily of a
combination of fixed and adjustable rate collateralized mortgage obligations and
mortgage-backed  securities. The borrowed money included long term floating rate
advances and short term fixed rate advances.

The  second  growth  program,  which was  completed  during  the  quarter  ended
September 30, 1997, was implemented to add to the Company's net interest income.
The  assets  purchased  were  primarily  fixed  rate   collateralized   mortgage
obligations  and  mortgage-backed  securities.  The assets were  funded  using a
combination of short term advances and a long term repurchase agreement. As part
of the program, the Company also purchased an interest rate cap with a five year
term to protect its funding costs in the event of rising interest rates.




                                       40

<PAGE>


The  Company  purchases  certain  debt  securities  (including   mortgage-backed
securities) for the purposes of earning income and meeting regulatory  liquidity
requirements.  At  date of  purchase,  a  decision  is  made  to  classify  debt
securities as either held to maturity or available for sale. Various factors are
considered when determining whether debt securities are classified available for
sale or held to maturity, including repricing characteristics,  liquidity needs,
expected  security life, yield and overall  asset/liability  strategies.  Events
which  may  be  reasonably  anticipated  are  considered  when  determining  the
Company's intent and ability to hold investment  securities to maturity. On June
30, 1997 the Company transferred all  mortgage-backed and investment  securities
that had previously  been  classified held to maturity to available for sale due
to a change in intent  with  respect  to  holding  the  securities  to  maturity
precipitated by changes in the Company's balance sheet following the merger with
MidConn Bank.  The Company does not intend to purchase  securities in the future
for classification as held to maturity.

From time to time,  management will sell securities  classified as available for
sale 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 realized  gain or
loss being recorded as an adjustment to shareholders'  equity, net of income tax
effect.   At  September  30,  1997,   all  of  the  Company's   investment   and
mortgage-backed  securities portfolios were classified as available for sale and
had an after-tax net unrealized gain of $4.3 million.

During the year ended  September 30, 1997,  Eagle sold $30 million of investment
and  mortgage-backed  securities  producing net losses of $10,000 while maturing
investment securities totaled $26 million.  During fiscal 1996, the Company sold
$198 million of investment and mortgage-backed  securities  producing net losses
of $463,000 while maturing  investment  securities totaled $54 million.  Much of
the  1996  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.

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, 1997 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, 1997 (in thousands):

<TABLE>
<CAPTION>
                            Actual          Percent           Required         Percent          Excess
                        --------------- ---------------- ----------------- --------------- ----------------
<S>                      <C>                  <C>              <C>               <C>            <C>     
Core                     $156,550             7.59%            $61,881           3.0%           $ 94,669
Tangible                  156,550             7.59%             30,941           1.5%            125,609
Risk-based                165,668            17.87%             74,186           8.0%             91,482
</TABLE>

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, 1997,
the Bank had a core capital ratio of 7.58% and met the  requirements for a "well
capitalized" institution.

                                       41

<PAGE>



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.

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, 1997, the Bank had  approximately  $91.5 million of 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 distributions 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 or  relatively  short  average  life  fixed rate
investment and  mortgage-backed  securities,  it also uses certain techniques to
reduce the rate sensitivity of its deposits and borrowed money. Those techniques
include  attracting  longer  term  certificates  o 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.  A  customer's
propensity  to  refinance  his loan and  consumer  preferences  for  fixed  rate
mortgages are typically both higher when interest rates are low. 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, 1997, the Company sold  approximately  $13.7
million of fixed rate mortgage loans into the secondary market.

During fiscal 1997, management utilized both an interest rate cap and a collared
advance in order to better manage the Bank's exposure to interest rate risk. The
interest  rate cap,  which has a notional  amount of $41  million,  will help to
reduce Eagle's funding costs in the event of a rise in interest rates.  The Bank
also  entered  into an $81 million  collared  advance that will serve to balance
earnings in the event of severe volatility in interest rates.


                                       42

<PAGE>



The Company  measures its exposure to interest rate  fluctuations on a quarterly
basis,  primarily by using an in-house  computer  modeling  system  designed for
savings  institutions  such as the Bank. 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 an immediate
"shock"  basis,  under  which  interest  rates  are  assumed  to move up or down
instantaneously,  as well as on the basis of gradual  movements  in rates  based
upon prior interest rate cycles. The Board has an approved maximum tolerance for
decreases in net interest  income of 20%,  based upon the model's  prediction of
the impact of an  immediate  200 basis  point  increase  or decrease in interest
rates.  At  September  30,  1997,  according  to the  computer  model  and using
asset/liability   repricing   assumptions  based  on  the  Company's  historical
experience and industry data, it interest rates were to immediately rise or fall
by 200 basis points, the negative impact on the Company's net interest income in
either case 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  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
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, 1997 the  Company's  one-year gap was a negative 8.4% 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 liabilitie 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.

Eagle 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.

                                       43

<PAGE>



EFFECTIVE 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 the interest
income earned on its loan and investment  portfolios versus the interest paid on
its deposits and borrowed funds. If the cost of funds increases  faster than the
yield on  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
1997 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 rate that is greater than the increase in yields on interest-earning  assets,
the  interest  rate  spread is  negatively  affected.  Changes  in the asset and
liability mix also affect the interest rate spread.

                                       44

<PAGE>



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  net  interest  spread and a  corresponding  increase  or  decrease in
earnings.  For example, in fiscal 1996 the Company's average net interest margin
declined to 3.26% from 3.71% 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 later 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
purchase  of deposits  in 1996  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. In
fiscal 1997,  Eagle's  average net interest margin was comparable to the average
in fiscal 1996.

ASSET QUALITY

At September 30, 1997, the Company had total non-performing assets in the amount
of $8.2 million, including $4.5 million of non-performing loans and $3.7 million
in real estate  owned.  Loan loss  reserves  totaled  $9.8  million,  or 218% of
non-performing  loans. This compares with total  non-performing  assets of $17.3
million at September 30, 1996,  including $11.9 million of non-performing  loans
and $5.4 million in real estate owned.

The large decline in non-performing loans and assets in 1997 is primarily due to
the sale in the quarter  ended June 30, 1997 of  approximately  $17.7 million of
troubled loans.  Approximately $9.7 million, or 55%, of the total troubled loans
sold were classified as non-performing  at time of sale. The remaining  troubled
loans  include  $4.6  million of loans  delinquent  between  30-90 days and $3.4
million of loans with a current payment status. Troubled loans are considered to
be either  non-performing  loans,  other  delinquent loans or loans with poor or
inconsistent  payment histories.  In connection with the sale, the Bank recorded
charge-offs of approximately  $5.8 million,  which included  approximately  $2.4
million of reserves  previously  allocated to the loans and  approximately  $3.4
million of reserves  established through the additional provision made to reduce
the carrying value of the loans to the sale price.

The  Company's  non-performing  assets are  almost  exclusively  residential  in
nature,  comprising approximately 78.9% of the total at September 30, 1997. Loan
delinquencies  (greater than 60 days)  totaled $5.1  million,  or 0.45% of total
gross loans, at September 30, 1997 compared to $17.1 million,  or 1.54% of total
loans,  at  September  30,  1996.  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  $3.7  million of loans during the
year  ended  September  30,  1997 and has $2.4  million  of  restructured  loans
outstanding at September 30, 1997. Upon restructure, the loans are identified as
impaired  loans and represent 72% of the $3.4 million of impaired  loans at year
end. The entire $2.4 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.

                                       45

<PAGE>



The Company's total commercial loan portfolio has increased in recent years as a
result  of  strong  origination  activity  in  addition  to  loans  added to the
portfolio from recent acquisitions. As a result, the resources in the commercial
banking  department  and loan  review  function  have been  expanded to properly
monitor and  administer the  portfolio.  Purchased  loans have all been assigned
risk  ratings in  accordance  with the  Company's  risk  rating  system and each
individual  loan has been assigned to a commercial  loan officer for  monitoring
purposes. 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, 1997 (in thousands):
<TABLE>
<CAPTION>
                                        Non-                    Total Non-
                                     Performing   Real Estate   Performing
                                        Loans        Owned        Assets     % of Total
                                     ----------   -----------   ----------   ----------
<S>                                     <C>           <C>          <C>        <C>  
Mortgage loans:
  Residential                           $2,989        $2,620       $5,609     68.2%
  Commercial                               632         1,017        1,649     20.0
  Multi-family                               6            56           62      0.8
  Land development                          --            61           61      0.7
Non-mortgage commercial loans               28            --           28      0.3
Consumer loans                               8            --            8      0.1
Home equity loans                          815            --          815      9.9
                                        ------        ------       ------    -----
        Total                           $4,478        $3,754       $8,232      100%
                                        ======        ======       ======    =====
</TABLE>

The  allowance  for loan losses  decreased to $9.8 million at September  30,1996
compared to $10.5  million at the start of the fiscal  year.  The  $742,000  net
decrease in the balance includes $9.0 million of provisions during the year less
$9.7 million of net chargeoffs in fiscal 1997.

                                       46

<PAGE>



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 allowances  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 (in thousands):

<TABLE>
<CAPTION>
                                                                       YEARS ENDED SEPTEMBER 30,
                                                             1997               1996                 1995
                                                           --------           --------             --------
<S>                                                        <C>                <C>                  <C>     
BALANCE AT BEGINNING OF YEAR                               $ 10,507           $  9,611             $ 10,305

LOANS CHARGED-OFF:
  RESIDENTIAL MORTGAGE LOANS                                 (6,007)            (3,179)              (3,247)
  MULTI-FAMILY, COMMERCIAL AND LAND DEVELOPMENT LOANS        (2,794)              (866)              (1,348)
  CONSUMER AND HOME EQUITY LOANS                             (1,077)              (295)                (366)
                                                           --------           --------             --------      
  TOTAL LOANS CHARGED-OFF                                    (9,878)            (4,340)              (4,961)
                                                           --------           --------             --------
RECOVERIES:
  RESIDENTIAL MORTGAGE LOANS                                    136                 91                  118
  MULTI-FAMILY, COMMERCIAL AND LAND DEVELOPMENT LOANS             1                  5                   10
  CONSUMER AND HOME EQUITY LOANS                                 21                  3                    1
                                                           --------           --------             ---------
  TOTAL RECOVERIES                                              158                 99                  129
                                                           --------           --------             --------
PROVISION FOR LOAN LOSSES                                     8,978              3,266                4,138
ALLOWANCE ASSOCIATED WITH PURCHASES                              --              1,871(a)                --
                                                           --------           --------             --------
BALANCE AT END OF PERIOD                                   $  9,765           $ 10,507             $  9,611
                                                           ========           ========             ========

RATIO OF NET CHARGE-OFFS TO AVERAGE LOANS                      0.86%              0.41%                0.44%
ALLOWANCE FOR LOAN LOSSES TO GROSS LOANS RECEIVABLE            0.86%              0.95%                0.98%
ALLOWANCE FOR LOAN LOSSES TO NON-PERFORMING LOANS               218%                89%                  71%
</TABLE>

(a)  Represents an addition to the allowance associated with the loans purchased
     in the Fleet/Shawmut transaction.

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 was paid in November  1996,  was  included as a $5.4  million
pretax  charge to  operations  in September  1996.  The  assessment  reduced the
Company's 1996 net income by approximately $3.2 million, or $0.51 per share.

                                       47

<PAGE>



Since  January 1, 1997,  SAIF  members have had the same  risk-based  assessment
scheduled as BIF members.  The Bank, as a healthy bank, has effectively  paid no
assessment for deposit insurance  coverage since January 1, 1997.  However,  all
SAIF and BIF institutions including the Bank 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 the Bank is
estimated at $560,000.

As a result of the Deposit  Insurance  Funds Act of 1996,  the  Secretary of the
Treasury was to review recommendations in 1997 for the establishment of a common
charter for banks and savings associations. Several proposals for abolishing the
federal  thrift  charter  were  introduced  in  Congress  during  1997 in  bills
addressing  financial  services  modernization,  including  a proposal  from the
Treasury Department  developed pursuant to requirements of the 1996 legislation.
While no legislation  was passed in 1997, it is anticipated  that the issue will
be taken up again by Congress in 1998. If legislation  is passed  abolishing the
federal thrift charter.  The Bank 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.  The Bank 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 the Bank 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 the Bank'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

In June 1996,  the FASB issued SFAS No. 125, which  superseded  SFAS No. 122 and
established  the accounting for transfers and servicing of financial  assets and
extinguishment  of liabilities.  This statement  specifies when financial assets
and  liabilities  are to be  removed  from  an  entity's  financial  statements,
specifies the accounting for servicing assets and liabilities, and specifies the
accounting for assets that can be  contractually  prepaid in such a way that the
holder would not recover substantially al of its recorded investment.

Under SFAS No. 125, an entity recognizes only assets it controls and liabilities
it has incurred, derecognizes assets only when control has been surrendered, and
derecognizes liabilities only when they have been paid, or the entity is legally
released from being the primary obligor under the liability judicially or by the
creditor.  SFAS No. 125  requires  that the  selling  entity  continue  to carry
retained  interests,  including  servicing  assets,  relating  to  assets it has
derecognized.  Such  retained  interest are recorded  based on the relative fair
values  of the  retained  interests  and  derecognized  assets  at the  date  of
transfer.  Transfers not meeting the criteria for sale recognition are accounted
for as a secured borrowing with pledge of collateral. Under SFAS No. 125 certain
collateralized  borrowings  may  result in asset  derecognition  when the assets
provided as collateral  may be  derecognized  based on whether the secured party
takes control over the collateral and whether the secured party is: (1) permitte
to repledge or sell the  collateral;  and (2) the debtor does not have the right
to redeem the collateral on short notice.  Extinguishments  of  liabilities  are
recognized  only  when the  debtor  pays the  creditor  and is  relieved  of its
obligation  of the  liability or when the debtor is legally  released from being
the primary obligor under the liability, either judicially or by the creditor.

                                       48

<PAGE>



SFAS No. 125 requires an entity to recognize its obligation to service financial
assets  that are  retained  in a transfer  of assets in the form of a  servicing
asset or  liability.  The  servicing  asset or  liability  is to be amortized in
proportion  to and over the period of net  servicing  income or loss.  Servicing
assets and  liabilities  are to be  assessed  for  impairment  based on the fair
value.

SFAS No. 125 is effective for  transfers  and servicing of financial  assets and
extinguishments  of liabilities  occurring  after December 31, 1996,  except for
those transfers related to secured borrowings, repurchase agreements and similar
transactions  which are effective after December 31, 1997. The adoption of these
remaining  requirements  is not  expected  to  materially  effect the  Company's
results of operations. As a result of loans sold with servicing rights retained,
the Bank  recorded  $86,000 in mortgage  servicing  assets and $6,600 in related
amortization  during fiscal 1997,  pursuant to SFAS No. 125 and SFAS No. 122, an
accounting pronouncement with substantially the same requirements.  SFAS No. 122
was applicable to the Bank during the three-month period October 1, 1996 through
December 31, 1996.

In February  1997,  the FASB issued SFAS No. 128,  "Earnings per Share" and SFAS
No. 129, "Disclosure of Financial Information About Capital Structure". SFAS No.
128 simplifies the standards found in Accounting Principles Board Opinion No. 15
("APB 15") for computing  earnings per share ("EPS"),  and makes them comparable
to international standards.

Under SFAS No. 128,  the  Company is required to present  both basic and diluted
EPS on the face of its  statements  of  operations.  Basic EPS,  which  replaces
primary EPS required by APB 15 for entities  with  complex  capital  structures,
excludes common stock  equivalents and is computed by dividing income  available
to  common  stockholders  by  the  weighted-average   number  of  common  shares
outstanding for the period.  Diluted EPS gives effect to all dilutive  potential
common shares that were outstanding during the period.

SFAS No. 128 is effective for financial  statements  for both interim and annual
periods ending after December 15, 1997 and earlier application is not permitted.
Upon adoption of SFAS No. 128, all prior-period  EPS data will be restated.  The
Company will adopt SFAS No. 128  effective  December 31, 1997.  The Company does
not expect this pronouncement to significantly impact its consolidated financial
statements.

SFAS No. 129  supersedes  capital  structure  disclosure  requirements  found in
previous accounting  pronouncements and consolidates them into one statement for
ease  of  retrieval  and  greater  visibility  for  non-public  entities.  These
disclosures  are  required for  financial  statements  for periods  ending after
December  15,  1997.  As SFAS No. 129 makes no changes  to  previous  accounting
pronouncements as those pronouncements applied to the Company,  adoption of SFAS
No. 129 will have no impact on the Company's  result of operations and financial
condition.

In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income".
SFAS No.  130  requires  the  inclusion  of  comprehensive  income,  either in a
separate statement for comprehensive  income, or as part of a combined statement
of income and comprehensive  income in a full-set of  general-purpose  financial
statements.

Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances,  excluding
those resulting from investments by and  distributions  to owners.  SFAS No. 130
requires that comprehensive income is to be presented beginning with net income,
adding the elements of comprehensive income not included in the determination of
net income, to arrive at comprehensive  income.  SFAS No. 130 also requires that
an enterprise  display the  accumulated  balance of other  comprehensive  income
separately from retained  earnings and additional  paid-in capital in the equity
section of a statement of financial position.

SFAS No. 130 is effective for the Bank's fiscal year beginning  October 1, 1998.
SFAS No. 130 requires the presentation of information  already  contained in the
Bank's financial  statements and therefore will not have an impact on the Bank's
financial position or results of operation.

                                       49

<PAGE>



In June 1997, the FASB also issued SFAS No. 131,  "Disclosures About Segments of
an enterprise and Related  Information".  SFAS No. 131 establishes standards for
the  reporting  of  information  about  operating  segments  by public  business
enterprises   in  their  annual  and  interim   financial   reports   issued  to
shareholders.

SFAS No. 131 requires that a public  business  enterprise  report  financial and
descriptive information,  including profit or loss, certain specific revenue and
expense items,  and segment  assets,  about its reportable  operating  segments.
Operating  segments  are  defined as  components  of an  enterprise  about which
separate financial  information is available that is evaluated  regularly by the
chief  operating  decision-maker  in deciding how to allocate  resources  and in
assessing performance.

SFAS No.  131 is  effective  for the Bank's  financial  statements  for  periods
beginning after December 15, 1997. SFAS No. 131 is a disclosure  requirement and
therefore will not have an effect on the Bank's financial position or results of
operations.


                                       50

<PAGE>



COMPARISON OF YEARS ENDED SEPTEMBER 30, 1997 AND 1996

NET INCOME
Net income for the year ended September 30, 1997 was $7.3 million,  or $1.12 per
fully diluted share, a decrease of $8.4 million from the net income recorded for
the year ended  September 30, 1996 of $15.5 million,  or $2.42 per fully diluted
share.  The decrease in net income is attributable to two principal  factors,  a
$15.4  million  decline in the gain on sale of  deposits  and an increase in the
provision  for loan  losses of $5.7  million to $9.0  million for the year ended
September 30, 1997.  Partially  offsetting the above factors was a $6.0 million,
or 11.4%,  increase in net interest  income to $59.1  million for the year ended
September  30, 1997 from $53.1  million a year  earlier.  Non-interest  expense,
which includes several  non-recurring items in both fiscal 1996 and fiscal 1997,
decreased slightly overall by $806,000, or 1.8%, in 1997.

INTEREST INCOME
Interest  income  increased $12.4 million from $120.6 million for the year ended
September 30, 1996 to $133.0 million for the year ended  September 30, 1997. The
increase in interest income was driven by a $174 million increase in the average
balance of total  interest-earning  assets  from  fiscal 1996 to fiscal 1997 and
occurred  despite a two basis  point  decline  in the yield on  interest-earning
assets from 7.40% in 1996 to 7.38% for the year ended September 30, 1997.

Interest  income from loans  represented  48% of the total  increase in interest
income  improving $6.0 million to $87.4 million for the year ended September 30,
1997.  The average  yield on loans  declined six basis points to 7.72% in fiscal
1997 from 7.78% in fiscal  1996,  but was more than offset by an increase in the
average  loan  balances  of $84.9  million to $1.13  billion  for the year ended
September 30, 1997 from $1.05 billion in the prior fiscal year.

Interest income on the securities portfolio and liquidity  investments was $45.6
million for the year ended  September 30, 1997 compared to $39.2 million for the
year ended  September  30,  1996,  an increase of $6.4  million,  or 16.5%.  The
increase  in the  average  balance of the  securities  portfolio  and  liquidity
investments of $89.3 million to $671.7 million for the year ended  September 30,
1997 was the principal  reason for the increase in interest  income and resulted
from the Company's growth and leverage  strategies  implemented during the year.
Additionally,  interest  income  benefited  from an increase in the yield on the
securities  portfolio  and  liquidity  investments  to 6.80% in fiscal 1997 from
6.73% in fiscal 1996. A lower average balance in liquid investments,  which have
a lower  overall  yield,  in  fiscal  1997  compared  to the prior  fiscal  year
contributed to the improvement in yield.

INTEREST EXPENSE
Interest  expense  totaled $73.9  million for the year ended  September 30, 1997
compared to $67.5 million  during  fiscal 1996, an increase of $6.4 million,  or
9.5%. The increase in interest  expense is attributable to a $122.6 million,  or
58.3%,  increase in the average  balance of FHLB  advances and other  borrowings
from $210.4  million  for the year ended  September  30, 1996 to $333.0  million
during the year ended September 30, 1997. The increase in borrowings is a result
of funding the asset growth in both loan and securities.

Interest expense on deposits remained relatively stable,  decreasing $400,000 to
$54.9  million for the year ended  September  30, 1997 compared to $55.3 million
for the year ended  September 30, 1996. The slight  decrease is almost  entirely
attributable  to a decline in the cost of deposits  of three  basis  points from
4.22% in fiscal 1996 to 4.19% for the year ended  September 30, 1997.  The lower
cost of deposits resulted from a general decline in rates offered throughout the
year on the various deposit account types.

                                       51

<PAGE>



NET INTEREST INCOME
Net interest  income was $59.1 million for the year ended September 30, 1997, an
increase of $6.0  million from the previous  years total.  The average  interest
rate spread  declined  eight basis points from 2.96% in fiscal 1996 to 2.88% for
the year ended September 30, 1997  predominantly  due to an increase in the cost
of  interest-bearing  liabilities  to 4.50% in fiscal  1997 from 4.44% in fiscal
1996.  The  increased  cost of  interest-bearing  liabilities  in 1997  occurred
despite  a decline  in the cost of  deposits,  reflecting  a large  increase  in
borrowed  funds,  which carry a higher cost than  deposits,  as a percentage  of
total interest-bearing liabilities.

PROVISION FOR LOAN LOSSES
The provision for loan losses for the year ended September 30, 1997 totaled $9.0
million,  representing  an increase of $5.7 million from the amount provided for
the year ended  September  30, 1996 of $3.3  million.  There were two  principal
reasons for the increase.  The first was a $2.7 million provision related to the
merger with MidConn that was made in order to  consistently  apply  Eagle's loan
loss allowance calculation methodology to the MidConn loan portfolio. The second
was a $3.4  million  provision  resulting  from the sale of troubled  loans that
occurred in June, 1997.

NON-INTEREST INCOME
Non-interest  income totaled $6.3 million for the year ended September 30, 1997,
a $13.6 million  decline from the $19.8 million for the year ended September 30,
1996.  The principal  reason for the decline is the reduction in gain on sale of
deposits  from $15.9  million in fiscal  1996  resulting  from the sale of seven
Danbury  region branch  offices  compared to a $546,000 gain in fiscal 1997. The
fiscal  1997 gain  occurred  as a result of the sale of the  Middlefield  branch
acquired during the MidConn merger.  Offsetting the decrease in the gain on sale
of  deposits  were  several  items,  including a decrease in the loss on sale of
securities of $453,000,  a decline in the net gain (loss) from mortgage  banking
activities  from a loss of $1.4 million for the year ended September 30, 1996 to
a gain of  $124,000  during  fiscal  1997 and an increase of $698,000 in service
fees and other income.

Also included as a charge to non-interest income during the year ended September
30, 1997 was a loss on disposal of premises and equipment of $915,000.  The loss
is made up of  $455,000  of  charges  incurred  as a result of the  merger  with
MidConn and $424,000 of charges  related to relocating  one of the branch office
facilities.

NON-INTEREST EXPENSE
Non-interest expense decreased $806,000,  or 1.8%, to $43.1 million for the year
ended  September  30, 1997 from $43.9  million in the prior  fiscal  year.  Each
fiscal year includes non-recurring expenses that significantly impact the total.
The year ended  September  30, 1997  includes  $2.7  million of merger  expenses
incurred as a result of the merger with  MidConn  and the $2.5  million  cost of
corporation  obligated mandatorily  redeemable preferred securities.  The merger
expenses are composed of $800,000 of compensation  related  expenses,  primarily
severance  payments  made to former  MidConn  employees,  $1.7 million of legal,
accounting  and other  professional  fees and  approximately  $200,000  of other
miscellaneous expenses.

Non-recurring items in fiscal 1996 non-interest expense include the $5.4 million
SAIF recapitalization  charge and $1.2 million of expenses,  primarily marketing
and various consulting charges.

                                       52

<PAGE>



Recurring  expenses  were  reasonably  consistent  from  year to year  with  the
exception of a $616,000, or 12.6%, increase in office occupancy,  a $383,000, or
23.2%,  increase  in the net cost of real  estate  owned  operations  and a $1.1
million, or 62.9%, decrease in Federal deposit insurance premiums.  The increase
in office occupancy is the result of a full year of operations in fiscal 1997 of
the  branch  offices  acquired  in the  Fleet/Shawmut  transaction  and the four
supermarket  branch  offices.  Fiscal 1996  expenses  include only partial years
operations  for  these  branch  offices.  The  net  cost of  real  estate  owned
operations  for the year ended  September  30, 1997 include  $477,000 of charges
reflecting the Bank's disposition  strategy for several  properties  obtained in
the merger with MidConn.  The decrease in Federal deposit insurance premiums was
caused by a lower  premium rate in fiscal 1997  resulting  from the  legislation
enacted in September 1996 that recapitalized the SAIF.

INCOME TAXES
Income tax  expense  was $6.0  million  for the year ended  September  30,  1997
compared to $10.2  million for the year ended  September 30, 1996, a decrease of
$4.2 million or 41%. The decrease was  essentially  the result of lower  pre-tax
income.  The  effective  rate was 45.0% for fiscal  1997  compared  to 39.8% for
fiscal 1996. The higher effective rate is caused by  approximately  $1.2 million
of merger  expenses  incurred during the year ended September 30, 1997 that will
not be deductible for income tax purposes.


                                       53

<PAGE>



COMPARISON OF YEARS ENDED SEPTEMBER 30, 1996 AND 1995

NET INCOME
Net income for the year ended September 30, 1996 was $15.5 million, or $2.42 per
fully  diluted  share,  compared to $12.0  million,  or $1.92 per fully  diluted
share,  for the year ended  September 30, 1995. The change in net income of $3.5
million  represents a 29% increase  from the prior  fiscal year.  Fully  diluted
earnings per share  increased by 26%. The increase in net income was primarily a
result of a $15.9 million gain on the sale of deposits 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  $9.8  million  increase  in
non-interest  expense which  included a $5.4 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 $1.4 million loss on mortgage
banking activities and a $463,000 loss on the sales of securities.

INTEREST INCOME
Interest  income  was  $120.6  million  for the year ended  September  30,  1996
compared to $106.7 million for the year ended September 30, 1995, an increase of
$13.8 million,  or 13%. The increase was due to a $195 million, or 14%, increase
in the average balance of interest  earning assets.  A reduction in the yield on
interest  earning  assets to 7.40% in 1996  from  7.44% 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 on  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.

INTEREST EXPENSE
Interest  expense was $67.5  million in fiscal 1996 compared to $53.4 million in
the prior fiscal year,  an increase of $14.1  million,  or 26%. The increase was
caused  by  a  combination  of  a  43  basis  point  increase  in  the  cost  of
interest-bearing  liabilities  from  4.01%  in 1995  to  4.44%  in  1996  and an
approximately  $188 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 3.81% in 1995 to 4.22% in 1996
along with a $93  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.  In
addition,  the average balance of borrowed  funds,  FHLB advances and repurchase
agreements, all of which generally carry a higher cost than deposits,  increased
by $95.4 million.

NET INTEREST INCOME
Net  interest  income  remained  very  stable  when  comparing  the years  ended
September  30, 1996 and 1995  decreasing  slightly by $234,000 to $53.1  million
from  $53.3  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 2.96% and 3.26%, respectively, in fiscal 1996 compared to
3.44% and 3.72%, 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 decreased by
$872,000, or 21%, to $3.3 million from $4.1 million for the year ended September
30, 1995. The decrease is primarily the result of higher than normal  provisions
in fiscal 1995 due to the valuation of two significant loan  relationships.  The
ratio of allowance for loan losses to non-performing loans increased from 71% at
September  30,  1995 to 89% at  September  30,  1996  due in part to  additional
allowances associated with loans purchased in the Fleet/Shawmut transaction.

                                       54

<PAGE>



NON-INTEREST INCOME
Non-interest  income for the year ended September 30, 1996 was $19.8 million, an
increase  of $14.4  million  from the  prior  year  total of $5.4  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 $1.4  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 $5.8 million in 1996 from
$5.2 million  principally due to a $258,000  increase in servicing  income and a
$205,000 increase in checking account service fees.

NON-INTEREST EXPENSE
Non-interest  expense was $43.9  million for the year ended  September 30, 1996.
This  represents a $9.8 million,  or 29%,  increase from the $34.1 million total
reported for the year ended  September  30, 1995.  The primary  component of the
increase  was the $5.4  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 $765,000, marketing increased
$669,000,  federal insurance  premiums decreased  $978,000,  the amortization of
intangible assets increased $850,000 and other  non-interest  expenses increased
$1.4 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
consummation  of the  Fleet/Shawmut  transaction in January 1996 and the Danbury
transaction in March 1996, 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.

On an overall basis the Company's ratio of operating  expenses to average assets
decreased two basis points from 2.25% in 1995 to 2.23% in 1996.

INCOME TAXES
The  effective tax rate for the year ended  September  30, 1996 was 39.8%,  down
from the 41.1% reported for fiscal 1995. As a result,  the $1.8 million increase
in income  taxes to $10.2  million  for the year  ended  September  30,  1996 is
substantially attributable to a higher level of taxable income.

                                       55

<PAGE>

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,
                                        1997                                    1996                             
                                               Interest  Average Yield/                    Interest   Average    
                             Average          Income/     Cost           Average          Income/    Yield/     
(in thousands)               Balance          Expense                    Balance          Expense     Cost      
                             ----------       ---------- -------------   -------          ---------- ---------  
<S>                      <C>              <C>              <C>       <C>               <C>              <C>     
Interest-earning assets:       
 Loans receivable (a)    $    1,131,418   $    87,358      7.72%    $  1,046,563      $    81,390      7.78%    
 Mortgage-backed securities:   
  Available for sale            504,530        35,115      6.96%         338,766           23,432      6.92%    
  Held to maturity               66,343         4,488      6.76%          87,376            6,456      7.39%    
  Trading                             -             -         -              732               53      7.24%    
 Investment securities:        
   Available for sale            30,324         1,791      5.91%          60,877            3,542      5.82%    
   Held to maturity (b)          35,503         2,295      6.46%          37,671            2,528      6.71%    
 Overnight  investments and    
   Federal Funds sold            34,996         1,959      5.60%          56,933            3,167      5.56%    
                             ----------    ----------                  ---------       ----------               
       Total                  1,803,114       133,006      7.38%       1,628,918          120,568      7.40%    
                                           ----------                                  ----------               
Noninterest-earning assets       85,284                                   97,867                                
                             ----------                                ---------                                
 Total assets            $    1,888,398                            $   1,726,785                                
                             ==========                                =========                                

Interest-bearing liabilities:  
  Deposits               $    1,310,431        54,889      4.19%   $   1,310,602           55,289      4.22%    
  FHLB advances                 315,092        18,232      5.79%         157,854            9,043      5.73%    
  Other borrowings               17,903           760      4.25%          52,540            3,155      6.00%    
                              ---------     ---------                  ---------         --------               
        Total                 1,643,426        73,881      4.50%       1,520,996           67,487      4.44%    
                                            ---------                                    --------               
Noninterest-bearing deposits     53,416                                   49,155                                
Other noninterest-
  bearing liabilities            52,199                                   23,314                                
Stockholders' equity            139,357                                  133,320                                
                              ----------                               ---------                                
Total liabilities and
  stockholders' equity    $   1,888,398                             $  1,726,785                                
                              ==========                               =========                                
Net interest income                       $    59,125                                 $    53,081                               
                                           ==========                                  ==========                               
Average interest rate spread                               2.88%                                        2.96%                   
Net interest margin (c)                                    3.28%                                        3.26%                   
</TABLE>
<TABLE>
<CAPTION>
                                                    1995
                                                     Interest     Average    
                                       Average        Income/      Yield/    
                                       Balance        Expense       Cost     
                                       ----------     ----------  -----------
<S>                                 <C>               <C>         <C>        
(in thousands)                                                               

Interest-earning assets:                                                     
 Loans receivable (a)              $   1,087,923    $ 82,712      7.60%  
 Mortgage-backed securities:
  Available for sale                      69,800       6,132       8.79% 
  Held to maturity                       138,886       9,335       6.72% 
  Trading                                      -           -          -  
 Investment securities:                                                  
   Available for sale                     87,602       5,024       5.74% 
   Held to maturity (b)                   27,288       2,134       7.82% 
 Overnight  investments and               22,310       1,393       6.24% 
   Federal Funds sold              -------------    --------
        Total                          1,433,809     106,730       7.44% 
 Noninterest-earning assets               80,562    --------
                                   -------------

Total assets                        $  1,514,371                             
                                   =============                             
Interest-bearing liabilities:                                                
  Deposits                          $  1,217,534      46,333       3.81%     
  FHLB advances                           70,259       4,223       6.01%     
  Other borrowings                        44,705       2,859       6.40%     
                                   -------------    -----------              
        Total                          1,332,498      53,415       4.01%     
                                                    -----------              
Noninterest-bearing deposits              38,593                             
Other noninterest-                                                           
  bearing liabilities                     22,582 
Stockholders' equity                     120,698                             
                                    --------------                  
Total liabilities and                                                        
  stockholders' equity              $  1,514,371                             
                                    ==============  $ 53,315                 
Net interest income                                 ============             
                                                                             
Average interest rate spread                                       3.44%     
Net interest margin (c)                                            3.72%
</TABLE>
<PAGE>

-------------------

(a)  Interest income includes fees of $117,950, $533,300 and $1,412,100 in 1997,
     1996, 1995, respectively.
(b)  Investment securities held to maturity include FHLB stock.
(c)  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):

<TABLE>
<CAPTION>
                                                1997 v. 1996                                    1996 v. 1995
                                                           Rate/                                           Rate/
(in thousands)                     Volume       Rate       Volume       Total      Volume       Rate       Volume     Total
--------------------------------  --------    --------    --------    --------    --------    --------    --------    --------
<S>                               <C>             <C>          <C>       <C>      <C>         <C>         <C>         <C>      
Interest-earning assets:
  Loans receivable                $  6,599     $  (584)    $   (47)    $ 5,968    $ (3,144)   $  1,895    $    (73)   $ (1,322)
  Mortgage-backed securities:
   Available for sale               11,466         146          71      11,683      23,629      (1,304)     (5,025)     17,300
   Held to maturity                 (1,554)       (545)        131      (1,968)     (3,462)        927        (344)     (2,879)
   Trading                              --          --         (53)        (53)         --          --          53          53
  Investment securities:
   Available for sale               (1,778)         54         (27)     (1,751)     (1,533)         73         (22)     (1,482)
   Held to maturity (a)               (145)        (93)          5        (233)        812        (303)       (115)        394
 Overnight investments and
    Federal funds sold              (1,220)         20          (8)     (1,208)      2,162        (152)       (236)      1,774
                                   --------    -------     --------    --------    --------    --------    --------    --------
        Total                       13,368      (1,002)         72      12,438      18,464       1,136      (5,762)     13,838
                                   --------    --------    --------    --------    --------    --------    --------    --------
Interest-bearing liabilities:
  Deposits                              (7)       (393)         --        (400)      3,542       5,030         384       8,956
  FHLB advances                      9,008          91          90       9,189       5,265        (198)       (247)      4,820
  Other borrowings                  (2,080)       (925)        610      (2,395)        501        (174)        (31)        296
                                   --------    --------    --------    --------    --------    --------    --------    --------
        Total                        6,921      (1,227)        700       6,394       9,308       4,658         106      14,072
                                   --------    --------    --------    --------    --------    --------    --------    --------
Net change in net
  interest income                 $  6,447     $   225     $  (628)    $ 6,044    $  9,156    $ (3,522)   $ (5,868)   $   (234)
                                   ========    ========    ========    ========    ========    ========    ========    ========
</TABLE>

-------------------

(a)  Investment securities held to maturity include FHLB stock.


                                       56

<PAGE>



         Item 8.  Financial Statements and Supplementary Data


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                            PAGE
Consolidated Balance Sheets                                                   58
Consolidated Statements of Income                                             59
Consolidated Statements of Shareholders Equity                                60
Consolidated Statements of Cash Flows                                         61
Notes to Consolidated Financial Statements                                 63-97
Independent Auditor's Report                                                  98


                                       57


<PAGE>



                           CONSOLIDATED BALANCE SHEETS
                           September 30, 1997 and 1996
                (dollars in thousands, except for per share data)

<TABLE>
<CAPTION>
                                Assets                                                  1997                1996
--------------------------------------------------------------------------------     -----------         -----------
<S>                                                                                  <C>                 <C>        
Cash and amounts due from depository institutions                                    $    29,055         $    26,341
Interest-bearing deposits                                                                 46,600              31,523
                                                                                     -----------         -----------
     Cash and cash equivalents                                                            75,655              57,864
Investment securities available for sale (amortized cost: $53,604 in 1997 and
  $26,512 in 1996)                                                                        53,061              26,519
Investment securities held to maturity (market value: $25,442 in 1996)                        --              25,544
Mortgage-backed securities available for sale (amortized cost: $736,150
  in 1997 and $375,010 in 1996)                                                          743,943             372,018
Mortgage-backed securities held to maturity (market value: $90,238 in 1996)                   --              90,290
Loans held for sale                                                                        1,830                 705
Loans, net of allowance for loan losses of $9,765 in 1997 and $10,507 in 1996          1,128,381           1,094,656

Accrued interest receivable:
     Loans                                                                                 6,332               6,637
     Investment securities                                                                 1,150               1,209
     Mortgage-backed securities                                                            4,421               3,363
Real estate owned, net                                                                     3,754               5,384
Stock in Federal Home Loan Bank of Boston, at cost                                        22,770              13,100
Premises and equipment, net                                                               13,247              13,897
Intangible assets                                                                         29,574              32,488
Prepaid expenses and other assets                                                          6,978              18,057
                                                                                     -----------         -----------
               Total Assets                                                          $ 2,091,096         $ 1,761,731
                                                                                     ===========         ===========

                 Liabilities and Shareholders' Equity

Liabilities:
     Deposits                                                                        $ 1,353,274         $ 1,368,703
     Federal Home Loan Bank advances                                                     445,014             217,008
     Repurchase agreements and other borrowed money                                       76,409              14,820
     Advance payments by borrowers for taxes and insurance                                 7,235               6,631
     Accrued expenses and other liabilities                                               15,631              18,577
                                                                                     -----------         -----------
               Total Liabilities                                                       1,897,563           1,625,739
                                                                                     -----------         -----------

Corporation obligated mandatorily redeemable preferred securities of
  subsidiary trust holding solely junior subordinated debentures of the                   48,627                  --
  Corporation
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; 6,363,410
       and 6,246,402 shares issued at September 30, 1997 and 1996,
       respectively, including 47,373 shares held in treasury                                 64                  62
     Additional paid-in capital                                                           78,963              77,628
     Retained earnings                                                                    61,964              60,426
     Cost of common stock in treasury                                                       (362)               (362)
     Net unrealized gain (loss) on available for sale securities                           4,277              (1,762)
                                                                                     -----------         -----------
               Total Shareholders' Equity                                                144,906             135,992
                                                                                     -----------         -----------
               Total Liabilities and Shareholders' Equity                            $ 2,091,096         $ 1,761,731
                                                                                     ===========         ===========
</TABLE>

See accompanying notes to consolidated financial statements


                                       58

<PAGE>



                        CONSOLIDATED STATEMENTS OF INCOME
                  Years Ended September 30, 1997, 1996 and 1995
                (dollars in thousands, except for per share data)

<TABLE>
<CAPTION>
                                                                                         1997               1996               1995
                                                                                    ---------          ---------          ---------
<S>                                                                                 <C>                <C>                <C>      
Interest Income:
  Interest and fees on loans                                                        $  87,358          $  81,390          $  82,712
  Interest on mortgage-backed securities                                               39,603             29,941             15,467
  Interest on investment securities                                                     2,228              3,880              4,363
  Interest on overnight investments                                                     1,959              3,162              1,393
  Dividends on investment securities                                                    1,858              2,190              2,795
  Interest on Federal funds sold                                                           --                  5                 --
                                                                                    ---------          ---------          ---------
          Total interest income                                                       133,006            120,568            106,730
                                                                                    ---------          ---------          ---------
Interest expense:
  Interest on deposits                                                                 54,889             55,289             46,333
  Interest on Federal Home Loan Bank advances                                          18,232              9,043              4,223
  Interest on repurchase agreements and other borrowed money                              760              3,155              2,859
                                                                                    ---------          ---------          ---------
          Total interest expense                                                       73,881             67,487             53,415
                                                                                    ---------          ---------          ---------
          Net interest income                                                          59,125             53,081             53,315

Provision for loan losses                                                               8,978              3,266              4,138
                                                                                    ---------          ---------          ---------
          Net interest income after provision for loan losses                          50,147             49,815             49,177
                                                                                    ---------          ---------          ---------
Non-interest income:
  Net loss on sale of securities                                                          (10)              (463)               (30)
  Net gain (loss) from mortgage banking activities                                        124             (1,442)               247
  Gain on sale of deposits                                                                546             15,904                 --
  Loss on disposal of premises and equipment                                             (915)                --                 --
  Checking account service fees                                                         3,541              3,207              2,930
  Other customer service fees                                                             787                611                518
  Other income                                                                          2,201              2,013              1,749
                                                                                    ---------          ---------          ---------
          Total non-interest income                                                     6,274             19,830              5,414
                                                                                    ---------          ---------          ---------
                                                                                       56,421             69,645             54,591
                                                                                    ---------          ---------          ---------
Non-interest expense:
  Compensation, taxes and benefits                                                     16,718             16,974             15,567
  Office occupancy                                                                      5,491              4,875              4,110
  Marketing                                                                             1,846              1,840              1,171
  Net cost of real estate owned operations                                              2,034              1,651              1,381
  Federal deposit insurance premiums                                                      664              1,789              2,767
  Amortization of intangible assets                                                     2,987              2,764              1,914
  Data processing expenses                                                              2,154              2,074              2,018
  Merger expenses                                                                       2,734                 --                 --
  Cost of Corporation obligated mandatorily redeemable preferred securities             2,523                 --                 --
  SAIF Assessment                                                                          --              5,398                 --
  Other                                                                                 5,965              6,557              5,199
                                                                                    ---------          ---------          ---------
          Total non-interest expense                                                   43,116             43,922             34,127
                                                                                    ---------          ---------          ---------
Income before income taxes                                                             13,305             25,723             20,464
Income taxes                                                                            5,990             10,230              8,418
                                                                                    ---------          ---------          ---------
          Net income                                                                $   7,315             15,493          $  12,046
                                                                                    =========          =========          =========
Net income per share:
          Primary                                                                   $    1.13          $    2.44          $    1.94
          Fully diluted                                                                  1.12               2.42               1.92
                                                                                    =========          =========          =========
</TABLE>

See accompanying notes to consolidated financial statements

                                       59

<PAGE>

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  Years Ended September 30, 1997, 1996 and 1995
                (dollars in thousands, except for per share data)

<TABLE>
<CAPTION>
                                                                                                                    
                                              Common Stock                                Cost of      Employee     
                                          --------------------   Additional               Common        Stock       
                                                                 Paid-in       Retained   Stock in      Ownership   
                                          Shares      Amount     Capital       Earnings   Treasury      Plan Debt   
--------------------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>      <C>         <C>            <C>           <C> 
BALANCE AT SEPTEMBER 30, 1994                   4,802 $       48  $    51,115    $ 50,207   $     (362)  $     (546)
                                             
Net Income                                                                         12,046                           
Cash dividends declared, $0.82 per share                                           (4,650)                          
Reduction in debt related to Employee        
  Stock Ownership Plan                                                                                          452 
Exercise of stock options and other                39                     478                                       
Dividend reinvestment plan                         33                     498                                       
Common stock dividend declared - 10%,        
  less fractional shares                          405          4        7,380      (7,392)                          
Common stock offering                             862          9       16,648                                       
Unrealized loss upon adoption of SFAS        
  115 on October 1, 1994                                                                                            
Change in unrealized gain (loss) on          
  available for sale securities                                                                                     
--------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995                   6,141         61       76,119      50,211         (362)         (94)
                                             
                                             
Net Income                                                                         15,493                           
Cash dividends declared, $0.92 per share                                           (5,278)                          
Reduction in debt related to Employee        
  Stock Ownership Plan                                                                                           94 
Exercise of stock options and other                76          1          854                                       
Dividend reinvestment plan                         29                     655                                       
Unrealized gain on securities transferred    
  from held to maturity to available for sale                                                                       
Change in unrealized gain (loss) on          
  available for sale securities                                                                                     
--------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1996                   6,246         62       77,628      60,426         (362)            -
                                             
                                             
Net Income                                                                          7,315                           
Cash dividends declared, $0.94 per share                                           (5,777)                          
Exercise of stock options and other                61          1          739                                       
Dividend reinvestment plan                         21          -          597                                       
Shares issued upon conversion of             
  outstanding MidConn stock options                35          1           (1)                                      
Unrealized gain on securities transferred    
  from held to maturity to available for sale                                                                       
Change in unrealized gain (loss) on          
  available for sale securities                                                                                     
--------------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1997                   6,363        $64      $78,963     $61,964        $(362)  $         -
                                          =========== ========== ============  ========== ============= ============
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                   
                                                   Net Unrealized  
                                                   Gain (Loss)     
                                                   on Available    
                                                   for Sale        
                                                   Securities            Total     
--------------------------------------------------------------------------------
<S>                                                     <C>           <C>      
BALANCE AT SEPTEMBER 30, 1994                           $    (754)    $   99,708 
                                                                                 
Net Income                                                                12,046 
Cash dividends declared, $0.82 per share                                  (4,650)
Reduction in debt related to Employee                                            
  Stock Ownership Plan                                                       452 
Exercise of stock options and other                                          478 
Dividend reinvestment plan                                                   498 
Common stock dividend declared - 10%,                                            
  less fractional shares                                                      (8)
Common stock offering                                                     16,657 
Unrealized loss upon adoption of SFAS                               
  115 on October 1, 1994                                     (435)          (435)
Change in unrealized gain (loss) on                                              
  available for sale securities                             1,465          1,465 
--------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995                                 276        126,211 
                                                                                 
Net Income                                                                15,493 
Cash dividends declared, $0.92 per share                                  (5,278)
Reduction in debt related to Employee                                            
  Stock Ownership Plan                                                        94 
Exercise of stock options and other                                          855 
Dividend reinvestment plan                                                   655 
Unrealized gain on securities transferred                                        
  from held to maturity to available for sale               1,322          1,322 
Change in unrealized gain (loss) on                                              
  available for sale securities                            (3,360)        (3,360)
--------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1996                              (1,762)       135,992 
                                                                                 
                                                                                 
Net Income                                                                 7,315
Cash dividends declared, $0.94 per share                                  (5,777)
Exercise of stock options and other                                          740
Dividend reinvestment plan                                                   597
Shares issued upon conversion of                                                   
  outstanding MidConn stock options                                            -
Unrealized gain on securities transferred                                       
  from held to maturity to available for sale                 299            299
Change in unrealized gain (loss) on                                             
  available for sale securities                             5,740          5,740
--------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1997                              $4,277       $144,906
                                                   ===============  ============
</TABLE>                                          

See accompanying notes to consolidated financial statements

                                       60
<PAGE>



                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years Ended September 30, 1997, 1996 and 1995
                             (dollars in thousands)


<TABLE>
<CAPTION>
OPERATING ACTIVITIES:                                                              1997            1996            1995
                                                                                ---------       ---------       ---------
<S>                                                                             <C>             <C>             <C>      
Net income                                                                      $   7,315       $  15,493       $  12,046
Adjustments to reconcile net income to net cash provided (used) by
  operating activities:
    Provision for loan losses                                                       8,978           3,266           4,138
    Provision for losses on real estate owned                                         891             657           1,333
    Provision for depreciation and amortization                                     1,739           1,564           1,299
    Amortization (accretion) of discounts and fees on loans                            56            (721)           (434)
    Amortization of premiums (accretion of discounts) on
       investment and mortgage-backed securities                                    1,448             957            (616)
    Amortization of core deposit and other intangibles                              2,987           2,764           1,914
    Loss (gain) on sale of premises and equipment                                     915              42             (12)
    Gain on sale of deposits                                                         (546)        (15,904)             --
    Gain on trading securities                                                         --             (64)             --
    Proceeds from sales of trading securities                                          --          16,592          83,909
    Realized gain on sale of real estate owned                                        (34)           (296)           (981)
    Realized loss on sale of securities, net                                           10             527              30
    Loss (gain) from mortgage banking activities                                     (124)          1,442            (247)
    Origination of loans held for sale                                            (14,724)        (65,859)         (2,965)
    Proceeds from sale of loans held for sale                                      13,723          27,532              --
    Increase in accrued interest receivable                                          (694)           (122)         (2,598)
    Decrease (increase) in prepaid expenses and other assets                        6,718          (5,049)          8,360
    Loan origination fees                                                            (201)            582             352
    Increase (decrease) in accrued expenses and other liabilities                  (2,854)          4,755           2,116
                                                                                ---------       ---------       ---------
          Net cash provided (used) by operating activities                         25,603         (11,482)        107,650
                                                                                ---------       ---------       ---------

INVESTING ACTIVITIES:
  Proceeds from sales of investment securities available for sale                  18,558          25,593           7,139
  Proceeds from maturities of investment securities                                25,644          54,200          39,400
  Principal payments on investment securities available for sale                      973           3,255           6,262
  Principal payments on investment securities held to maturity                         --              --           4,512
  Purchases of investment securities available for sale                           (46,610)        (26,561)        (26,929)
  Purchases of investment securities held to maturity                                  --          (6,000)        (23,692)
  Principal payments on mortgage-backed securities available for sale              80,407          94,580          10,768
  Principal payments on mortgage-backed securities held to maturity                 7,339          13,138          15,154
  Purchases of mortgage-backed securities available for sale                     (368,723)       (314,399)       (141,390)
  Purchases of mortgage-backed securities held to maturity                         (2,866)        (56,138)        (49,182)
  Proceeds from sales of mortgage-backed securities available for sale             11,422         155,566          11,164
  Proceeds from sales of mortgage-backed securities held to maturity                   --              --           4,032
  Principal payments on loans receivable                                          167,003         196,949         137,036
  Loan originations                                                              (221,942)       (237,266)       (187,427)
  Loan purchases                                                                   (3,263)        (36,142)         (8,062)
  Proceeds from sales of loans                                                     12,150             999           1,059
  Additional investment in real estate owned                                          (27)           (303)           (866)
  Proceeds from sales of real estate owned                                          4,294           5,980           8,166
  Purchases of premises and equipment                                              (2,004)         (2,629)         (1,962)
  Proceeds from sales of premises and equipment                                        --             735             443
  Increase in investment in Federal Home Loan Bank stock                           (9,670)         (1,504)         (2,422)
  Acquisition of loans, investments and other assets                                   --         (39,108)             --
                                                                                ---------       ---------       ---------
          Net cash used by investing activities                                  (327,315)       (169,055)       (196,797)
                                                                                ---------       ---------       ---------
</TABLE>

                                       61

<PAGE>
<TABLE>
<CAPTION>

                Consolidated Statements of Cash Flows, Continued
                             (dollars in thousands)


FINANCING ACTIVITIES:                                                             1997              1996              1995
                                                                               -----------       -----------       -----------
<S>                                                                                 <C>              <C>               <C>     
  Net decrease in passbook, NOW and money market accounts                           (7,211)          (40,048)          (80,421)
  Net increase in certificates of deposit                                            1,507            76,468            80,588
  Assumption of deposits and liabilities of acquired banks                              --           235,893                --
  Sale of deposits                                                                  (9,179)         (168,506)               --
  Borrowings under Federal Home Loan Bank advances                               2,078,255           551,238           215,875
  Principal payments under Federal Home Loan Bank advances                      (1,850,249)         (417,380)         (179,500)
  Net increase (decrease) in repurchase agreements and
   other borrowed money                                                             61,589           (67,553)           74,873
  Net increase (decrease) in advance payments by borrowers for taxes
    and insurance                                                                      604              (558)             (387)
  Proceeds from issuance of Corporation obligated mandatorily
    redeemable preferred securities                                                 48,627                --                --
  Proceeds from exercise of stock options and dividends reinvested                   1,337             1,510               976
  Payment of fractional shares from stock dividend                                      --                --                (8)
  Proceeds from common stock offerings                                                  --                --            16,657
  Cash dividends                                                                    (5,777)           (5,278)           (4,650)
                                                                               -----------       -----------       -----------
          Net cash provided by financing activities                                319,503           165,786           124,003
                                                                               -----------       -----------       -----------

Increase (decrease) in cash and cash equivalents                                    17,791           (14,751)           34,856
Cash and cash equivalents at beginning of period                                    57,864            72,615            37,759
                                                                               -----------       -----------       -----------

Cash and cash equivalents at end of period                                     $    75,655       $    57,864       $    72,615
                                                                               ===========       ===========       ===========


NON-CASH INVESTING ACTIVITIES:
  Transfer of investment securities to investment securities available
     for sale                                                                  $    23,609       $        --       $    53,124
  Transfer of mortgage backed securities to mortgage-backed
    securities available for sale                                                   85,720            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                                        3,494             5,227             3,741
                                                                               ===========       ===========       ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid                                                                $    72,826       $    67,602       $    52,654
  Income taxes paid                                                                  3,081            15,453             9,902
</TABLE>


See accompanying notes to consolidated financial statements

                                       62

<PAGE>



                     EAGLE FINANCIAL CORP. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                        September 30, 1997, 1996 and 1995

(1)  ACCOUNTING POLICIES

Principles of Consolidation

Eagle  Financial  Corp.  (the  "Holding  Company")  is the savings  bank holding
company  for  Eagle  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  54% of the Bank's  deposits are
insured up to  applicable  limits by the  Savings  Associations  Insurance  Fund
("SAIF") with the remainder of the deposits  insured by the Bank  Insurance Fund
("BIF").  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.  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 informatio available to them
at the time of their examination.

On May 31, 1997, the Company  completed its merger with MidConn Bank ("MidConn")
through a stock for stock exchange and merged the operations of MidConn into the
operations of the Bank. The  transaction  has been accounted for as a pooling of
interests  combination and, accordingly,  the consolidated  financial statements
for periods prior to the combination  have been restated to include the accounts
and results of operations of MidConn.

                                       63

<PAGE>



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 has no securities
classified as trading as of September 30, 1997.

Upon  adoption of SFAS 115,  $109.7  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 $410,000, 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.

Loans

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 non-accrual 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, the result of which 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  non-accrual
and does not begin again until the loan is returned to accrual status.

                                       64

<PAGE>



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  result  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 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 sales 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.

                                       65

<PAGE>



Loan Servicing and Mortgage Servicing Rights

The Company from time-to-time  enters into transactions to acquire the rights to
service  pools of loans for others and collect the  servicing  and related fees.
The amount  paid by the  Company  for these  rights is  capitalized  as mortgage
servicing rights.  The Company also sells loans and retains the right to service
the loans for the investors. As of October 1, 1996, the Company adopted SFAS No.
122, " Accounting for Mortgage Servicing  Rights".  SFAS No. 122 was superseded,
for  transactions  recorded after December 31, 1996, by SFAS No. 125 "Accounting
for  Transfers  and  Servicing  of  Financial  Assets  and   Extinguishments  of
Liabilities".  Both  SFAS No.  122 and SFAS No.  125  require,  and the  Company
recorded,  the  recognition of a servicing asset or liability and other retained
interests as an allocation of the carrying amount of the assets sold between the
asset sold and the servicing  obligation and other retained  interests  based on
the relative fair value of the assets sold to the interests  retained.  SFAS No.
125 also  requires that mortgage  servicing  rights be evaluated for  impairment
based  on  the  asset's  fair  value.  The  Company  estimates  fair  values  by
discounting  servicing asset cash flows using discount and prepayment rates that
it believes market participants would use. For purposes of measuring impairment,
mortgage servicing rights are stratified by the Bank based upon the terms of the
loans, whether the loans are fixed or adjustable and the period during which the
loans were originated.

Mortgage  servicing  rights are amortized in proportion  to, and over the period
that the servicing rights generate net servicing fee income.

Stock Compensation

In October  1995,  the FASB  issued SFAS No. 123,  "Accounting  for  Stock-Based
Compensation",  which  defines  a fair  value  based  method of  accounting  for
employee stock options or similar equity instruments  granted after December 31,
1994.  SFAS No. 123 is effective for the Company  beginning with the fiscal year
ending  September  30,  1997.  However,  SFAS No.  123 also  allows an entity to
continue to account for these plans  according to  Accounting  Principles  Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"),  provided
pro forma  disclosures  of net income and  earnings per share are made as if the
fair value based method of accounting  defined by SFAS No. 123 had been applied.
The Company elects to continue  measuring  compensation cost related to employee
stock  purchase  options  using APB 25, and  provides pro forma  disclosures  as
required  by SFAS  No.  123 in Note 15 of the  Notes to  Consolidated  Financial
Statements.

Interest Rate Instruments

The Company utilizes interest rate cap and interest rate floor contracts as part
of  its  asset/liability  management  strategy.  Interest  rate  cap  and  floor
contracts are entered into as hedges against future interest rate  fluctuations.
The  Company's  accounting  policy  relating  to  interest  rate  cap and  floor
contracts  is to  amortize  the cost of the  contract  into  interest  income or
expense over the expected  remaining life of the hedged asset or liability.  The
conditions for obtaining and  maintaining  hedge  accounting  treatment  require
identification  of the asset or  liability to be hedged and linking the interest
rate cap or floor to the asset or liability  being hedged.  The Company does not
hold any interest rate cap or floor contracts for trading purposes.

Income Taxes

The Company files consolidated state and federal income tax returns.

                                       66

<PAGE>



The Company uses the asset and liability  method of accounting for income taxes.
Under the asset and liability  method,  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.  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.

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  6,468,437,
6,352,097 and 6,217,274 in 1997, 1996, and 1995, respectively.  Weighted average
common shares  outstanding  used to calculate  fully diluted  earnings per share
were 6,558,478,  6,413,356, and 6,274,942 in 1997, 1996, and 1995, respectively.
All share data for all periods  prior to September  30, 1996 have been  adjusted
retroactively  to give effect to a 10% stock dividend to common  shareholders of
record on February 15, 1995

Reclassification

Certain  1996 and 1995  amounts  have been  reclassified  to conform to the 1997
presentation for comparative purposes.  Such  reclassifications had no effect on
net income.

(2)  ACQUISITIONS AND DIVESTITURES

On May 31,  1997,  the  Company  completed  its merger  with  MidConn  through a
tax-free stock for stock exchange.  The Company issued  approximately  1,708,000
common shares in exchange for all the common shares of MidConn.  The transaction
has been accounted for as a pooling of interests  combination and,  accordingly,
the consolidated  financial statements for periods prior to the combination have
been restated to include the accounts and results of operations of MidConn.

The results of operations  previously  reported by the separate entities and the
combined amounts presented in the accompanying consolidated financial statements
are summarized below:

                                        Years Ended September 30,

                                        1997      1996      1995
                                      -------   -------   -------
Net interest income:
Company                               $49,988   $39,759   $40,017
MidConn                                 9,137    13,322    13,298
                                      -------   -------   -------
  Combined                            $59,125   $53,081   $53,315
                                      =======   =======   =======

Net income:
Company                               $ 6,641   $13,638   $10,972
MidConn                                   674     1,855     1,074
                                      -------   -------   -------
  Combined                            $ 7,315   $15,493   $12,046
                                      =======   =======   =======

                                       67

<PAGE>



On June 28, 1997 the Company completed the sale of the Middlefield,  Connecticut
branch  office,  which had been  acquired in the MidConn  Bank  transaction,  to
Liberty Bank. As a result of the sale,  the Company  recorded a gain on the sale
of deposits of  approximately  $546,000 based on a 6% deposit premium applied to
total deposits of approximately  $9.7 million.  The deposits sold represent 3.2%
of the deposits assumed in the acquisition of MidConn and 0.7% of total deposits
at June 30, 1997.

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
                                            --------

                                            $254,100
                                            ========

     Deposits                               $253,139
     Other liabilities                           961
                                            --------
                                            $254,100
                                            ========

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

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, 1997 was $3,457,000.

                                       68

<PAGE>



(4)  INVESTMENT SECURITIES

The aggregate carrying amounts and market values of investment securities are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                 Gross       Gross
                                                    Amortized  unrealized  unrealized  Market
                                                    cost         gains      losses      value
                                                   -------     -------     -------    -------
<S>                                                <C>         <C>         <C>        <C>    
SEPTEMBER 30, 1997:

Investment securities available for sale:
  U.S. Treasury securities                         $13,015     $     6     $     5    $13,016
  U.S. Government agency obligations                 8,000          19          --      8,019
  Corporate and other securities                    18,068          29         152     17,945
  Preferred stock                                   14,521          --         440     14,081
                                                   -------     -------     -------    -------
     Total                                         $53,604     $    54     $   597    $53,061
                                                   =======     =======     =======    =======

SEPTEMBER 30, 1996:

Investment securities held to maturity:
  U.S. Treasury securities                         $ 2,542     $    17     $    --    $ 2,559
  U.S. Government agency obligations                17,944          --         218     17,726
  Corporate and other securities                     5,058         100           1      5,157
                                                   -------     -------     -------    -------
     Total                                         $25,544     $   117     $   219    $25,442
                                                   =======     =======     =======    =======

Investment securities available for sale:
  U.S. Treasury securities                         $ 9,508     $    19     $    56    $ 9,471
  U.S. Government agency obligations                 7,000          17           5      7,012
  Corporate and other securities                     1,444          37          --      1,481
  Mutual funds                                       4,860          --           5      4,855
  Equity securities                                  3,700          --          --      3,700
                                                   -------     -------     -------    -------
      Total                                        $26,512     $    73     $    66    $26,519
                                                   =======     =======     =======    =======
</TABLE>

The amortized cost and market value of debt securities at September 30, 1997, by
contractual maturity,  are shown below (in thousands).  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.


                                                   Available for Sale

                                                   Amortized  Market
                                                   cost        value
                                                   -------   -------
Due in one year or less                            $ 8,389   $ 8,386
Due after one year through five years                9,816     9,842
Due after five years through ten years               6,051     6,052
Due after ten years                                 14,827    14,700
                                                   -------   -------
                                                   $39,083   $38,980
                                                   =======   =======

Proceeds   from  sales  of  investment   securities   available  for  sale  were
$18,558,000,  $25,593,000, and $7,139,000 in 1997, 1996, and 1995, respectively.
Gross realized gains on sales of investment  securities  available for sale were
$120,000, $9,000, and $101,000 in 1997, 1996, 1995, respectively. Gross realized
losses on investment securities available for sale were $45,000,  $664,000,  and
$194,000 in 1997, 1996, and 1995, respectively.

As discussed in note 5 to the  consolidated  financial  statements,  the Company
transferred  all  investment  securities  from held to maturity to available for
sale in 1997 and ceased using the held to maturity classification.

                                       69

<PAGE>



Investment  securities  with a book  value of  $5,345,000  and  $4,483,000  were
pledged as collateral to secure public  deposits at September 30, 1997 and 1996,
respectively.

As  required  by the FHLB of Boston,  the Bank must hold FHLB stock  equal to at
least 5% of  outstanding  advances.  As of September 30, 1997 and 1996, the Bank
was in compliance with the Federal Home Loan Bank stock requirement.

(5)  MORTGAGE-BACKED SECURITIES

Mortgage-backed  securities primarily includes 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.

The aggregate carrying amounts and market values of  mortgage-backed  securities
are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                             Gross              Gross
                                                       Amortized           unrealized         unrealized         Market
                                                         cost                gains              losses            value
                                                    --------------      --------------     --------------     --------------
<S>                                                     <C>                <C>                <C>                <C>     
SEPTEMBER 30, 1997:

Available for sale:
  FHLMC                                                 $110,262           $  1,374           $    361           $111,275
  FNMA                                                   114,058                930                 73            114,915
  GNMA                                                    55,925                112                 72             55,965
  Other                                                    1,414                 39                 --              1,453
  Collateralized mortgage obligations                    454,491              6,513                669            460,335
                                                        --------           --------           --------           --------
    Total                                               $736,150              8,968              1,175           $743,943
                                                        ========           ========           ========           ========

SEPTEMBER 30, 1996:

Held to maturity:
  FHLMC                                                 $  5,830           $     77           $     40           $  5,867
  FNMA                                                     5,532                 73                 38              5,567
  GNMA                                                    13,623                 11                312             13,322
  Collateralized mortgage obligations                     65,305                729                552             65,482
                                                        --------           --------           --------           --------
    Total                                               $ 90,290           $    890           $    942           $ 90,238
                                                        ========           ========           ========           ========

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
                                                        ========           ========           ========           ========
</TABLE>

                                       70

<PAGE>



Proceeds  from  sales of  mortgage-backed  securities  available  for sale  were
$11,422,000,  $155,566,000 and $11,164,000 in 1997, 1996 and 1995, respectively.
Gross realized gains on sales of mortgage-backed  securities  available for sale
were  $34,000,  $1,190,000  and $309,000 in 1997,  1996 and 1995,  respectively.
Gross realized losses on sales of mortgage-backed  securities available for sale
were $119,000, $1,062,000 and $152,000 in 1997, 1996 and 1995, respectively.

Proceeds  from sales of  mortgage-backed  securities  classified as trading were
$16,952,000 and $83,909,000 in 1996 and 1995, respectively.  There were no sales
of  mortgage-backed  securities  classified as trading in 1997.  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.

On June 30,  1997 the  Company  transferred  $85.7  million  of  mortgage-backed
securities and $23.6 million of investment  securities  from held to maturity to
available for sale. The transfer resulted in an unrealized gain of approximately
$299,000,  which is net of income tax expense of approximately  $200,000,  being
recorded as an increase to shareholders' equity. The securities were transferred
due to a change in intent  with  respect to holding the  securities  to maturity
precipitated  by changes in the Company  balance sheet following the merger with
MidConn.  The  Company  does not  currently  intend to purchase  securities  for
classification as held to maturity.

In November 1995, the FASB issued a "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 and $3.5 million of investment  securities  were
reclassified  resulting in an  unrealized  gain of  approximately  $1.3 million,
which is net of income tax expense of $882,000, being recorded as an increase to
shareholders' equity.

                                       71

<PAGE>



(6) LOANS

Loans consisted of the following (in thousands):


                                                           September 30,

                                                      1997              1996
                                                  -----------       -----------
Real estate mortgage loans:
  Residential - One-to-four family                $   912,646       $   904,370
  Residential - Multi-family                           15,949            18,106
  Residential - Construction                           17,095            15,950
  Commercial - Construction                             3,177                --
  Commercial real estate                               60,802            52,132
  Land                                                  9,594            10,701
                                                  -----------       -----------
                                                    1,019,263         1,001,259
                                                  -----------       -----------

Other loans:
  Home equity lines of credit                          45,316            41,992
  Second mortgages                                     45,405            46,389
  Commercial                                           19,376             9,422
  Consumer                                             10,459             8,444
                                                  -----------       -----------
                                                      120,556           106,247
                                                  -----------       -----------

Unearned discounts and premiums                          (609)             (574)
Deferred loan origination fees                         (1,064)           (1,769)
Allowance for loan losses                              (9,765)          (10,507)
                                                  -----------       -----------

                                                  $ 1,128,381       $ 1,094,656
                                                  ===========       ===========

In fiscal 1997, the Company sold $13.7 million of newly  originated loans in the
secondary  market  and,  pursuant  to SFAS No.  122 and SFAS  No.  125,  created
mortgage servicing rights totaling $86,000.

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  $1.4 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.

At September 30, 1997,  1996 and 1995,  loans serviced for the benefit of others
approximated $246.5 million, $261.4 million and $256.1 million, respectively.

                                       72

<PAGE>



Changes in the allowance for loan losses were as follows (in thousands):


                                                  Years ended September 30,

                                             1997           1996           1995
                                         --------       --------       --------

Balance at beginning of year             $ 10,507       $  9,611       $ 10,305
Charge-offs                                (9,878)        (4,340)        (4,961)
Recoveries                                    158             99            129
Provision for loan losses                   8,978          3,266          4,138
Allowance associated with
  purchases                                    --          1,871             --
                                         --------       --------       --------

Balance at end of year                   $  9,765       $ 10,507       $  9,611
                                         ========       ========       ========

Non-performing  loans,  approximated  $4.5  million  and  $11.9  million  as  of
September 30, 1997 and 1996,  respectively.  If these loans had been current, in
accordance with their original terms, additional interest income would have been
recorded in the amounts of $250,500,  $778,700, and $666,800 for 1997, 1996, and
1995, respectively.

During  the year  ended  September  30,  1997,  the Bank sold  $17.7  million of
non-performing,  delinquent or otherwise troubled loans resulting in a provision
of $3.4 million and charge-offs totaling $5.8 million.

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.

The following summarizes the Company's impaired loans (in thousands):


                                         At or for the years ended September 30,

                                                   1997            1996
                                                -------         -------

Impaired loans                                  $ 3,350         $10,950
Impaired loans with reserve                       2,940          10,350
Impaired loans without reserve                      410             600
Impaired loan reserve                               244           1,037
Impaired loans average balance                    8,991           8,672

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  $367,700 and $399,700 for
the years ended September 30, 1997 and 1996, respectively.

At  September  30,  1997,  the Company had $2.4  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 $3.4 million.

                                          73

<PAGE>



(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 (in thousands):


                                                 Years ended September 30
                                                 ------------------------
                                                       1997       1996
                                                    -------    -------

Balance, beginning of year                          $ 5,939    $ 7,024
New loans                                               583        126
Repayments                                             (864)      (560)
Other changes                                          (723)      (651)
                                                    -------    -------
Balance, end of year                                $ 4,935    $ 5,939
                                                    =======    =======

Other changes in 1997 represent the resignations of former MidConn Bank officers
and directors.  Other changes in 1996 represent  sales of loans to the secondary
market, $310,000, and the resignations from the Bank, $341,000.


(8) REAL ESTATE OWNED

Real estate owned consisted of the following (in thousands):


                                                                September 30
                                                                ------------
                                                               1997       1996
                                                            -------    -------

Properties acquired through foreclosure                     $ 4,402    $ 5,463
Valuation allowance                                            (648)       (79)
                                                            -------    -------

  Total                                                     $ 3,754    $ 5,384
                                                            =======    =======

                                       74

<PAGE>



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


                                                   Years ended September 30,

                                               1997          1996          1995
                                            -------       -------       -------

Balance at beginning of year                $    79       $   278       $   545
Charge-offs                                    (322)         (856)       (1,600)
Provisions for losses                           891           657         1,333
                                            -------       -------       -------

Balance at end of year                      $   648       $    79       $   278
                                            =======       =======       =======

The net cost of real estate owned operations was as follows (in thousands):


                                                   Years ended September 30,

                                               1997          1996          1995
                                            -------       -------       -------

Net gain from sales                         $   (34)      $  (296)      $  (981)
Provisions for losses                           891           657         1,333
Expenses of holding real estate
  owned, net of rental income                 1,177         1,290         1,029
                                            -------       -------       -------

Total                                       $ 2,034       $ 1,651       $ 1,381
                                            =======       =======       =======


                                       75

<PAGE>




(9) PREMISES AND EQUIPMENT

The following is a summary of premises and equipment (in thousands):



                                                              September 30
                                                              ------------
                                                              1997        1996
                                                          --------    --------

Land                                                      $  1,137    $  1,137
Premises and leasehold improvements                         10,550      11,452
Furniture, fixtures and equipment                            9,705       9,536
                                                          --------    --------
                                                            21,392      22,125
Less accumulated depreciation and amortization              (8,145)     (8,228)
                                                          --------    --------

                                                          $ 13,247    $ 13,897
                                                          ========    ========

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  $1,048,800,  $874,000,  and
$741,000 for 1997, 1996, and 1995, respectively.

The Company  currently  has 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  $91,033,  75,200,  and  $71,700  for  1997,  1996,  and  1995,
respectively.

The future minimum rental  commitments for the leased facilities as of September
30, 1997 were as follows (in thousands):


1998                        $        974
1999                                 767
2000                                 583
2001                                 548
2002                                 484
thereafter                         2,325
                            -------------
                            $      5,681
                            =============


                                       76

<PAGE>



(10) PREPAID EXPENSES AND OTHER ASSETS

A summary of prepaid expenses and other assets follows (in thousands):


                                                            September 30
                                                            ------------
                                                            1997      1996
                                                         -------   -------

Mortgage servicing rights                                $   564   $   592
Deferred tax assets, net                                     233     4,162
Income tax receivable                                        225     8,088
Other assets                                               5,956     5,215
                                                         -------   -------
                                                         $ 6,978   $18,057
                                                         =======   =======

A summary of the  activity  of  mortgage  servicing  rights  was as follows  (in
thousands):


                                            Years ended September 30,

                                              1997     1996     1995
                                             -----    -----    -----

Balance at beginning of year                 $ 592    $ 716    $ 839
Originated servicing                            86       --       --
Amortization                                  (114)    (124)    (123)
                                             -----    -----    -----

Balance at end of year                       $ 564    $ 592    $ 716
                                             =====    =====    =====

The following table shows activity in goodwill and core deposit  intangibles (in
thousands):

<TABLE>
<CAPTION>
                                                                                 Total Goodwill
                                                                Core Deposit     & Core Deposit        Accumulated
                                             Goodwill           Intangibles        Intangibles         Amortization
                                           ------------        --------------   -----------------     --------------
<S>                                          <C>                    <C>                <C>               <C>     
Balance at September 30, 1994                $ 14,610               3,677              18,287            $  1,744
Amortization of intangibles                      (992)               (922)             (1,914)              1,914
Other adjustments                                (290)               (228)               (518)                 --
                                             --------            --------            --------            --------

Balance at September 30, 1995                  13,328               2,527              15,855               3,658
Intangible assets acquired                     19,914                  --              19,914                  --
Write-off due to branch sale                       --                (517)               (517)                 --
Amortization of intangibles                    (2,214)               (550)             (2,764)              2,764
                                             --------            --------            --------            --------

Balance at September 30, 1996                  31,028               1,460              32,488               6,422
Amortization of intangibles                    (2,658)               (329)             (2,987)              2,987
Other adjustments                                  73                  --                  73                  --
                                             --------            --------            --------            --------

Balance at September 30, 1997                $ 28,443            $  1,131            $ 29,574            $  9,409
                                             ========            ========            ========            ========
</TABLE>

Other  adjustments  in 1995  represent  the  realization  of tax benefits due to
changes in tax law related to amortization of intangibles.


                                       77

<PAGE>



(11) DEPOSITS

Deposit balances consisted of the following (in thousands):


<TABLE>
<CAPTION>
                                                          September 30,

                                               1997                          1996
                                             ---------                     --------
                                                    Weighted                     Weighted
                                                    Average                      Average
                                    Amount          Rate            Amount       Rate
                                    -----------     --------        ----------   -------

<S>                              <C>                <C>          <C>             <C>
Non-interest bearing             $     52,970          -%        $     41,435       -%
Passbook accounts                     233,267       1.98              250,718    2.00
NOW accounts                          110,769       0.53              112,698    0.99
Money market accounts                 107,008       2.49              110,756    2.68
                                    -----------     --------        ----------   -------
                                      504,014       1.56              515,607    1.76
                                    -----------     --------        ----------   -------

Certificate accounts, with
 original maturities of:
  Six months or less                  149,411       4.65              124,073    4.69
  Over six months to one year         283,748       5.09              362,929    5.18
  Over one year to two years          142,173       5.33              111,024    5.54
  Over two years                      273,928       5.99              255,070    6.04
                                    -----------     --------        ----------   -------
                                      849,260       5.34              853,096    5.42
                                    -----------     --------        ----------   -------

                                 $  1,353,274       3.94%        $  1,368,703    4.04%
                                    ===========     ========        ==========   =======
</TABLE>

The interest  rates in effect as of  September  30, 1997 were 1.98% for passbook
accounts,  0.25% for NOW  accounts,  1.98% for money market  accounts and ranged
from  2.96%  for a one  month  certificate  account  to  5.60%  for a five  year
certificate account.

Interest on deposits is summarized as follows (in thousands):

                                           Years Ended September 30,

                                    1997             1996              1995
                                 -------          -------           -------

Passbook accounts                $ 4,894          $ 5,162           $ 5,345
NOW accounts                       1,053            1,009               927
Money market accounts              2,567            3,135             3,735
Certificate accounts              46,375           45,983            36,326
                                 -------          -------           -------

                                 $54,889          $55,289           $46,333
                                 =======          =======           =======

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 $222,367,  $186,000 and $239,000 for 1997, 1996
and 1995 respectively.

The total amount of time deposit  accounts of $100,000 or more was $69.3 million
at September 30, 1997.


                                       78

<PAGE>



The  following  table sets forth the  maturities  of time  deposit  accounts  at
September 30, 1997 (in thousands):


                  Maturity                             Amount
--------------------------------------------       ------------

Under one year                                      $ 611,484
Between one year and two years                        131,816
Between two years and three years                      80,090
Between three years and four years                     14,932
Between four years and five years                      10,651
More than five years                                      287
                                                   ------------
                                                    $ 849,260
                                                   ============


(12) FEDERAL HOME LOAN BANK ADVANCES,  REPURCHASE  AGREEMENTS AND OTHER BORROWED
     MONEY

FHLB advances consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                          September 30,

                                                   1997                   1996
                                          ---------------------  -------------------
                                                       Interest              Interest
                                          Amount         Rate     Amount       Rate
                                          --------    ---------  --------    -------
<S>                                       <C>             <C>    <C>            <C>  
Short-term advances:                      $219,420        5.65%  $ 97,235       5.54%
                                          --------    ---------  --------    -------
Long-term advances:
    Due 1997                                    --         --      21,500       5.64
    Due 1998                                48,900        5.58     51,200       5.51
    Due 1999                                56,462        5.77     22,427       5.57
    Due 2000                                18,150        6.06      8,500       5.98
    Due 2001                                 6,845        6.66      4,550       6.76
    Due 2002                                 2,000        6.87         --         --
    Due 2003                                 4,157        6.14      4,762       6.14
    Due 2004                                80,000        6.01         --         --
    Due 2006                                 3,577        6.31      3,881       6.31
    Due 2007                                 2,675        6.98         --         --
    Due 2011                                 2,828        6.60      2,953       6.60
                                          --------    ---------  --------    -------
                                           225,594        5.92    119,773       5.70
                                          --------    ---------  --------    -------
                                          $445,014        5.78%  $217,008       5.63%
                                          ========    =========  ========    =======
</TABLE>

Repurchase  agreements and other  borrowed money  consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                                         September 30,
                                                   1997                   1996
                                          ---------------------  -------------------
                                                       Interest              Interest
                                          Amount         Rate     Amount       Rate
                                          --------    ---------  --------    -------
<S>                                      <C>              <C>     <C>            <C>  
Repurchase agreements, due within
  one year                               $ 1,259          4.50%   $14,670        5.22%
Repurchase agreements, due 2002           75,000          6.04         --          --
Other borrowings                             150          4.00        150        4.00
                                         -------       -------    -------     -------
                                         $76,409          6.01%   $14,820        5.21%
                                         =======       =======    =======     =======
</TABLE>

                                       79

<PAGE>



The  repurchase  agreements  due in 2002 become  callable in 2000 and thereafter
until maturity.

The entire amount of repurchase  agreements at September 30, 1997 of $76,259,000
represents  agreements  to  repurchase  the  same  securities.   The  securities
collateralizing the repurchase  agreements,  which are being held by the counter
party to the agreement, consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                     Amortized     Accrued        Market
                                                        Cost       Interest        Value
                                                     -------       -------       -------
<S>                                                  <C>           <C>           <C>    
FHLMC mortgage-backed securities                     $11,597       $    75       $11,452
FNMA mortgage-backed securities                       37,301           230        37,613
GNMA mortgage-backed securities                       30,456           201        30,464
U.S. Treasury notes                                    1,179             5         1,178
                                                     -------       -------       -------
                                                     $80,533       $   511       $80,707
                                                     =======       =======       =======
</TABLE>

The following table summarizes  information  regarding short-term borrowings (in
thousands):

<TABLE>
<CAPTION>
                                                                          Years Ended September 30,
                                                                         1997        1996        1995
                                                                     --------    --------    --------
<S>                                                                  <C>         <C>         <C>     
Short-term FHLB advances:
  Maximum amount outstanding at any month-end                        $268,220    $ 98,255    $ 63,665
  Average amount outstanding                                          165,378      72,049      35,343
  Weighted average interest rate                                         5.60%       5.60%       5.83%
Repurchase agreements:
  Maximum amount outstanding at any month-end                        $  1,579    $ 85,200    $ 84,200
  Average amount outstanding                                              835      52,300      44,500
  Weighted average interest rate                                         4.45%       5.88%       6.26%
</TABLE>

                                       80

<PAGE>



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
with 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  $474  million in advances  from FHLB of Boston as of  September  30,
1997. The Bank also has a preapproved line of credit up to 2% of total assets.

In  connection  with its purchase of the Company's  common  stock,  the Employee
Stock  Ownership Plan (the "Plan")  borrowed  $794,750 in 1986 under a term note
which  matured on October 3, 1995 with  interest due  quarterly at 86.45% of the
lender's  floating  prime rate and $1,163,000 in 1987 under a term note maturing
in 1997 with  interest due  quarterly at 82.5% of the  lender's  floating  prime
rate. In 1991, the Plan 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 Plan debt as borrowed  money and as a  reduction  of  shareholders'  equity.
During  1996,  the  Company  repaid  all  amounts  due under the  aforementioned
borrowings.

(13) CAPITAL SECURITIES

On April 1, 1997 the Company  completed a $50 million  private  placement of 10%
capital securities due March 15, 2027. The securities were issued by the Holding
Company's recently formed  subsidiary,  Eagle Financial Capital Trust 1, and are
fully and unconditionally  guaranteed by the Holding Company.  Proceeds from the
issue were invested by Eagle  Financial  Capital Trust I in Junior  Subordinated
Debentures  issued by the Holding  Company  which  represent  the sole assets of
Eagle  Financial  Capital  Trust 1. The Junior  Subordinated  Debentures  have a
principal  amount of  $50,398,000,  bear  interest at 10% and mature on April 1,
2027.  Net proceeds from the sale of the  debentures  are being used for general
corporate purposes, including capital contributions to the Bank.


                                       81

<PAGE>



(14) INCOME TAXES

Charges for income taxes in the consolidated  statements of income comprised the
following (in thousands):


                                         Years ended September 30,

                                        1997        1996       1995
                                    --------    --------   --------
Current:
  Federal                           $  4,847    $  6,200   $  6,155
  State                                1,497       1,752      2,005
                                    --------    --------   --------
                                       6,344       7,952      8,160
                                    --------    --------   --------
Deferred:
  Federal                               (236)      1,844        160
  State                                 (118)        434         98
                                    --------    --------   --------
                                        (354)      2,278        258
                                    --------    --------   --------
Total:
  Federal                              4,611       8,044      6,315
  State                                1,379       2,186      2,103
                                    --------    --------   --------
                                    $  5,990    $ 10,230   $  8,418
                                    ========    ========   ========


The  actual  income  tax  expense  for  1997,  1996  and 1995  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 (in thousands):

<TABLE>
<CAPTION>
                                                                     Years ended September 30,
                                                                     1997       1996        1995
                                                                 --------   --------    --------
<S>                                                              <C>        <C>         <C>     
Expected income tax on income before income taxes                $  4,657   $  8,975    $  7,145
Increase (decrease) in income taxes resulting from:
  State income taxes, net of federal income tax benefit               896      1,421       1,369
  Other, net                                                          437       (166)        (96)
                                                                 --------   --------    --------

                                                                 $  5,990   $ 10,230    $  8,418
                                                                 ========   ========    ========
</TABLE>

                                       82

<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 (in
thousands):

<TABLE>
<CAPTION>
                                                                                 September 30,
                                                                                 -------------
                                                                                  1997       1996
                                                                               -------    -------
Deferred tax assets:
<S>                                                                            <C>        <C>    
  Post-retirement benefits                                                     $ 1,153    $ 1,837
  Deferred compensation                                                            223        239
  Loans receivable, principally due to allowance for loan losses                 4,139      3,163
  Intangibles                                                                      633        406
  Unrealized loss on securities available for sale                                  --      1,310
  Other miscellaneous                                                              374        672
                                                                               -------    -------
Total gross deferred assets                                                      6,522      7,627
                                                                               -------    -------
Deferred tax liabilities:
  Premises and equipment, principally due to differences in depreciation        (1,309)    (1,343)
  Tax discount on acquired loans                                                (1,397)    (1,698)
  Deferred loan fees                                                              (610)      (424)
  Unrealized gain on securities available for sale                              (2,973)        --
                                                                               -------    -------
Total gross deferred tax liabilities                                            (6,289)    (3,465)
                                                                               -------    -------
Net deferred tax asset                                                         $   233    $ 4,162
                                                                               =======    =======
</TABLE>

The  valuation  allowance  for deferred tax assets as of September  30, 1997 and
1996 was $0.  There was no change in the  valuation  allowance  during the years
ended September 30, 1997 and 1996.

In order to fully realize the gross 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.


                                       83

<PAGE>



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  $13.8 million at September 30, 1997. If the Company does not meet
the  remaining  income tax  requirements  of IRC section  593, as amended by The
Small 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  $5.7  million as of September  30,
1997.

(15) STOCK OPTION PLANS

The Company  maintains  incentive and  non-incentive  stock option plans for the
benefit of its directors, officers and certain other employees. In October 1995,
the Financial  Accounting  Standard  Board issued SFAS No. 123  "Accounting  for
Stock-Based  Compensation." This Statement  establishes financial accounting and
reporting  standards for  stock-based  employee  compensation  plans.  Under the
provisions  of this  Statement,  the  Company has elected to continue to measure
compensation for its option plans using th accounting  prescribed by APB Opinion
No. 25  "Accounting  for  Stock  Issued to  Employees".  Disclosure  information
requirements  are effective for financial  statements for fiscal years beginning
after  December 15, 1995, or for an earlier fiscal year for which this statement
is initially  adopted for recognizing  compensation  cost. Pro forma disclosures
required for entities that elect to continue to measure  compensation cost using
APB Opinion No. 25 must include the effects of all awards granted in fiscal year
that begin after December 31, 1994.

The  Company   applies  the  provisions  of  APB  Opinion  No.  25  and  related
interpretations in accounting for the plans.  Accordingly,  no compensation cost
has been recognized for its stock option plans in the Consolidated Statements of
Income.  Had compensation cost for the Company's stock option based compensation
plans been determined consistent with SFAS No. 123; the Company's net income and
net income per share would have been reduced to the pro forma amounts  indicated
below (in thousands, except share data):

                                                 Years Ended September 30,
                                                     1997         1996
                                                  ---------   ----------
Net Income:
  As Reported                                  $      7,315    $     15,493
  Pro Forma                                    $      6,387    $     15,305

Primary Net Income Per Share:
  As Reported                                  $       1.13    $       2.44
  Pro Forma                                    $       0.99    $       2.41

Fully Diluted Net Income Per Share:
  As Reported                                  $       1.12    $       2.42
  Pro Forma                                    $       0.97    $       2.39


The effects of applying this Statement for providing pro forma  disclosures  are
not likely to be  representative  of the effects on reported  net income and net
income per share for future years.  This is due to the fact that awards may vest
over several years and stock options may be granted each year.

At  September  30, 1997,  1996 and 1995,  554,991,  895,379 and 973,298  shares,
respectively,  were  reserved  for issuance in  connection  with  incentive  and
non-incentive  stock  option  plans for the benefit of  directors,  officers and
certain other employees. Under the terms of the stock option plans, the exercise
price of each option granted  equals the market price of the Company's  stock on
the date of grant and each option has a maximum contractual life of ten years.


                                       84

<PAGE>



The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   Option-Pricing   Model  with  the  following   weighted  average
assumptions used for grants issued during 1997 and 1996: expected option term of
ten years,  expected dividend yield of 1.85%,  expected volatility of 25.22% and
weighted average risk-free interest rate of 5.47%.

A summary of the status of the  Company's  stock option  plans at September  30,
1997,  1996,  and 1995 and  changes  during  the years  ended on those  dates is
presented below:

<TABLE>
<CAPTION>
                                                     1997                          1996                       1995
                                                            Weighted                    Weighted                    Weighted
                                                            Average                     Average                     Average
                                                            Exercise                    Exercise                    Exercise
                                             Shares         Price         Shares        Price         Shares        Price
                                             ----------- ---------------  ---------- ---------------- ----------  ----------
<S>                                         <C>            <C>             <C>         <C>             <C>         <C>       
Options outstanding at beginning of year       514,127     $   14.12       550,156     $   12.77       387,785     $    10.27
Granted                                        140,507         34.58        46,620         23.57       172,888          17.84
Exercised                                      (63,027)         9.99       (77,919)        10.51       (39,864)          8.71
Forfeited/canceled                              (2,475)        18.18        (4,730)         9.83            --          --
Converted upon MidConn acquisition             (69,944)        11.78            --            --            --          --
Stock dividend                                      --            --            --            --        29,347          --
                                              --------     -----------     --------     -----------    --------     -----------
Options outstanding at end of year             519,188     $   20.45       514,127     $   14.12       550,156     $    12.77
                                              ========     ===========     ========     ===========    ========     ===========
                                                                      
Options Exercisable at Year End                473,688                      473,527                     548,866

Weighted Average Per Share Fair Value
  of Options Granted During the Year       $     11.99                     $   7.71                         N/A
</TABLE>

The following  table  summarizes  information  about the Company's  stock option
plans for options granted that are outstanding at September 30, 1997.

<TABLE>
<CAPTION>
                                                                                             
                                                Options Outstanding at                             Options Exercisable at 
                                                  September 30, 1997                                  September 30, 1997  
                                                     Weighted
                                                      Average                Weighted                                 Weighted
                                                     Remaining               Average                                  Average
                                    Number       Contractual Life            Exercise           Number                Exercise
Range of Exercise Prices          Outstanding       (In Years)                Price          Exercisable               Price
------------------------------  ---------------  -----------------  -------------------- ---------------- ---------------------
<S>                             <C>                     <C>                <C>                  <C>              <C>    
$6.61-$8.64                     127,481                 2.1                $  7.88              127,481          $  7.88
$12.71-$13.95                    22,384                 5.2                  13.95               22,384            13.95
$16.36-$18.41                   199,723                 7.6                  18.07              199,723            18.07
$20.91-$23.00                     6,000                 8.4                  23.00                6,000            23.00
$25.25-$28.50                    60,600                 8.7                  26.88               60,600            26.88
$30.375 - $39.75                103,000                10.0                  38.11               57,500            36.82
                                ---------------  -----------------  -------------------- ---------------- ---------------------
Totals                          519,188                 6.8                  20.45              473,688            18.60
                                ===============  =================  ==================== ================ =====================
</TABLE>


                                       85

<PAGE>



(16) 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 its 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.

(17)  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
Company'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, 1997, the Bank meets all
capital adequacy requirements to which it is subject.

As of September 30, 1997, 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>
                                                                                                                                    
                                                                                                                                    
                                                                                                 For Capital                        
                                                   Actual                                     Adequacy Purposes                     
                                           ----------------------      -------------------------------------------------------------
                                           Amount       Ratio                Amount                                  Ratio          
                                           ------------ ----------     ------------------------------     --------------------------
<S>                                    <C>              <C>                                  <C>                                <C> 
As of September 30, 1997:
    Tangible capital                   $   156,550      7.59%       greater than or equal to $ 30,941  greater than or equal to 1.5%
    Core capital                           156,550      7.59%       greater than or equal to   61,881  greater than or equal to 3.0%
    Tier I risk-based capital              156,550     16.88%                                     N/A                           N/A 
    Total risk-based capital               165,668     17.87%       greater than or equal to   74,186  greater than or equal to 8.0%

As of September 30, 1996:
    Tangible capital                   $   103,902      6.01%       greater than or equal to $ 25,493  greater than or equal to 1.5%
    Core capital                           103,902      6.01%       greater than or equal to   51,885  greater than or equal to 3.0%
    Tier I risk-based capital              103,902     13.42%                                     N/A                           N/A 
    Total risk-based capital               113,207     14.62%       greater than or equal to   61,949  greater than or equal to 8.0%
</TABLE>
<TABLE>
<CAPTION>
                                                                 To Be Well                              
                                                              Capitalized Under                          
                                                              Prompt Corrective                          
                                                              Action Provisions                          
                                        -----------------------------------------------------------------
                                                   Amount                              Ratio             
                                        -------------------------------      ----------------------------
<S>                                     <C>                                  <C>
As of September 30, 1997:                                                                                
    Tangible capital                                                N/A                             N/A  
    Core capital                     greater than or equal to $ 103,136   greater than or equal to  5.0% 
    Tier I risk-based capital        greater than or equal to    55,640   greater than or equal to  6.0% 
    Total risk-based capital         greater than or equal to    92,733   greater than or equal to 10.0% 
                                                                                                         
As of September 30, 1996:                                                                                
    Tangible capital                                                N/A                             N/A  
    Core capital                     greater than or equal to $ 86,476    greater than or equal to  5.0% 
    Tier I risk-based capital        greater than or equal to   46,462    greater than or equal to  6.0% 
    Total risk-based capital         greater than or equal to   77,437    greater than or equal to 10.0% 
</TABLE>                               

                                       86

<PAGE>




(18) EMPLOYEE BENEFIT PLANS

The Bank maintains a  noncontributory  defined  benefit pension plan through the
Financial  Institutions  Retirement  Fund (the  "Fund")  covering  all  eligible
employees.  The plan is part of a multiple  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 1997,  1996  and 1995  were
$118,000, $396,000 and $123,000, respectively, and these amounts are expensed to
operations in the year contributed.  The 1997 and 1995 contribution  amounts are
net of credits received from the Fund of $292,700 and $221,000, respectively.

The Company also  maintains a  retirement  plan under a  non-contributory  group
annuity contract for former employees of MidConn Bank who had completed one full
year of service and attained age 21 as of the date of acquisition.  At September
30, 1997, all eligible  former  employees of MidConn Bank were covered under the
plan.  The plan assets are invested in a short term fixed  income  fund.  Annual
contributions will be made to the plan in amounts sufficient to meet the minimum
funding  requirements set forth in the Employee Retirement Security Act of 1974.
Retirement  benefits are based on a percentage of compensation  for each year of
service up to 30 years.

The following table sets forth the plan's funded status and amounts  recorded in
the Company's consolidated financial statements (in thousands).

<TABLE>
<CAPTION>
                                                                            September 30,
Actuarial present value of benefit obligations:                           1997      1996
---------------------------------------------------------------------   -------    -------
<S>                                                                     <C>        <C>    
Accumulated benefit obligation, including vested benefits of
  $1,558 in 1997 and $1,869 in 1996                                     $ 1,580    $ 1,934
                                                                        -------    -------

Projected benefit obligation for service rendered to date               $ 1,882    $ 3,222
Plan assets at fair value                                                 2,172      2,424
                                                                        -------    -------

Projected benefit obligation less than (in excess of) plan assets           290       (798)
Unrecognized net asset                                                       --        (12)
Unrecognized net loss (gain)                                                 --        303
Unrecognized prior service cost                                              --          4
                                                                        -------    -------

Prepaid (accrued) pension cost                                          $   290    $  (503)
                                                                        =======    =======
</TABLE>

<TABLE>
<CAPTION>
                                                             Years Ended September 30,

                                                               1997     1996     1995
                                                              -----    -----    -----
<S>                                                           <C>      <C>      <C>  
Net pension cost included the following components:
  Service cost - benefits earned during the period            $ 268    $ 299    $ 254
  Interest cost on projected benefit obligation                 234      229      203
  Actual return on plan assets                                 (841)    (191)    (159)
  Curtailment gain                                             (765)       -        -
  Net amortization and deferral                                 621       46       20
                                                              -----    -----    -----
  Net periodic pension cost (benefit)                         $(483)   $ 383    $ 318
                                                              =====    =====    =====
</TABLE>

The  weighted-average  discount rate and rate of increase in future compensation
levels used in determining the actuarial  present value of the projected benefit
obligation  were  7.5% and 4.0% at  September  30,  1997 and  7.75%  and 5.5% at
September 30, 1996, respectively.  The expected long-term rate of return on plan
assets was 9% in 1997 and 1996.


                                       87

<PAGE>



The Company  sponsors an ESOP that covers all full-time  employees.  The Company
makes annual  contributions  to the ESOP at the  discretion of the Company.  The
Company  contributes  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 was repaid,  shares were released from  collateral  and allocated to
active employees,  based on the proportion of debt service paid during the year.
The debt was fully repaid in 1996. The ESOP shares are as follows:


                                                       September 30,
                                                       1997      1996
                                                    -------   -------

Allocated Shares                                    275,492   229,564
Shares released for allocation                           --    19,993
    Total ESOP shares                               275,492   249,557
                                                    =======   =======

A summary of the  components of ESOP  contribution  expense by the Company is as
follows (in thousands):


                                                  Years Ended September 30,
                                                  1997      1996      1995
                                                  ----      ----      ----

Principal component                               $ --      $ 94      $452
Interest component                                  --        10        33
Purchase of shares on
  Open Market                                      375       309        --
                                                  ----      ----      ----

     Total contribution expense                   $375      $413      $485
                                                  ====      ====      ====

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 has matched  $0.25 in fiscal 1996 and 1995 and $0.50 in
fiscal  1997 for  every  $1.00 of the  employee's  contribution  which is not in
excess of 4% of the employees total  compensation.  The Bank recorded an expense
related to the savings plan in the amount of $159,000,  $146,000 and $41,000 for
the years ended September 30, 1997, 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.

(19) OTHER POSTRETIREMENT BENEFIT PLANS

In addition to the aforementioned plans, the Company provides medical and dental
insurance programs to its retirees.  The retiree programs are first available at
age 60 with 25 years of credited  service or at age 65 with 10 years of credited
service.  Some retirees are required to contribute to the cost of their coverage
and the provisions may be changed at the discretion of the Company.


                                       88

<PAGE>



The following  table sets forth the plans' funded status and amounts  recognized
in the Company's consolidated balance sheets (in thousands):

<TABLE>
<CAPTION>
                                                                               September 30,
                                                                               -------------
                                                                               1997       1996
                                                                            -------    -------
<S>                                                                         <C>        <C>     
Accumulated postretirement benefit obligation:
  Retirees                                                                  $(1,357)   $(1,286)
  Fully eligible active plan participants                                      (113)      (108)
  Other active plan participants                                               (273)      (624)
                                                                            -------    -------
  Accumulated Postretirement benefit obligation                              (1,743)    (2,018)
Plan assets at fair value                                                        --         --
                                                                            -------    -------
Accumulated Postretirement benefit obligation in excess of
  plan assets                                                                (1,743)    (2,018)
Unrecognized prior service cost                                                (331)      (374)
Unrecognized net loss gain                                                     (457)      (488)
                                                                            -------    -------
Net postretirement benefit liability included in other liabilities          $(2,531)   $(2,880)
                                                                            =======    =======
</TABLE>

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

                                                       Years Ended September 30,
                                                      1997        1996     1995
                                                      ----        ----     ----

Discount rate                                         7.25%       7.75%     7.5%
Rate of increase on health care costs
   Initial                                            8%          9%       10%
   Ultimate                                           5%          5%        6%

The  resulting  net periodic  postretirement  benefit  expense  consisted of the
following components (in thousands):


                                                       Years Ended September 30,
                                                       1997     1996     1995
                                                      -----    -----    -----

Service cost --
  benefits earned during the period                   $  18    $  71    $  64
Interest cost on accumulated
  postretirement benefit obligation                     109      169      161
Prior service credit                                    (43)      --       --
Net amortization                                        (18)     (45)     (48)
                                                      -----    -----    -----

Net postretirement benefit expense                    $  66    $ 195    $ 177
                                                      =====    =====    =====

The  weighted-average  annual assumed rate of increase in the per capita cost of
covered  benefits is 8% for 1997 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, 1997 by 9%, and the  aggregate of the service and  interest  cost
components of net periodic postretirement benefit costs for 1997 by 9%.

During  fiscal  1997,  the Company  recorded a gain of  $381,100  from a partial
curtailment of the MidConn postretirement benefit plan.


                                       89

<PAGE>



(20) 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 (in thousands):

<TABLE>
<CAPTION>
                                                                   September 30,
                                                                 1997        1996
                                                                -------     -------
<S>                                                             <C>         <C>    
Loan commitments:
  Approved loan commitments                                     $30,721     $22,181
  Commitments to sell loans                                       3,817       1,843
  Commitments to purchase loans                                      --       1,200
  Unadvanced portion of construction loans                       11,117      10,228
  Unadvanced portion of home equity lines of credit              39,492      38,640
  Unadvanced portion of commercial lines of credit               22,044      10,697
Standby letters of credit                                         1,457         740
                                                                =======     =======
</TABLE>

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  construction
loans, which generally mature within nine to twelve months, are adjustable.

Commitments  outstanding  at September 30, 1997 consist of adjustable  and fixed
rate loans of $23,858,500  and $3,905,000,  respectively,  at rates ranging from
5.25%  to  9.99%.  An  additional  $2,957,125  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, 1996
consist  of  adjustable  and fixed  rate  loans of  $14,275,000  and  $5,502,000
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  to
originate loans generally expire within 60 days.

Standby  letters of credit  commit the Bank to make  payments on behalf of third
party  customers  in the event of  nonoccurrence  of  certain  specified  future
events.  Standby  letters of credit are subject to the Bank's  underwriting  and
collateral  guidelines for extending credit.  The amount of collateral,  if any,
supporting  outstanding  letters  of credit is based  upon  management's  credit
analysis of the counterparty. Interest rates are generally variable.

The Bank entered into  interest  rate cap and collar  contracts  during the year
ended  September  30,  1997.  In June  1997,  the Bank  entered  into a collared
floating  rate  advance  with the FHLB of  Boston,  which  incorporates  both an
interest  rate cap and an interest rate floor.  The collared  advance has an $80
million  notional  amount,  a maximum interest rate of 8.01%, a minimum interest
rate of 5.76%  and a  maturity  of June  18,  2004.  In  August  1997,  the Bank
purchased a separate  interest rate cap contract  with a notional  amount of $41
million, a cap rate of 7.00% and a termination date of August 19, 2002. The cost
of the interest rate cap contract was $713,400. The counterparty to the interest
rate cap contract is Morgan Stanley Capital Services, Inc. The interest rate cap
contract is matched against two fixed rate borrowings with maturities of one and
two years,  respectively,  and a five year fixed rate borrowing that is callable
after  three  years.  The Company  anticipates  the need to  re-borrow  upon the
maturity  of the one and two year  borrowings  as these  borrowings  are funding
longer average-life securities.

The Company is party to various legal proceedings  normally incident to the kind
of business  conducted.  Management  believes  that no material  liability  will
result from such proceedings.

                                       90
<PAGE>



     (21) 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, 1997,  residential  mortgage loans,  including
     residential   construction   loans,   totaled   $946   million,   excluding
     off-balance-sheet  items. All such loans are collateralized by real estate,
     of which a majority are located in Connecticut.

     (22) 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 (in thousands):


<TABLE>
<CAPTION>

                                              September 30, 1997                          September 30, 1996
                                     -------------------------------------       -------------------------------------
                                  Carrying                      Estimated           Carrying            Estimated
                                   Amount                       Fair Value            Amount            Fair Value
                               --------------                 --------------      --------------       -------------
                                                                                
<S>                              <C>                               <C>           <C>                   <C>
Investment Securities            $ 53,061                     $  53,061           $     52,063          $   51,961
Mortgage-backed Securities        743,943                       743,943                462,308             462,256
                              ------------                    ----------          -------------       -------------
  Total                          $797,004                     $ 797,004           $    514,371          $  514,217
                              =============                   ===========         ==============      =============
</TABLE>

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

     The following table  represents fair value in formation for the Bank's loan
     portfolio (in thousands):


<TABLE>
<CAPTION>
                                                                Allowance   
    September 30, 1997:             Principal                   and Other            Carrying           Estimated
                                      Value                    Adjustments            Amount            Fair Value
                                   ------------                -----------        --------------      -------------
                                                                                
<S>                              <C>                               <C>              <C>               <C>         
Real estate mortgage loans       $   1,019,263                $    7,190          $ 1,012,073         $  1,013,324
Consumer and non-                                             
 mortgage commercial loans             120,556                     4,248              116,308              122,255
                                 -------------                ----------          -----------         ------------
  Total                          $   1,139,819                $   11,438          $ 1,128,381         $  1,135,579
                                 =============                ==========          ===========         ============
</TABLE>                                                      

                                       91


<PAGE>

<TABLE>
<CAPTION>
                                                              Allowance
September 30, 1996:                Principal                   and Other          Carrying             Estimated
                                    Balance                   Adjustments          Amount              Fair Value
                                    -------------             ---------------    --------------        ------------
<S>                                <C>                        <C>                  <C>               <C>         
Real estate mortgage loans         $1,001,259                 $ 10,346             $  990,913        $    991,491
Consumer and non-
mortgage commercial loans             106,247                    2,504                103,743             104,863
                                   --------------             ---------------    ------------        ------------
  Total                            $1,107,506                 $ 12,850           $  1,094,656        $  1,096,354
                                   ==============             ===============    ============        ============
</TABLE>

     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.

     The estimated fair value of the Bank's deposit  portfolio is as follows (in
     thousands):

<TABLE>
<CAPTION>

                                                                             September 30,
                                                1997                            1996
                                  ----------------------------          --------------------------
                                    Carrying         Estimated          Carrying         Estimated
                                     amount          Fair Value            amount        Fair Value
                                  ----------        ----------        ----------        ----------
<S>                               <C>               <C>               <C>               <C>       
Non-interest bearing              $   52,970        $   52,970        $   41,435        $   41,435
Passbook accounts                    233,267           233,267           250,718           250,718
NOW accounts                         110,769           110,769           112,698           112,698
Money market accounts                107,008           107,008           110,756           110,756
Certificate accounts                 849,260           850,532           853,096           855,691
                                  ----------        ----------        ----------        ----------
  Total deposits                  $1,353,274        $1,354,546        $1,368,703        $1,371,298
                                  ==========        ==========        ==========        ==========

</TABLE>


     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, 1997 and 1996.  The fair value of time deposits is
     based on the  discounted  value of  contractual  cash  flows,  using  rates
     offered at September 30, 1997 and 1996 for deposits with similar  remaining
     maturities.

     The  fair  value of FHLB  advances,  estimated  using  rates  available  at
     September  30,  1997  and  1996 for debt of  similar  terms  and  remaining
     maturities  was $445.4  million and $218 million at September  30, 1997 and
     1996,  respectively.  The fair  value of  repurchase  agreements  and other
     borrowed  money,  estimated using rates available at September 30, 1997 and
     1996 for debt of similar  terms and  maturities,  was $76.6 million and $15
     million at  September  30, 1997 and 1996,  respectively.  The fair value of
     FHLB stock accrued interest  receivable,  accrued interest payable and loan
     commitments  approximate the carrying value at September 30, 1997 and 1996.
     The fair value of  capitalized  mortgage  servicing  rights was $571,000 at
     September  30, 1997.  The fair value of the interest  rate cap contract was
     $569,900 at September 30, 1997.

     (23) SUBSEQUENT EVENT

     On October 27, 1997, the Company  announced the signing of an agreement and
     plan of merger  whereby the Company would be acquired by Webster  Financial
     Corp.  ("Webster") in a stock-for-stock  tax free exchange.  Holders of the
     Company  common stock would receive .84 shares of Webster  common stock for
     each  share of the  Company  common  stock.  The  transaction,  subject  to
     required regulatory and shareholder approvals,  is expected to close in the
     quarter ended March 31, 1998.





                                       92
<PAGE>



     (24) RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1996, the FASB issued SFAS No. 125, which  superseded  SFAS No. 122
     and  established  the  accounting  for transfers and servicing of financial
     assets and  extinguishment  of liabilities.  This statement  specifies when
     financial  assets  and  liabilities  are to be  removed  from  an  entity's
     financial  statements,  specifies the accounting  for servicing  assets and
     liabilities,   and  specifies  the   accounting  for  assets  that  can  be
     contractually  prepaid  in such a way that the  holder  would  not  recover
     substantially al of its recorded investment.

     Under SFAS No.  125,  an entity  recognizes  only  assets it  controls  and
     liabilities it has incurred, derecognizes assets only when control has been
     surrendered, and derecognizes liabilities only when they have been paid, or
     the entity is legally  released  from being the primary  obligor  under the
     liability  judicially  or by the  creditor.  SFAS No. 125 requires that the
     selling entity continue to carry retained  interests,  including  servicing
     assets, relating to assets it has derecognized.  Such retained interest are
     recorded  based on the relative  fair values of the retained  interests and
     derecognized  assets at the date of  transfer.  Transfers  not  meeting the
     criteria for sale recognition are accounted for as a secured borrowing with
     pledge of collateral.  Under SFAS No. 125 certain collateralized borrowings
     may result in asset  derecognition  when the assets  provided as collateral
     may be  derecognized  based on whether the secured party takes control over
     the collateral  and whether the secured party is: (1) permitted to repledge
     or sell the  collateral;  and (2) the  debtor  does  not have the  right to
     redeem the collateral on short notice.  Extinguishments  of liabilities are
     recognized  only when the debtor pays the  creditor  and is relieved of its
     obligation  of the  liability or when the debtor is legally  released  from
     being the primary obligor under the liability,  either judicially or by the
     creditor.

     SFAS No. 125  requires an entity to  recognize  its  obligation  to service
     financial assets that are retained in a transfer of assets in the form of a
     servicing  asset or liability.  The  servicing  asset or liability is to be
     amortized in proportion  to and over the period of net servicing  income or
     loss.  Servicing  assets and  liabilities are to be assessed for impairment
     based on the fair value.

     SFAS No. 125 is effective for  transfers and servicing of financial  assets
     and  extinguishments  of  liabilities  occurring  after  December 31, 1996,
     except  for those  transfers  related  to  secured  borrowings,  repurchase
     agreements and similar  transactions which are effective after December 31,
     1997.  The  adoption of these  remaining  requirements  is not  expected to
     materially effect the Company's results of operations. As a result of loans
     sold with servicing rights retained,  the Bank recorded $86,000 in mortgage
     servicing  assets and $6,600 in related  amortization  during  fiscal 1997,
     pursuant to SFAS No. 125 and SFAS No. 122, an accounting pronouncement with
     substantially  the same  requirements.  SFAS No. 122 was  applicable to the
     Bank during the  three month  period  October 1, 1996 through  December 31,
     1996.

     In February  1997,  the FASB issued SFAS No. 128,  "Earnings per Share" and
     SFAS  No.  129,   "Disclosure  of  Financial   Information   About  Capital
     Structure".  SFAS No. 128  simplifies  the  standards  found in  Accounting
     Principles Board Opinion No. 15 ("APB 15") for computing earnings per share
     ("EPS"), and makes them comparable to international standards.

     Under SFAS No.  128,  the  Company is  required  to present  both basic and
     diluted EPS on the face of its statements of  operations.  Basic EPS, which
     replaces  primary EPS required by APB 15 for entities with complex  capital
     structures,  excludes common stock  equivalents and is computed by dividing
     income available to common stockholders by the  weighted-average  number of
     common shares  outstanding for the period.  Diluted EPS gives effect to all
     dilutive potential common shares that were outstanding during the period.


                                       93
<PAGE>



     SFAS No. 128 is effective  for  financial  statements  for both interim and
     annual periods  ending after  December 15, 1997 and earlier  application is
     not  permitted.  Upon adoption of SFAS No. 128, all  prior-period  EPS data
     will be restated.  The Company will adopt SFAS No. 128  effective  December
     31, 1997. The Company does not expect this  pronouncement  to significantly
     impact its consolidated financial statements.

     SFAS No. 129 supersedes capital structure disclosure  requirements found in
     previous accounting pronouncements and consolidates them into one statement
     for ease of retrieval and greater visibility for non-public entities. These
     disclosures are required for financial  statements for periods ending after
     December 15, 1997. As SFAS No. 129 makes no changes to previous  accounting
     pronouncements as those pronouncements applied to the Company,  adoption of
     SFAS No. 129 will have no impact on the Company's  result of operations and
     financial condition.

     In June  1997,  the FASB  issued  SFAS No.  130,  "Reporting  Comprehensive
     Income".  SFAS No. 130 requires  the  inclusion  of  comprehensive  income,
     either in a separate  statement for  comprehensive  income, or as part of a
     combined  statement  of income and  comprehensive  income in a full-set  of
     general-purpose financial statements.

     Comprehensive  income is  defined  as the  change  in equity of a  business
     enterprise   during  a  period  from  transactions  and  other  events  and
     circumstances,   excluding   those   resulting  from   investments  by  and
     distributions to owners. SFAS No. 130 requires that comprehensive income is
     to  be  presented  beginning  with  net  income,  adding  the  elements  of
     comprehensive  income not included in the  determination of net income,  to
     arrive  at  comprehensive  income.  SFAS  No.  130  also  requires  that an
     enterprise display the accumulated  balance of other  comprehensive  income
     separately  from retained  earnings and additional  paid-in  capital in the
     equity section of a statement of financial position.

     SFAS No. 130 is effective for the Bank's fiscal year  beginning  October 1,
     1998.  SFAS No.  130  requires  the  presentation  of  information  already
     contained in the Bank's financial statements and therefore will not have an
     impact on the Bank's financial position or results of operation.

     In June  1997,  the FASB  also  issued  SFAS No.  131,  "Disclosures  About
     Segments  of  an  enterprise  and  Related   Information".   SFAS  No.  131
     establishes  standards for the  reporting of  information  about  operating
     segments  by  public  business  enterprises  in their  annual  and  interim
     financial reports issued to shareholders.

     SFAS No. 131 requires that a public business  enterprise  report  financial
     and descriptive  information,  including  profit or loss,  certain specific
     revenue  and  expense  items,  and  segment  assets,  about its  reportable
     operating  segments.  Operating  segments are defined as  components  of an
     enterprise about which separate financial  information is available that is
     evaluated  regularly by the chief operating  decision-maker in deciding how
     to allocate resources and in assessing performance.

     SFAS No. 131 is effective for the Bank's  financial  statements for periods
     beginning after December 15, 1997. SFAS No. 131 is a disclosure requirement
     and therefore will not have an effect on the Bank's  financial  position or
     results of operations.


                                       94

<PAGE>



     (25) EAGLE  FINANCIAL  CORP.  (PARENT  COMPANY  ONLY)  CONDENSED  FINANCIAL
     INFORMATION (IN THOUSANDS)

<TABLE>
<CAPTION>

Balance Sheets                                                                   September 30,
                                                                  -------------------------------------------
                                                                        1997                       1996
                                                                  --------------               -------------
<S>                                                        <C>                                <C>    
Assets:
  Cash                                                     $            -                     $     -
  Interest-bearing deposits                                         2,893                         805
                                                                  --------------              -------------
    Cash and cash equivalents                                       2,893                         805

  Investment securities available for sale                             85                           -
  Investment securities held to maturity                                -                          85
  Investment in Bank subsidiary                                   186,371                     136,326
  Investment in Eagle Financial Capital Trust
    I subsidiary                                                    1,531                           -
  Dividend receivable                                               1,800                         900
  Receivable from Bank subsidiary                                     151                         347
  Other assets                                                        191                         178
                                                                 ---------------         ------------------
      Total assets                                         $      193,022                 $   138,641
                                                                  ==============         ==================


Liabilities and Shareholders' Equity:
  Payable to Bank subsidiary                               $           38                 $       638
  Accrued expenses and other liabilities                            2,201                         249
  Junior subordinated debentures                                   50,154                           -
  Shareholders' equity                                            140,629                     137,754
                                                                ----------------          -----------------
      Total liabilities and shareholders' equity           $      193,022                $    138,641
                                                                ================         ==================

                                       95
</TABLE>
<PAGE>


<TABLE>
<CAPTION>

Statements of Income                                                   Years Ended September 30,
                                                         --------------------------------------------------------
                                                             1997                    1996                1995
                                                         ------------            -------------       ------------
<S>                                                        <C>                  <C>                 <C>     
Interest on investments                                    $  246               $     28            $     71
Dividends from Bank subsidiary                              2,900                  3,200               2,000
Interest expense                                           (2,508)                     -                   -
Other expenses                                               (799)                  (872)               (909)
                                                          ------------          -------------       -------------
Income before income taxes and
  equity in undistributed earnings of                        (161)                 2,356               1,162
  subsidiaries
Income tax benefit                                          1,243                    353                 364
                                                          ------------          -------------       -------------
Income before equity in undistributed                     
  earnings of subsidiaries                                  1,082                  2,709               1,526
Equity in undistributed earnings of                       
  Bank subsidiary                                           6,252                 12,784              10,520
Equity in undistributed loss of Eagle Financial
  Capital Trust I subsidiary                                  (19)                     -                   -
                                                           -----------          -------------       ------------
     Net income                                            $7,315             $   15,493        $     12,046
                                                          ============          =============       ============
</TABLE>


<TABLE>
<CAPTION>
Statements of Cash Flows                                                           Years Ended September 30,
                                                                     ------------------------------------------------------
                                                                         1997                  1996                    1995
                                                                    ------------          ------------            -------------
<S>                                                              <C>                     <C>                      <C>         
  Net income                                                     $     7,315             $      15,493            $     12,046
  Adjustments to reconcile net income                        
    to net cash provided by operating activities:            
    Equity in undistributed earnings of                      
     Bank subsidiary                                                  (6,252)                 (12,784)                (10,520)
    Equity is undistributed loss of Eagle Financial Capital
     Trust I subsidiary                                                   19                        -                       -
    Decrease (increase) in other assets                                 (913)                    (945)                    103
    Increase (decrease) in accrued expenses                  
      expenses and other liabilities                                   1,952                     (129)                    837
                                                                    ----------               -----------            ----------
Net cash provided by operating activities                              2,121                    1,635                   2,466
                                                                    ----------               -----------            ----------
Investing activities:
  Decrease (increase) in receivable from Bank subsidiary                 196                      530                  (1,081)
  Investment in Bank subsidiary                                      (43,793)                       -                 (14,700)
  Investment in Eagle Financial Capital Trust I subsidiary            (1,550)                       -                       -
                                                                    ----------               -----------            -----------
    Net cash provided (used) by investing activities                 (45,147)                     530                 (15,781)
                                                                    ----------               -----------            -----------

Financing activities:
  Cash dividends                                                      (5,777)                  (4,132)                 (3,627)
 Proceeds from exercise of stock options and
    other                                                              1,337                    1,122                     873
 Payment of fractional shares from stock dividend                          -                        -                      (8)
 Proceeds from sale of common stock                                        -                        -                  16,657
 Proceeds from junior subordinated debentures                         50,154                        -                       -
  Increase in payable to Bank subsidiary                                (600)                     609                       2
                                                                    ----------               -----------            ----------
    Net cash provided (used) by financing activities                  45,114                   (2,401)                 13,897
                                                                    ----------               -----------            ----------

Increase (decrease) in cash and cash equivalents                       2,088                     (236)                    582
Cash and cash equivalents at beginning of year                           805                    1,041                     459
                                                                    ----------               -----------            ----------

Cash and cash equivalents at end of year                       $       2,893               $      805               $   1,041
                                                                    ==========               ===========            ==========
</TABLE>
                                       96

<PAGE>

     (26) SELECTED  QUARTERLY  FINANCIAL DATA (UNAUDITED) (IN THOUSANDS,  EXCEPT
     PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                       --------------------------------------------------------------------------------------------

                                        12/31/96         3/31/97        6/30/97      9/30/97          Total
                                       ----------       ---------      ---------  -----------     -----------
Fiscal 1997                                                                     
<S>                                 <C>             <C>              <C>         <C>            <C>       
Interest income                     $  31,226       $   31,595       $ 34,420    $ 35,765       $  133,006
Interest expense                       17,322           17,484         18,962      20,113           73,881
                                       ----------       ---------      ---------  -----------     -----------
Net interest income                    13,904           14,111         15,458      15,652           59,125
Provision for loan losses                 725              675          7,278         300            8,978
Net gain (loss) on sale of                                                      
  securities                                -               30            (65)         25              (10)
Gain (loss) from mortgage                                                       
  banking activities                       20               16             16          72              124
Gain on sale of deposits                    -                -            546           -              546
Loss on disposal of premises                                                    
  and equipment                             -                -           (912)         (3)            (915)
Non-interest income                     1,466            1,637          1,593       1,833            6,529
Non-interest expense                    8,587            9,075         15,575       9,879           43,116
Income tax provision (benefit)          2,497            2,462         (1,902)      2,933            5,990
                                       ----------       ---------      ---------  -----------     -----------
Net income (loss)                   $   3,581        $   3,582      $  (4,315)    $ 4,467        $   7,315
                                       ==========       =========      =========  ===========     ===========
                                                                                
                                                                                
Net income (loss) per share:                                                    
  Primary                           $    0.56         $   0.56        $ (0.67)    $  0.68        $    1.13
  Fully diluted                     $    0.55         $   0.56        $ (0.67)    $  0.68        $    1.12

</TABLE>

     The  quarter  ended June 30, 1997  includes a provision  for loan loss $3.4
     million  related to the sale of troubled loans and several  charges related
     to the merger with MidConn:  a provision for loan losses of $2.7 million, a
     loss on disposal of premises and  equipment of $455,000 and $3.5 million of
     merger  expenses.  The quarter also  includes a gain on sale of deposits of
     $546,000 resulting from the sale of a branch office acquired from MidConn.


<TABLE>
<CAPTION>
                                                                Three Months Ended
                                      -------------------------------------------------------------------
                                       12/31/95        3/31/96      6/30/96       9/30/96        Total
                                      ----------      ---------    ----------   -----------     ---------
Fiscal 1996                                                                    
<S>                              <C>               <C>           <C>            <C>          <C>    
Interest income                  $    28,412       $  30,354     $ 31,007       $ 30,795      $ 120,568
Interest expense                      15,726          17,505       17,151         17,105         67,487
                                      --------      ---------    ----------     ---------     -----------
Net interest income                   12,686          12,849       13,856         13,690         53,081
Provision for loan losses                350           1,532          659            725          3,266
Net gain (loss) on sale of                                                     
  securities                             631          (1,163)          64              5           (463)
Gain from mortgage banking                                                     
  activities                               6          (1,698)         255             (5)        (1,442)
Gain on sale of deposits                   -          15,904            -              -         15,904
Non-interest income                    1,472           1,391        1,510          1,458          5,831
Non-interest expense                   8,319          11,340        9,387         14,876         43,922
Income tax provision (benefit)         2,594           5,721        2,073           (158)        10,230
                                      --------      ---------    ----------     ---------     -----------
Net income (loss)                $     3,532           8,690        3,566           (295)        15,493
                                      ==========      =========    ==========     =========    ==========
                                                                               
Net income (loss) per share:                                                   
  Primary                        $      0.56         $  1.38       $ 0.56        $ (0.06)      $   2.44
  Fully diluted                  $      0.55         $  1.37       $ 0.56        $ (0.06)      $   2.42

</TABLE>

                                                                               
During the quarter ended March 31, 1996,  the Company's  operations  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 $5.4 million  charge  related to an assessment to
recapitalize the SAIF.

                                       97
<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,  1997 and 1996,  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,  1997.  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, 1997 and 1996,  and the results of
their  operations  and their cash flows for each of the years in the  three-year
period ended September 30, 1997 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.




KPMG Peat Marwick LLP

Hartford, Connecticut
October 27, 1997
                                       98


<PAGE>



     Item 9. Changes in and  Disagreements  with  Accountants  on Accounting and
     Financial Disclosure

     Not applicable.

PART III

     Item 10. Directors and Executive Officers of the Registrant

         Pursuant to the Company's Bylaws,  the Board of Directors  currently is
comprised of ten people which, pursuant to the Company's Restated Certificate of
Incorporation,  are divided into three classes,  with the number of directors in
each class to be as nearly  equal in number as  possible.  The term of office of
only one class of directors  expires each year, and their successors are elected
for terms of three years and until their  successors  are elected and qualified.
Eagle's Board  currently has three directors whose terms of office expire at the
1998 Annual Meeting,  Messrs. Alden, Britton and Torrizo. In addition, the Board
has three  directors whose terms of office expire at the 1999 Annual Meeting and
four  directors  whose terms expire at the 2000 Annual  Meeting.  Eagle's annual
stockholders  meeting that would  normally be scheduled in January 1998 has been
delayed  pending the completion of a special  shareholders  meeting  required to
vote on the acquisition of Eagle by Webster Financial Corp. ("Webster").

     On October 27,  1997,  the Company  announced  the signing of a  definitive
agreement to merge with and into Webster.  The merger would be accomplished by a
stock for  stock  exchange  based on a fixed  exchange  ratio of 0.84  shares of
Webster  common stock for each share of Eagle common stock.  The  transaction is
subject to shareholder and regulatory approval. Eagle and Webster will both hold
special  meetings of  stockholders  sometime during the quarter ending March 31,
1998 at which time their respective  stockholders  will be asked to consider and
vote upon the  proposed  merger.  In the event the  acquisition  by  Webster  is
approved by all required parties,  it would be unnecessary for Eagle to hold its
regular 1998 Annual Meeting.

     Messrs.  Alden,  Britton and Torrizo are  scheduled  to be nominated by the
Board of  Directors  of the Company at the 1998 Annual  Meeting to serve for new
three year terms expiring in 2001. There is no cumulative voting for election of
directors.  The three nominees  receiving the greatest  number of votes cast for
the election of directors at the Annual  Meeting  would become  directors at the
conclusion of the tabulation of votes.

     Eagle is the  holding  company  for Eagle Bank (the  "Bank"),  which is the
resulting  institution  from the merger on  January 1, 1993 of Eagle's  then two
savings institution subsidiaries,  First Federal Savings and Loan Association of
Torrington  ("Torrington")  and Bristol Federal Savings Bank  ("Bristol").  Each
director of Eagle currently also serves as a director of the Bank.  There are no
arrangements  or  understandings  between the Company and any person pursuant to
which such person has been nominate or elected as a director.



                                       99

<PAGE>



     Information as to Nominees and Continuing  Directors.  The following  table
sets  forth the names of the Board of  Director's  nominees  for  election  as a
director  and those  directors  who will  continue  to serve  after  the  Annual
Meeting.  Also set forth is certain other  information with respect to each such
person's age at December 1, 1997,  principal occupation or employment during the
past five years,  the periods  during which he has served as a director of Eagle
and positions currently held with Eagle.

<TABLE>
<CAPTION>
                                                      EXPIRATION
                                       DIRECTOR       OF CURRENT
                             AGE       SINCE          TERM             POSITION(S) HELD WITH EAGLE
                             ---       --------       ----------       ---------------------------
NOMINEES FOR 3-YEAR TERM: 
<S>                          <C>        <C>            <C>               <C>                                           
Richard H. Alden             61         1988           1998              Director

Robert J. Britton            45         1992           1998              Chairman of the Board, President and Chief 
                                                                           Executive Officer
Ernest J. Torizzo            57         1990           1998              Director
                                                                     
CONTINUING DIRECTORS:                                                
George T. Carpenter          56         1988           1999              Director
Eugene R. Curcio.            48         1997           2000              Director
Theodore M. Donovan          64         1988           2000              Director
Thomas V. LaPorta            67         1986           1999              Director
Steven E. Lasewicz, Jr.      59         1990           1999              Director
Ralph T. Linsley             63         1988           2000              Director
John F. McCarthy             57         1986           2000              Director
</TABLE>


     Richard H. Alden  became a director of Bristol in 1977.  Upon the merger of
Bristol's  holding  company  with Eagle in 1988,  Mr. Alden became a director of
Eagle.  Upon the merger of Bristol and  Torrington  in 1993,  he  continued as a
director of the Bank.  He has been engaged in the private  practice of law since
1962 in Bristol, Connecticut.

     Robert J.  Britton is  Chairman  of the Board and the  President  and Chief
Executive Officer of Eagle and the Bank. He joined Torrington in 1978 and became
Vice  President  and Chief  Lending  Officer of Torrington in 1983 and Executive
Vice  President of Torrington in 1989. He has served as an executive  officer of
Eagle since 1991 and as a director  of Eagle and the Bank since  1992.  Upon the
merger of Bristol and  Torrington in 1993,  Mr. Britton became the President and
Chief  Operating  Officer of the Bank. Mr.  Britton  became  President and Chief
Executive  Officer of Eagle and Chief Executive Officer of the Bank effective as
of September 30, 1994 and President of the Bank in January 1995. In January 1997
Mr. Britton became Chairman of the Board of Eagle and the Bank.

     Ernest J. Torizzo  became a director of  Torrington  in 1984, a director of
Eagle in 1990, and upon the merger of Torrington  and Bristol in 1993,  became a
director of the Bank.  Since 1975, he has been  Executive  Vice President of O&G
Industries,   Inc.,  a  construction   company   headquartered   in  Torrington,
Connecticut.  Mr.  Torizzo  is also part  owner  and a  director  of  Burlington
Construction Company in Torrington, Connecticut.

     George T. Carpenter  became a director of Bristol in 1972.  Upon the merger
of Bristol's  holding  company with Eagle in 1988,  he also became a director of
Eagle.  Upon the merger of Bristol with Torrington in 1993, he became a director
of the Bank.  Since 1977,  Mr.  Carpenter has been President and Treasurer of S.
Carpenter   Construction   Co.  and  Carpenter   Realty  Co.,  which  firms  are
headquartered  in Bristol,  Connecticut.  Mr.  Carpenter is a director of Barnes
Group,  Inc., a  manufacturer  of springs an aircraft  parts and  distributor of
automobile parts, which is headquartered in Bristol, Connecticut.

     Eugene R. Curcio, formerly a director of MidConn Bank, became a director of
Eagle and the Bank in May 1997 following the Bank's acquisition of MidConn Bank.
Mr.  Curcio  currently  works in a consultant  capacity for Superior  Consultant
Company, Inc., a part of The Kaufman Group.

                                       100

<PAGE>



     Theodore  M.  Donovan  became a director  of Bristol in 1982 and,  upon the
merger of Bristol's  holding  company with Eagle in 1988,  Mr.  Donovan became a
director  of Eagle.  Upon the  merger of Bristol  and  Torrington  in 1993,  Mr.
Donovan continued as a director of the Bank. Mr. Donovan has been in the private
practice of law in Bristol, Connecticut since 1959.

     Thomas V. LaPorta has been a director of Torrington since 1979 and became a
director of Eagle upon its formation in 1986.  Upon the merger of Torrington and
Bristol  in 1993,  he  became a  director  of the  Bank.  Mr.  LaPorta  has been
President and Chairman of the Board of The LaPorta  Funeral Home in  Torrington,
Connecticut since 1956.

     Steven E. Lasewicz, Jr. became a director of Bristol in 1986, a director of
Eagle in 1990 and was a director of Torrington  between 1990 and 1992.  Upon the
merger of Bristol and Torrington in 1993, Mr.  Lasewicz became a director of the
Bank. He has been  President of SELCO  Controls,  Inc.  since 1977.  The firm is
headquartered  in Bristol,  Connecticut  and installs  and services  temperature
control and building automation systems.  Mr. Lasewicz has been a Senior Account
Executive  with  Barber-   Colman/Cosentino,   Inc.  since  1993.  The  firm  is
headquartered  in East Granby,  Connecticut  and is engaged in similar  business
activities as SELCO Controls, Inc.

     Ralph T.  Linsley is a director of Eagle and the Bank.  He was  employed by
Bristol in 1956 and became its President in 1971. Mr. Linsley became Chairman of
the Board of  Bristol in 1986 and  Chairman  of the Board of  Bristol's  holding
company  prior  to its  combination  with  Eagle in 1988,  when he  became  Vice
Chairman  of the Board of Eagle.  Upon the merger of Bristol and  Torrington  in
1993, Mr. Linsley became the Chief  Executive  Officer of the Bank and continued
as a director of the Bank. In January  1994, he became  Chairman of the Board of
the Bank. Mr. Linsley retired as President and Chief Executive  Officer of Eagle
and Chief Executive Officer of the Bank effective September 30, 1994 and retired
as an employee of Eagle and the Bank  effective  December 31,  1994.  In January
1995,  Mr.  Linsley  became  Chairman  of the Board of Eagle.  Also,  commencing
January 1, 1995, Mr.  Linsley  became a consultant to Eagle.  In January 1997 he
resigned from his position as Chairman of the Board and continued as a director.


     John F.  McCarthy  became a director of  Torrington  in 1984, a director of
Eagle upon its formation in 1986 and upon the merger of  Torrington  and Bristol
in 1993,  continued  as a  director  of the Bank.  Since  1970,  he has been the
President of J&M Sales, Inc., a Torrington-based beer distributorship, and since
1979,  he has been the  President of Thames River  Recycling  Co. in  Newington,
Connecticut.


     Board of Directors Committees and Nominations by Shareholders. The Board of
Directors of Eagle acts as a nominating  committee  for  selecting  nominees for
election as directors.  Eagle's Bylaws also permit shareholders eligible to vote
at the Annual Meeting to make  nominations for directors if such nominations are
made  pursuant  to timely  notice in writing to the  Secretary  of Eagle.  To be
timely,  such notice must be  delivered  to, or mailed to and  received  at, the
principal executive offices of Eagle not less than 30 days nor more than 90 days
prior to the date of the  meeting,  provided  that at least 45 days'  notice  or
prior  public  disclosure  of the  date  of the  meeting  is  given  or  made to
shareholders.  If less than 45 days'  notice or prior public  disclosure  of the
date of the  Annual  Meeting  is given or made to  shareholders,  notice  by the
shareholder  must be  received  by Eagle not later than the close of business on
the 15th day  following  the day on which such  notice of the date of the Annual
Meeting was mailed or such public  disclosure  was made.  The Board of Directors
has  delayed  setting a date for the Annual  Meeting  pending  the  outcome of a
special  meeting of  stockholders  to vote on the  Agreement and Plan of Merger,
dated   October  26,  1997,   by  and  between   Eagle  and  Webster   Financial
Corp.("Webster")  and the merger  provided for therein.  Pursuant to the merger,
Eagle  will  merge  with  and  into  Webster,  with  Webster  as  the  surviving
corporation.  Should the annual meeting become necessary, a shareholder's notice
of nomination must also set forth certain information  specified in Article III,
Section 13 of Eagle's Bylaws concerning each person the shareholder  proposes to
nominate for election and the nominating shareholder. Eagle has not received any
nominations for directors from shareholders.


                                       101

<PAGE>



     The Board of Directors of Eagle has  appointed a standing  Audit  Committee
which met four  times  during the 1997  fiscal  year.  The  members of the Audit
Committee  currently  are  Messrs.  Curcio,  McCarthy  and  Linsley.  The  Audit
Committee  reviews the scope and results of the  independent  annual audit.  The
Audit  Committee  also reviews the scope and results of audits  performed by the
Company's internal auditor.

     The  Compensation  Committee  of the Board of  Directors  reviews  employee
compensation  and  makes  recommendations  to the  Board  regarding  changes  in
compensation.  In addition,  the Board of Directors has appointed a Stock Option
Committee to administer  the Company's  stock option plans and to make grants of
options thereunder.  During the 1997 fiscal year, the Compensation Committee and
Stock Option Committee held three and three meetings,  respectively. The members
of the  Compensation  Committee  currently  are  Messrs.  Donovan,  LaPorta  and
Torizzo.  The  Stock  Option  Committee  currently  consists  of  the  following
non-employee directors: Messrs. LaPorta, Lasewicz, McCarthy and Torizzo.

     In  October  1994,  the  Board of  Directors  of Eagle  established  a Loan
Oversight  Committee  which met fourteen  times during the 1997 fiscal year. The
members of the Loan Oversight  Committee currently are Messrs.  Alden,  Britton,
Carpenter and Lasewicz.  The Loan Oversight  Committee  reviews  commercial loan
applications and monitors the Bank's commercial loan portfolio.

     During the 1997 fiscal year,  Eagle held eighteen  meetings of the Board of
Directors.  Each incumbent  director  attended more than 75% of the aggregate of
the total  number  of  meetings  held by the  Board  and of the total  number of
meetings  held by all  committees  of the  Board on which he served  during  the
period that he served.

     Compensation of Directors.  Each  non-employee  director of Eagle currently
receives an annual retainer of $9,200 (including amounts paid by the Bank) while
Committee Chairmen receive an additional  retainer of $2,800. In addition,  each
non-employee  director  receives $750  (including  amounts paid by the Bank) for
each regular or special  Board  meeting  attended,  and $700 for each  committee
meeting attended.

     Under Eagle's  deferred  compensation  plan for  non-employee  directors of
Eagle and its subsidiaries, non-employee directors are permitted to defer all or
a portion of their director and committee fees until they cease to be directors.
Interest  is paid on  deferred  amounts  at a rate  determined  by the  Board of
Directors. During fiscal 1997, interest on deferred amounts was paid at the rate
paid on the Bank's  three year  certificate  of deposit  accounts as last set on
December 16, 1997. A director's  deferred  compensation under the plan generally
will be paid to such  director only upon his  retirement as a director,  but the
director may apply to the Board of Directors to withdraw up to 100% of the value
of his deferred compensation  account.  During the 1997 fiscal year, none of the
participating directors deferred fees into the plan.

         Since  January  1,  1994,   Eagle  has  maintained  a   Post-Retirement
Compensation  Plan for  Outside  Directors  (the  "Post-Retirement  Compensation
Plan")   under   which   participating   non-employee   directors   may  receive
post-retirement  benefits  following  their  termination of service with Eagle's
Board of Directors  due to  retirement  or removal from  service,  failure to be
reelected to the Board after  accepting  the  nomination,  becoming  disabled or
after a "change in control" as defined  under the  Post-Retirement  Compensation
Plan. To be eligible to receive such post-retirement  benefits, the director may
not have been an employee or officer of Eagle or its  subsidiaries and must have
served five years on Eagle's Board.  Following his service with Eagle's Board of
Directors,  a participating  non-employee director shall continue to receive the
annual  retainer fee paid during the last year such director served on the Board
for a period equal to the number of years and partial years served on the Board,
up to a  maximum  of 10  years.  In the  event of the  death of a  participating
director  prior  to   commencement   of  benefits   under  the   Post-Retirement
Compensation Plan or prior to receiving the total number of payments to which he
is  entitled,  a  payment  equal  to  100%  of the  benefit  payable  under  the
Post-Retirement  Compensation Plan will be made to the director's beneficiary or
estate.  No  benefits  are  payable  to a  director  under  the  Post-Retirement
Compensation  Plan who is removed from service by regulatory  authorities or who
is removed from the Board for cause by Eagle's  shareholders.  No payments  were
made to any director under the Post-Retirement Compensation Plan during the 1997
fiscal year.

         In April 1994,  Mr.  Linsley,  the then  President and Chief  Executive
Officer of Eagle and Chief  Executive  Officer of the Bank,  entered  into a new
employment  agreement  with Eagle and the Bank.  The agreement was  subsequently

                                      102

<PAGE>



amended in July 1994 in connection  with Mr.  Linsley's  notice to Eagle and the
Bank under the agreement  that he was retiring as President and Chief  Executive
Officer of Eagle and Chief Executive Officer of the Bank effective September 30,
1994 and would  remain as an  executive  employee of Eagle and the Bank  through
December  31,  1994,  at  which  time Mr.  Linsley's  employment  agreement  was
terminated.  Mr. Linsley's  employee  agreement provided that upon Mr. Linsley's
voluntary  termination  not  related to a "change in  control" as defined in the
agreement,  Mr. Linsley would receive special retirement  payments from the Bank
equal to three times his annual  salary (based on his salary at the time of such
retirement).  Such special  retirement  payments are payable in 60 equal monthly
installments and will cease if Mr. Linsley accepts employment with a significant
competitor  of the Bank.  Based upon his annual  salary of  $215,000  at time of
retirement, such payments for fiscal 1997 were $129,000.

         Mr.  Linsley also has a consulting  agreement with Eagle which provides
that Mr. Linsley will provide consulting  services to Eagle (not to exceed 1,000
hours per year) for a five year period commencing  January 1, 1995 following his
retirement  as an  employee  of Eagle at an annual  rate of  $50,000,  with such
amount paid in fiscal 1997. The compensation and other benefits available to Mr.
Linsley  thereunder  continue for the term of the  agreement in the event of his
death prior to reaching  age 70. In addition,  Mr.  Linsley has use of a Company
owned vehicle.

         Eagle has four stock  option  plans (the  "Option  Plans"),  which were
approved  by the  shareholders  of Eagle,  or, in the case of the  Bristol  1987
Option Plan,  by the  shareholders  of Bristol's  holding  company  prior to its
combination  with  Eagle.  The Option  Plans are for the  benefit  of  officers,
directors and  directors  emeriti of Eagle and its  subsidiaries.  Under Eagle's
1991 Stock Option Plan, as in effect before the amendment  discussed  below, new
non-employee  directors of Eagle  receive  options for 8,250 shares (as adjusted
for the Company's subsequent 10% stock dividend) upon the completion of one year
of service as a director, subject to the availability of options. Also under the
1991 Option Plan,  pursuant to amendments  adopted in November 1994 and approved
by  shareholders  at the 1995 annual  meeting,  each  outside  director of Eagle
serving in  November  1994  received a one-time  grant of an option to  purchase
8,250  shares at an  exercise  price of $18.18  per share (as  adjusted  for the
Companies subsequent 10% stock dividend). In November 1994, although Mr. Linsley
had retired as  President  and Chief  Executive  Officer,  he continued to be an
executive employee and received a grant of options for 8,250 shares (as adjusted
for the Company's subsequent 10% stock dividend). At the meeting of shareholders
on January  28,  1997 it was voted to amend the 1991 Stock  Option Plan to allow
for discretionary grants of options, but not more than 2,000 shares per year, to
non-employee  directors in consideration of compensation to Board members and to
encourage growth in shareholder value.

In June 1997  Eagle's  Stock  Option  Committee  voted to grant 2,000  shares of
non-qualified  options  from  the 1991  Stock  Option  plan to all  non-employee
directors  at a price of $30.375,  the closing  price of Eagle  Financial  Corp.
Common Stock on the last trading day prior to the date of grant.


                                      103
<PAGE>



                                   MANAGEMENT
EXECUTIVE OFFICERS

     The  following  table sets forth  certain  information  with respect to the
executive officers of Eagle. All executive officers serve pursuant to employment
agreements. See "Management -- Executive Compensation."

                        AGE AT
                      DECEMBER 1,
NAME                     1997          POSITION(S) HELD WITH EAGLE
----                  -----------      ---------------------------

Robert J. Britton.......   45          Chairman of the Board, President and
                                        Chief Executive Officer
Mark J. Blum............   44          Vice President, Chief Financial Officer
                                        and Secretary
Kenneth F. Burns........   38          Vice President
Ercole J. Labadia.......   62          Vice President
Barbara S. Mills........   61          Vice President and Treasurer
                                   

     Information concerning the principal occupation of Mr. Britton is set forth
under "Election of Directors."  Information  concerning the principal occupation
during  the last five  years of those  executive  officers  of Eagle who are not
directors of Eagle is set forth below.

     Mark J. Blum,  Vice  President,  Chief  Financial  Officer and Secretary of
Eagle,  joined  Torrington  in 1985 and became  Treasurer  in 1986.  He has held
similar  positions  with Eagle since its  formation in 1986.  Upon the merger of
Bristol with Torrington in 1993, Mr. Blum became Senior Vice President and Chief
Financial  Officer of the Bank.  In November  1996,  Mr.  Blum became  Corporate
Secretary of both Eagle and the Bank. In April 1997,  Mr. Blum became  Executive
Vice President of the Bank.

     Kenneth F. Burns became a Vice  President of Eagle in 1996.  Prior thereto,
he joined Bristol in 1980,  upon the merger of Bristol with  Torrington in 1993,
Mr.  Burns  became Vice  President -  Marketing  of the Bank.  In 1994 he became
Senior Vice President - Retail  Banking and Marketing.  In April 1997, Mr. Burns
became Executive Vice President of the Bank.

     Ercole J. Labadia, Vice President -- Administration of Eagle, has served in
such capacity with Eagle since 1988.  Upon the merger of Bristol with Torrington
in 1993,  Mr. Labadia became  Executive  Vice  President --  Administration  and
Operations of the Bank. Prior thereto, he had served as Executive Vice President
of Bristol since 1989. In June 1997 Mr. Labadia retired from Eagle and the Bank.

     Barbara S. Mills, Vice President and Treasurer of Eagle, has served in such
positions with Eagle since 1988.  Upon the merger of Bristol with  Torrington in
1993, Ms. Mills became Vice President and Treasurer of the Bank.  Prior thereto,
Ms. Mills had served as Chief Financial Officer of Bristol since 1982.

                                      104

<PAGE>




     Item 11. Executive Compensation

     Compensation. The following table sets forth the salary compensation,  cash
bonus and certain other forms of compensation paid by Eagle and its subsidiaries
for services rendered in all capacities during fiscal 1997, 1996 and 1995 to the
President  and Chief  Executive  Officer  of Eagle and to each of the other most
highly  compensated  executive  officers of Eagle whose total annual  salary and
bonus for fiscal 1997 exceeded $100,000 (the "named executive officers").


<TABLE>
<CAPTION>
                                              SUMMARY COMPENSATION TABLE

                                                       Annual                 Long-Term
                                                    Compensation         Compensation Awards
                                               ----------------------    -------------------
                                                                              Securities         All Other
                                     Fiscal                                   Underlying       Compensation
   Name and Principal Position(s)     Year      Salary$        Bonus$         Options(b)          $ (c)
   ------------------------------  -----------  ------------  -------    --------------------  ------------
<S>                                 <C>         <C>          <C>              <C>              <C>
Robert J. Britton (a)                 1997     $236,723      $     -           24,000           $   29,826
  President, Chief Executive          1996      222,577            -            9,000               13,267
  Officer and Chairman of the         1995      183,846       20,000           27,500               21,050
  Board of Eagle and the Bank

Ercole J. Labadia                     1997      116,050            -            6,000               57,383
  Vice President - Administration     1996      144,604            -            6,000               15,588
  of Eagle and Executive              1995      133,484       14,000           16,500               22,577
  Vice President of the Bank

Mark J. Blum                          1997      139,500            -           18,000               26,655
  Vice President, Chief Financial     1996      127,308            -            5,500               12,573
  Officer and Secretary of Eagle      1995      113,269       12,000           16,500               18,410
  and Executive Vice President,
  Chief Financial Officer, and
  Secretary of the Bank

Kenneth F. Burns                      1997      108,069            -           15,000               20,505
  Vice President of Eagle and         1996      102,308       10,500            5,500                8,051
  Executive Vice President -          1995       90,000        9,500           16,500               13,536
  Retail Banking and Marketing
  of the Bank
</TABLE>


(a) Mr. Britton was elected  President and Chief Executive  Officer of Eagle and
Chief  Executive  Officer of the Bank  effective upon the retirement of Ralph T.
Linsley as President and Chief  Executive  Officer of Eagle and Chief  Executive
Officer of the Bank  effective  September 30, 1994. In January 1995, Mr. Britton
became  President of the Bank. In January 1997, Mr.  Britton became  Chairman of
the Board of Eagle and the Bank.

(b) Option  awards in fiscal 1995 are  adjusted  to reflect a ten percent  stock
dividend paid on March 1, 1995.

(c) All other  compensation  includes amounts  contributed by the Company to the
non-contributory  employee  stock  ownership plan (the "ESOP") on behalf of each
named executive  officer.  Participants  share  proportionately,  based on their
annual  compensation,  in the benefits of the contributions made to the ESOP and
share proportionately, based on the amount credited to their respective accounts
under the ESOP, in the  investment  earnings or losses of the trust fund.  Fleet
Bank, N.A. acts as trustee of the ESOP. For fiscal year 1997,  Messrs.  Britton,
Labadia,  Blum and Burns were allocated 489 shares,  481 shares, 463 shares, and
376 shares,  respectively,  pursuant to the ESOP,  having a value  (based on the
market value on September 30, 1997) of $19,560,  $19,240,  $18,520, and $15,040,
respectively.  All other compensation also includes matching  contributions made
in fiscal 1996 under the Eagle Financial  Corp.  Financial  Institutions  Thrift
Plan,  as adopted in October  1994,  of $3,609,  $2,493,  $2,440,  an $1,879 for
Messrs. Britton, Labadia, Blum, and Burns, respectively. Additionally, all other
compensation  includes  premiums paid by the Company for term life insurance and
the lease value of company automobiles.

                                      105
<PAGE>


     Option Grants.  The following  table contains  information  with respect to
grants of stock  options  to each of the named  executive  officers  during  the
fiscal year ended  September  30, 1997.  All such grants were made under Eagle's
1991 Option Plan.


                        OPTION GRANTS IN 1997 FISCAL YEAR
<TABLE>
<CAPTION>

                                                                                     Potential Realizable Value
                                                                                     at Assumed Annual Rates of
                                                                                     Stock Price Appreciation for
                               Individual Grants (a)                                        Option Term (b)
------------------------------------------------------------------------------------------------------------------

                                            % of Total
                           Number of       Options Granted
                       Shares Underlying    to Employees      Exercise    Expiration
        Name          Options Granted (#)  in Fiscal Year   Price ($/sh)     Date         5%($)        10%($)
-------------------- -------------------- ----------------  ------------ -------------   ---------  ---------
<S>                      <C>                  <C>          <C>              <C>        <C>         <C>      
Robert J. Britton         9,000                8%           $   28.50        11-25-06   $ 161,311   $ 408,795
                         15,000               14%               39.75         9-22-07     374,978     950,269

Ercole J. Labadia         6,000                5%               28.50        11-25-06     107,541     272,530

Mark J. Blum              6,000                5%               28.50        11-25-06     107,541     272,530
                         12,000               11%               39.75         9-22-07     299,982     760,215

Kenneth F. Burns          5,000                5%               28.50        11-25-06      89,617     227,108
                         10,000                9%               39.75         9-22-07     249,985     633,513

</TABLE>

-----------------

(a)  26,000  option  grants  were made on November  26,  1996 and 85,000  option
     grants were made on September 23, 1997. All grants are  exercisable in full
     as of the date of this Proxy Statement. All option grants were made at fair
     market value, as determined by the closing price of the Common Stock on the
     day prior to the date of grant.

(b)  The dollar  amounts under these columns are the result of  calculations  at
     the 5% and 10%  assumed  annual  growth  rates  mandated  by the  SEC  and,
     therefore,  are not intended to forecast possible future  appreciation,  if
     any, in Eagle's stock price.  The  calculations  were based on the exercise
     price.

     Option Exercises and Holdings.  The following table sets forth  information
with respect to each of the named executive officers  concerning the exercise of
stock options during the fiscal year ended  September 30, 1997, and the value of
all unexercised options held by such individuals at such date.


                 AGGREGATED OPTION EXERCISES IN 1997 FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
                                                              Number of Shares           Value of Unexercised
                                                           Underlying Unexercised     In-the Money Options at
                                                       Options at Fiscal Year-End (#)  Fiscal Year-End ($)(b)
                                                       ------------------------------  ----------------------

                   Shares Acquired         Value
        Name       on Exercise (#)    Realized ($)(a)  Exercisable  Unexercisable  Exercisable  Unexercisable
----------------- -----------------   ---------------- -----------  -------------  ------------ -------------
<S>                    <C>            <C>                <C>                       <C>               
Robert J. Britton      4,070          $  92,943          76,351       -            $ 2,192,033      -
Ercole J. Labadia      3,606             86,003          37,553       -              1,202,329      -
Mark J. Blum           4,770            117,819          46,944       -              1,260,065      -
Kenneth F. Burns       5,886            187,416          39,475       -              1,044,791      -
                 
</TABLE>
(a) Market value of Common Stock at date of exercise, less the exercise price.

(b) Based on the  $52.4375  closing  price  of the  Company's  Common  Stock as
    reported on The Nasdaq Stock Market on December 9, 1997, minus the exercise
    price.


                                      106

<PAGE>



     Pension Plans.  The Bank maintains a qualified  defined  benefit plan under
the Internal Revenue Code of 1986, as amended (the "Code"),  which is subject to
the  requirements  of the Employee  Retirement  Income  Security Act of 1974, as
amended ("ERISA").  Retirement  benefits are calculated by multiplying 2% of the
average of the five highest years of the employee's salary  (including  overtime
and  bonuses,  if any) by years  of  benefit  service  partially  offset  by the
Estimated  Primary Social Security  Benefit,  as defined under the plan.  Normal
retirement is age 65.  Retirement  benefits are fully vested after five years of
service. Provisions in the program allow for benefits to be delayed after age 65
or to be paid to vested  participants  who terminate  employment after they have
attained age 55.  Benefits may be received in one of several forms,  including a
lump sum cash payment or monthly installments payable to the employee during his
or her life and/or  continuing  to a contingent  annuitant if he or she survives
the employee. Disability benefits under the plan are limited to the vested early
retirement  benefit.  If a member in active  service  dies  before  age 65 after
becoming vested,  the beneficiary  would be entitled to a lump sum death benefit
equal to the commuted value of 120 monthly  installments,  which would have been
payable  had his or her  allowance  commenced  on the  first day of the month in
which the member died.

     At September  30, 1997,  293 persons were  eligible to  participate  in the
pension plan,  which number  includes 255 employee  participants,  34 terminated
employees with a deferred interest, and 4 retired participants.

     The following table  illustrates  current annual pension benefits under the
Bank's  retirement  plan  for  retirement  in  fiscal  year  1997 at age 65 to a
participant  electing to receive the benefit in the standard form of benefit,  a
life annuity with ten year certain and continuous.  For 1997,  pension  benefits
are  subject to a  statutory  maximum  of  $120,000,  subject to  cost-of-living
adjustments. Additionally, annual compensation in excess of $160,000 (subject to
cost of living increases) may not be used in calculation of retirement benefits.

                               PENSION PLAN TABLE
<TABLE>
<CAPTION>
     ANNUAL                                       YEARS OF SERVICE
                   -------------------------------------------------------------------------------
  COMPENSATION        15               20                25               30                35
  ------------        --               --                --               --                --
<S>                 <C>               <C>              <C>               <C>              <C>    
    $100,000        $27,700           $36,900          $46,100           $55,300          $64,600
     125,000         35,200            46,900           58,600            70,300           82,100
     150,000         42,700            56,900           71,100            85,300           99,600
     175,000         50,200            66,900           83,600           100,300          117,100
     200,000         57,700            76,900           96,100           115,300          134,600
     225,000         65,200            86,900          108,600           130,300          152,100
     250,000         72,700            96,900          121,100           145,300          169,600
     300,000         87,700           116,900          146,100           175,300          204,600
     400,000        117,700           156,900          196,100           235,300          274,600
     450,000        132,700           176,900          221,100           265,300          309,600
     500,000        147,700           196,900          246,100           295,300          344,600
</TABLE>

     As of September 30, 1997, Messrs. Britton,  Labadia, Blum and Burns had 19,
39, 11 and 18 years of credited service, respectively, under the pension plan.

     In addition,  the Bank maintains a qualified defined benefit plan under the
Internal Revenue Code of 1986, as amended (the "Code"),  which is subject to the
requirements of the Employee  Retirement Income Security Act of 1974, as amended
("ERISA"), through its purchase of MidConn Bank in May 1997. Retirement benefits
are calculated by multiplying 2% of the average of the three highest consecutive
years of earnings  times years of Credited  Service up to a maximum of 30 years.
For  employee   terminations  prior  to  Normal   Retirement,   the  benefit  is
proportionately  reduced  by  the  ratio  that  years  of  Credited  Service  at
termination  bears  to years of  Credited  Service  at  Normal  Retirement.  For
employees  formerly of The Federal  Savings Bank,  which was acquired by MidConn
Bank in 1994,  their  benefit  cannot be less than the benefit  they had accrued
under that Plan as of May 31,  1994.  Normal  Retirement  is age 65.  Retirement
benefits  are fully  vested  after seven  years of  service,  with a 20% vesting
increase  each year  beginning  with three years of service.  Provisions  in the
program  allow for  benefits to be delayed  after age 65 or to be paid to vested
participants  who  terminate  employment  after they have  attained  age 55 with
fifteen  years of Service.  Benefits  may be  received in one of several  forms,
including a lump sum cash payment or monthly installments


                                      107

<PAGE>



payable to the employee during his or her life and/or continuing to a contingent
annuitant if he or she survives the employee.

     If a member in active service dies before age 65 after becoming vested, the
beneficiary  would be entitled to a benefit equal to 100% of the vested  pension
benefit  accrued to date of death deferred to the early  retirement  date of the
deceased  Participant  and  reduced  by the  appropriate  early  retirement  and
joint-and-survivor factors. After ten years the benefit is reduced by 50%.

     As of September 30, 1997,  124 persons were eligible to  participate in the
pension  plan,  which number  includes 36 employee  participants,  83 terminated
employees with a deferred interest, and 5 retired participants.

     The  Board of  Directors  of Eagle  has  adopted  a  nonqualified  benefits
equalization plan (the "BEP") for certain highly compensated  executive officers
who are also participants in the pension plan to provide supplemental retirement
income benefits which are not currently available because annual compensation in
excess of $160,000  (subject to cost of living increases) may not be used in the
calculation of retirement  benefits under the Code and because pension  benefits
are  currently  subject to a statutory  maximum of $120,000  (subject to cost of
living   increases).   See  "Management  -  Executive   Compensation  -  Summary
Compensation Table."

     Employment and Consulting Agreements.

     In April 1994,  Mr. Britton  entered into a new  employment  agreement with
Eagle and the Bank. His employment  agreement was  subsequently  amended in July
1994 in connection  with the  appointment  of Mr. Britton as President and Chief
Executive  Officer of Eagle and Chief  Executive  Officer of the Bank  effective
September 30, 1994. Mr.  Britton's annual salary for the calendar year under the
agreement  is  $239,200,  with such  increases  as  determined  by the Boards of
Directors of Eagle and the Bank. Mr.  Britton's  salary then in effect under the
agreement  may not be  decreased  without his  written  consent.  Mr.  Britton's
agreement currently expires on March 31, 2000 and may be renewed by the Bank and
Eagle by  written  notice  for one  additional  year on March 31,  1998 and each
subsequent  March 31  thereafter  during the term of the  agreement,  unless Mr.
Britton gives contrary written notice to Eagle and the Bank prior to the renewal
date.

     In April 1994,  Mr. Labadia  entered into a new  employment  agreement with
Eagle and the Bank.  The agreement was renewable  annually by the Bank and Eagle
for an additional  one-year  period,  and was most recently renewed in March 31,
1997 with an  expiration  date of March 31,  2000.  In June  1997,  Mr.  Labadia
retired from the Bank and Eagle thereby terminating his employment agreement.

     In April 1994, Mr. Blum entered into a new employment  agreement with Eagle
and the Bank.  His  employment  agreement  currently  expires on March 31, 2000.
Eagle and the Bank may renew the agreement by written  notice for one additional
year on March 31, 1998 and each subsequent  March 31 thereafter  during the term
of the  agreement,  unless Mr. Blum gives  contrary  written notice prior to the
renewal date. The agreement  provides for an annual salary for the calendar year
of $143,000,  with such annual increases as determined by the Board of Directors
of Eagle and the Bank.  Mr. Blum's salary then in effect under the agreement may
not be decreased without Mr. Blum's written consent.

     In May 1996, Mr. Burns entered into a new  employment  agreement with Eagle
and the Bank.  His  employment  agreement  currently  expires on March 31, 2000.
Eagle and the Bank may renew the agreement by written  notice for one additional
year on March 31, 1998 and each subsequent  March 31 thereafter  during the term
of the agreement,  unless Mr. Burns gives  contrary  written notice prior to the
renewal date. The agreement  provides for an annual salary for the calendar year
of $109,200  with such annual  increases as determined by the Board of Directors
of Eagle and the Bank.  Mr. Burn's salary then in effect under the agreement may
not be decreased without Mr. Burn's written consent.


                                      108

<PAGE>



     Each of the active  employment  agreements with Messrs.  Britton,  Blum and
Burns also provides for  participation in Eagle's and the Bank's  retirement and
employee benefit plans.  Each of the employment  agreements may be terminated by
Eagle or the Bank at any time.  The  employee is not  entitled  to any  benefits
under the employment agreement if he is terminated for "cause" as defined in the
employment  agreement.  If the  employee  is  terminated  "without  cause,"  the
employee will be entitled to a cash payment equal to the  employee's  salary for
the remainder of the contract  term.  Each agreement also provides for a payment
to be made to the employee if the employee's service is terminated in connection
with or within  two  years  after a "change  in  control"  of Eagle or the Bank,
unless such  termination  occurs by virtue of normal  retirement,  permanent and
total disability or death;  provided,  however, that the employee shall not have
any right to receive a payment or benefit  under the  agreement  which  would be
considered a "parachute  payment" under the Code. If the employee's  termination
within two years of a change in control was voluntary  with "good reason" or was
involuntary,  the employee shall receive a lump-sum payment equal to three times
the employee's average annual compensation (as calculated for federal income tax
reporting  purposes) for the five years prior to such change in control less one
dollar.  It is  currently  estimated  that,  in  the  event  of  an  involuntary
termination  of  employment  or  a  voluntary  termination  with  "good  reason"
following a change of control, the amount payable to Messrs.  Britton,  Blum and
Burns  would  be  $1,936,000,  $1,185,000,  and  $1,042,000,  respectively.  The
severance  payments  are  limited  to one year's  compensation  in the case of a
voluntary  termination  without  "good  reason"  after a "change in control." In
addition to the foregoing  severance  payments,  in the event of the  employee's
termination  "without  cause" or following a change in control,  the employee is
entitled to life,  health and  disability  insurance  coverage for the remaining
term of his  employment  contract  and to  continued  director's  and  officer's
liability coverage.

                                      109

<PAGE>




     Item 12. Security Ownership of Certain Beneficial Owners and Management

                            STOCK OWNED BY MANAGEMENT

     The  following  table sets forth  information  as of  December 9, 1997 with
respect to the shares of Eagle Common Stock  beneficially owned by each director
and nominee for director of Eagle, each of the named executive officers,  and by
all directors and executive officers as a group.

<TABLE>
<CAPTION>
                                                                                                PERCENT OF
        NAME AND POSITION(S)                            AMOUNT AND NATURE OF                   COMMON STOCK
          WITH THE COMPANY                            BENEFICIAL OWNERSHIP (A)                  OUTSTANDING
        --------------------                          ------------------------                 ------------
<S>                                                           <C>                                  <C>
Richard H. Alden
  Director.....................................               45,594(b)                            *

Mark J. Blum
  Vice President, Chief Financial Officer
  and Secretary................................               33,382(c)                            *

Robert J. Britton
  Chairman of the Board, President and Chief
   Executive Officer...........................               46,492(d)                            *

Kenneth F. Burns
  Vice President...............................               19,349(e)                            *

George T. Carpenter
  Director.....................................               63,761(f)                            *

Eugene R. Curcio
  Director.....................................                  2,430                             *

Theodore M. Donovan
  Director.....................................                 33,049                             *

Ercole J. Labadia
  Vice President ..............................               54,406(g)                            *

Thomas V. LaPorta
  Director.....................................                 58,045                             *

Steven E. Lasewicz, Jr.
  Director.....................................                 22,164                             *

Ralph T. Linsley
  Director.....................................               75,724(h)                            1.1%

John F. McCarthy
  Director.....................................               41,936(i)                            *

Ernest J. Torizzo
  Director.....................................               28,415(j)                            *

All directors and executive officers
  as a group (14 persons)......................              534,046(k)                            7.8%

</TABLE>

                                      110

<PAGE>



(a)  In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
     be the beneficial owner, for purposes of this table, of any shares of Eagle
     Common Stock (1) over which he has or shares voting or investment power, or
     (2) of which he has the right to acquire  beneficial  ownership at any time
     within 60 days from December 9, 1997. As used herein, "voting power" is the
     power to vote or direct the voting of shares and "investment  power" is the
     power to dispose or direct the disposition of shares.  All persons shown in
     the table above have sole voting and investment power,  except as otherwise
     indicated. The number of shares reflected for each individual and the group
     includes  shares subject to options which are exercisable and were adjusted
     for the 10% stock dividend of March 1, 1995. The following  individuals and
     group held such options for the following number of shares as of such date:
     Mr.  Alden - 19,930;  Mr.  Blum - 0; Mr.  Britton  - 0; Mr.  Burns - 0; Mr.
     Carpenter - 19,930; Mr Curcio - 2,000; Mr. Donovan - 19,930;  Mr. Labadia -
     37,553;  Mr. LaPorta - 19,930; Mr. Lasewicz - 12,050; Mr. Linsley - 41,171;
     Mr. McCarthy - 15,880; Mr. Torizzo - 10,250; and all directors and officers
     as a group 198,624.

(b)  Includes 158 shares as to which Mr. Alden disclaims beneficial ownership.

(c)  Includes 8,505 shares allocated to the account of Mr. Blum under the ESOP.

(d)  Includes  7,052 shares  allocated to the account of Mr.  Britton  under the
     ESOP.

(e)  Includes 4,472 shares allocated to the account of Mr. Burns under the ESOP.

(f)  Includes  2,232  shares  as to which  Mr.  Carpenter  disclaims  beneficial
     ownership and 30,300 shares held by S. Carpenter Construction Co., of which
     Mr. Carpenter is President and Treasurer.

(g)  Includes  7,923 shares  allocated to the account of Mr.  Labadia  under the
     ESOP.

(h)  Includes  11,112 shares  allocated to the account of Mr.  Linsley under the
     ESOP  and  4,154  shares  as to  which  Mr.  Linsley  disclaims  beneficial
     ownership.

(i)  Includes 2,114 shares owned by Mr.  McCarthy's wife,  10,915 shares held by
     J&M Sales, Inc., of which Mr. McCarthy is President,  and 2,902 shares held
     for the benefit of Mr.  McCarthy under a profit sharing plan  maintained by
     J&M Sales, Inc.

(j)  Includes 8,905 shares owned by Mr. Torizzo's wife.

(k)  Includes 44,085 shares  allocated to Eagle's current and retired  executive
     officers  of the total  275,492 shares  allocated  to the  accounts  of all
     participating employees under the ESOP.


                                      111

<PAGE>



                 PRINCIPAL HOLDERS OF VOTING SECURITIES OF EAGLE

     The following table sets forth information at December 9, 1997 with respect
to ownership of Eagle Common Stock by each person  believed by  management to be
the beneficial owner of more than 5% of the outstanding  Eagle Common Stock. The
historical  information  set  forth  below  is  based  on  beneficial  ownership
information  contained in the most recent Schedule 13D or 13G filed on behalf of
such person with the SEC.

<TABLE>
<CAPTION>
                                                                                                PERCENT OF
         NAME AND ADDRESS OF                            AMOUNT AND NATURE OF                   COMMON STOCK
          BENEFICIAL OWNER                              BENEFICIAL OWNERSHIP                    OUTSTANDING
          ----------------                              --------------------                    -----------
<S>                                                         <C>                                    <C> 
Fleet Financial Group, Inc.....................             255,723 (a)                            5.7%
  50 Kennedy Plaza
  Providence, RI  02903

Beck, Mack & Oliver
 330 Main Street
 New York, NY  10017...........................             229,235 (b)                            5.1%
</TABLE>

----------

(a)Fleet Financial  Group,  Inc.  ("Fleet") filed a Schedule 13G, dated February
   13,  1997,  reporting  that  255,723  shares  are  owned  beneficially,  as a
   fiduciary  for the  account  of  others,  and that it has  shared  voting and
   dispositive  power with respect to such shares.  The number of shares  listed
   above  reflects  the  10%  stock  dividend  of  March  1,  1995.  The  shares
   beneficially  owned by Fleet are held by Fleet Bank,  N.A. in connection with
   the Eagle Bank ESOP Trust.  Fleet Bank,  N.A., an affiliate of Fleet,  is the
   trustee of the ESOP. All shares held by the ESOP Trust have been allocated to
   the accounts of eligible  employees of the Bank. The shares  allocated to the
   accounts  of eligible  employees  held by the ESOP Trust will be voted at the
   Annual Meeting as directed by such employees.  The amounts shown are based on
   information provided to Eagle.

(b)The  Reporting  Persons  filed a Schedule  13G,  dated  January 21, 1997 (the
   "Beck, Mack Schedule 13G") reporting that the 229,235 are shares beneficially
   owned. The securities are owned by investment  advisory clients of Beck, Mack
   & Oliver.  These clients have the right to receive or the power to direct the
   receipt of dividends from, or the proceeds from sale of, such securities.  No
   one of these clients own more than 5% of such class of securities.

     SECTION 16(a) COMPLIANCE

     Mr.  Linsley  reported  on the Form 4 for the month of August  1997 the 860
shares of Eagle  common  stock he  received  in  exchanged  for 1,000  shares of
MidConn common stock resulting from the merger of Eagle and MidConn in May 1997.

     Item 13. Certain Relationships and Related Transactions

     CERTAIN TRANSACTIONS

     From time to time the Bank makes loans to its directors, officers and other
employees  for the  financing of their homes,  as well as home  improvement  and
consumer  loans.  The Bank also will consider other lending  relationships  with
directors,   officers  and  other  employees,   and  presently  has  outstanding
participation  interests  in two  loans to a  company  owned by a  director  and
secured by commercial  real estate.  Except for loans made prior to January 1990
at preferential interest rates (as discussed below), it is the belief of Eagle's
management  that  these  loans  are  currently  made in the  ordinary  course of
business,  and  neither  involve  more than normal  risk of  collectability  nor
present other  unfavorable  features.  Except for the  preferential  rate loans,
loans to such  persons  were made on  substantially  the same  terms,  including
interest rates and  collateral,  as those  prevailing at the time for comparable
transactions with other persons. All loans to directors,  nominees for director,
and  executive  officers  must be approved by the full Board of Directors of the
Bank,  and loans to all other  employees  are approved by one of two  designated
officers.  Loans to such individuals are made pursuant to the same  underwriting
criteria as apply to loans to the general public.  Such loans are written at the
prevailing  interest  rate for  customers  of the Bank,  except that for certain
loans made prior to January 23, 1990, interest is charged at a preferential rate
as long as the  borrower

                                      112

<PAGE>



remains  employed  by the Bank (other than  retired or  disabled  directors  and
employees who continue to receive the preferential  rate).  Directors,  officers
and other  employees pay legal fees,  appraisal  fees and all other direct costs
incurred by the Bank in originating the loan.

     Management  believes  that the  loans to  directors  and  officers  were in
compliance with federal law and regulations in effect at the time the loans were
made.  As a result of federal  legislation  enacted in August 1989,  the Bank is
precluded  from making loans to directors and  executive  officers on terms that
would not be  offered to a member of the  general  public of  comparable  credit
standing   seeking  a  comparable  loan.  Such  legislation  did  not  apply  to
outstanding mortgage loans made by Bristol or Torrington prior thereto.

     The  following  table sets forth certain  information  with regard to loans
(except  deposit  account  loans) at  preferential  interest rates to directors,
nominees  for  director  and  executive  officers of Eagle (and members of their
immediate  families)  and  to any  corporation  or  organization  in  which  any
director,  nominee for director or executive officer has a substantial interest,
which were  outstanding in amounts  greater than $60,000 in the aggregate at any
time since October 1, 1996.

                      HIGHEST AMOUNT
                        OUTSTANDING      UNPAID BALANCE         INTEREST RATE
                           SINCE             AS OF                  AS OF
NAME/LOAN TYPE        OCTOBER 1, 1996   SEPTEMBER 30, 1997    SEPTEMBER 30, 1997
--------------        ---------------   ------------------    ------------------

Ernest J. Torizzo
     Mortgage ........  $  228,389         $ 223,819                7.50%


     For  a  description  of  certain  transactions   regarding  Messrs.  Alden,
Carpenter  and  Donovan  and  the  Bank,  see  "Compensation  and  Stock  Option
Committees Interlocks and Insider Participation."

     Eagle is unaware of any other  transactions  to which  Eagle or the Bank is
party in which any  director  or  executive  officer of Eagle has or will have a
direct or indirect material interest.

COMPENSATION AND STOCK OPTION COMMITTEES INTERLOCKS AND INSIDER PARTICIPATION

         The  Compensation  Committee  for fiscal 1997 is comprised of the three
non-employee  directors  listed  previously.   The  Stock  Option  Committee  is
comprised of the four disinterested non-employee directors listed previously.

         Richard H. Alden, a director of Eagle and the Bank, is a partner in the
law  firm  of  Anderson,   Alden,  Hayes  &  Ziogas  LLC,  located  in  Bristol,
Connecticut.  The Bank retains Mr.  Alden's law firm with regard to a variety of
legal matters and has paid such firm legal fees totaling  $89,816,  a portion of
which was  reimbursed to the Bank by third parties,  for services  rendered from
October 1, 1996 to September 30, 1997.

         George T. Carpenter, a director of Eagle and the Bank, is the President
and  Treasurer  of  Carpenter  Realty Co.  ("CRC").  Mr.  Carpenter  is also the
President and  Treasurer of S.  Carpenter  Construction  Co.,  headquartered  in
Bristol,  Connecticut.  In addition, CRC and S. Carpenter Construction Co. are a
partner in Bristol Holding LLC (formerly known as Bristol  Shopping Plaza,  Inc.
prior to September 1995).

         CRC has  three  loans  outstanding  from the Bank in which the Bank has
participation  interests.  Eagle  believes  that the loans,  in which the Bank's
interests  include  (1) an original  participation  amount of  $2,340,000  (with
respect to a loan in the amount of $9 million) which had a participation balance
of $2,109,038 on September 30, 1997, and (2) an original participation amount of
$130,000  (with  respect  to a loan  in the  amount  of  $500,000)  which  had a
participation  balance of $120,744 on September  30,  1997,  and (3) an original
participation  amount  of  $455,000  (with  respect  to a loan in the  amount of
$1,750,000) which had a participation balance of $440,499 on September 30, 1997,
were made in the  ordinary  course of  business,  and neither  involve more than
normal risk of collectability nor present other unfavorable  features.  In 1992,
Bristol  entered  into a five year  lease for  office  space  with S.  Carpenter
Construction  Co., CRC, and Bristol  Shopping Plaza,  Inc. for an annual rent of
$45,000  for the first two years  plus  maintenance  fees,  which  rent has been
increased by $2,500 annually for each of the three years thereafter. The initial
five year term of this lease expired 10/15/97 and was not renewed. During fiscal
1991,  Bristol  entered  into a five year lease for office space with CRC for an
annual rent of $19,800 plus maintenance fees, which rent was increased by $2,200
annually  for the second and third years.  On August 31,  1996,  Eagle leased an
additional  1,554  square  feet of  space  from  CRC  adjacent  to the  existing
premises. The term of the additional space begins on September 1, 1996 and shall
run concurrently with the existing lease for an additional  minimum fixed rental
rate of $12,000  annually plus  maintenance  fees. The Bank entered into a three
year lease effective August 1, 1996 for storage space with CRC at an annual rate
of $6,300 plus maintenance fees. Eagle and its subsidiaries paid such affiliated
entities  of Mr.  Carpenter  an  aggregate  of  $125,966  in  rental,  taxes and
maintenance fees for the period from October 1, 1996 through September 30, 1997.
In addition,  Eagle paid the  entities of Mr.  Carpenter an aggregate of $20,650
for renovations on other properties of Eagle.





Theodore M.  Donovan,  a director of Eagle and the Bank, is a partner in the law
firm of Furey,  Donovan,  Eddy,  Kocsis,  Tracy & Daly, P.C. located in Bristol,
Connecticut.  The Bank has  retained  Mr.  Donovan's  law firm with  regard to a
variety of legal matters. The Bank paid such firm legal fees totaling $24,047, a
portion  of which was  reimbursed  to the Bank by third  parties,  for  services
rendered from October 1, 1996 to September 30, 1997.

PART IV

     Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a)(1) The following  consolidated  financial  statements of registrant and
its  subsidiaries  and report of  independent  auditors  are  included in Item 8
hereof.

     Report of Independent Auditors.
     Consolidated Balance Sheets - September 30, 1997 and 1996.
     Consolidated  Statements of Income - Years Ended  September 30, 1997,  1996
          and 1995.
     Consolidated Statements of Shareholders' Equity - Years Ended September 30,
          1997, 1996 and 1995.
     Consolidated  Statements  of Cash Flows - Years Ended  September  30, 1997,
          1996 and 1995.
     Notes to Consolidated Financial Statements.

     (a)(2)  All  schedules  for  which  provision  is  made  in the  applicable
accounting  regulations  of the  Securities  and  Exchange  Commission  are  not
required under the related  instructions or are  inapplicable and therefore have
been omitted.

     (a)(3) The  following  exhibits  are either  filed with this  Report or are
incorporated herein by reference:

     3.1  Certificate  of  Incorporation,  as  amended,  incorporated  herein by
reference from  Pre-Effective  Amendment No. 2 to the Registrant's  Registration
Statement on Form S-1 (No. 33-9166), filed with the SEC on December 24, 1986.

                                      113

<PAGE>



     3.2 Bylaws of the Company,  as amended to date,  incorporated  by reference
from Eagle's Current Report on Form 8-K dated November 12, 1993.

     10.1 Eagle  Financial  Corp.  Stock  Option  Plan  (incorporated  herein by
reference  from the  Company's  Annual  Report on Form  10-K for the year  ended
September 30, 1987 as filed with the SEC on December 22, 1987).

     10.2 BFS Bancorp,  Inc. Stock Option Plan,  (incorporated by reference from
the Company's  Registration  Statement on Form S-8 (No. 33-28403) filed with the
SEC on April 28, 1989.)

     10.3  Eagle  Financial  Corp.  1988  Stock  Option  Plan  (incorporated  by
reference from the Company's  definitive Proxy Statement dated December 21, 1988
for the 1989 Annual Meeting of  Shareholders,  as filed with the SEC on December
22, 1988).

     10.4 Employment  Agreement dated April 1, 1994 among the Company,  the Bank
and Ralph T. Linsley (incorporated by reference from Pre-effective Amendment No.
1 to the Company's  Registration Statement on Form S-2 (Reg. No. 33-54981) filed
with the SEC on September 12, 1994).

     10.5  Consulting  Agreement  dated  August 25, 1988 between the Company and
Ralph T. Linsley  (incorporated by reference from the Company's Annual Report on
Form  10-K for the year  ended  September  30,  1988,  as filed  with the SEC on
December 28, 1988).

     10.6 Employment  Agreement dated April 1, 1994 among the Company,  the Bank
and Robert J. Britton  (incorporated by reference from  Pre-effective  Amendment
No. 1 to the Company's  Registration  Statement on Form S-2 (Reg. No.  33-54981)
filed with the SEC on September 12, 1994).

     10.7 Employment  Agreement dated April 1, 1994 among the Company,  the Bank
and Ercole J. Labadia (incorporated by reference from the Company's Registration
Statement on Form S-2 (Reg. No. 33-54981) filed with the SEC on August 9, 1994).

     10.8 Employment  Agreement dated April 1, 1994 among the Company,  the Bank
and Mark J. Blum  (incorporated  by reference  from the  Company's  Registration
Statement on Form S-2 (Reg. No. 33-54981) filed with the SEC on August 9, 1994).

     10.9 Employment  Agreement dated April 1, 1994 among the Company,  the Bank
and Irene K. Hricko  (incorporated by reference from the Company's  Registration
Statement on Form S-2 (Reg. No. 33-54981) filed with the SEC on August 9, 1994).

     10.10 Employment  Agreement dated April 1, 1994 among the Company, the Bank
and Barbara S. Mills (incorporated by reference from the Company's  Registration
Statement on Form S-2 (Reg. No. 33-54981) filed with the SEC on August 9, 1994).

     10.11 The Bank deferred  compensation plan  (incorporated by reference from
Pre-Effective  Amendment No. 1 to the Company's  Registration  Statement on Form
S-4 (Reg. No. 33-21122) filed with the SEC on May 17, 1988).

     10.12 Deferred Compensation Plan for Non-Employee  Directors  (incorporated
by reference  from the  Company's  Annual Report on Form 10-K for the year ended
September 30, 1988, as filed with the SEC on December 29, 1988).

     10.13  Outside   Directors  Post  Retirement  Plan,  dated  July  26,  1994
(incorporated by reference from the Company's Registration Statement on Form S-2
(Reg No. 33-54981) filed with the SEC on August 9, 1994).

                                      114

<PAGE>



     10.14  Guarantee and Pledge  Agreement  dated  November 1, 1990 between the
Company  and Bank of Boston  Connecticut  (incorporated  by  reference  from the
Company's  Annual Report on Form 10-K for the year ended  September 30, 1990, as
filed with the SEC on December 28, 1990).

     10.15 Annual  Incentive Plan  (incorporated by reference from the Company's
Registration  Statement  on Form S-2 (Reg No.  33-54981)  filed  with the SEC on
August 9, 1994).

     10.16  Amendment  to  Employment  Agreement  dated July 26,  1994 among the
Company,  the  Bank  and  Ralph  T.  Linsley  (incorporated  by  reference  from
Pre-effective  Amendment No. 1 to the Company's  Registration  Statement on Form
S-2 (Reg. No. 33-54981) filed with the SEC on September 12, 1994).

     10.17  Amendment  to  Employment  Agreement  dated July 26,  1994 among the
Company,  the Bank  and  Robert  J.  Britton  (incorporated  by  reference  from
Pre-effective  Amendment No. 1 to the Company's  Registration  Statement on Form
S-2 (Reg. No. 33-54981) filed with the SEC on September 12, 1994).

     12 Computation of Ratio of Earnings to Fixed Charges

     21 Subsidiaries of the Registrant

     23 Consent of KPMG Peat Marwick LLP

     27 Financial Data Schedule

     (b)  No current reports on Form 8-K were filed by the Registrant during the
          fourth quarter of fiscal 1997.

     (c)  Exhibits to this Form 10-K are attached or  incorporated  by reference
          as stated above.

     (d)  Not applicable.


                                      115

<PAGE>



SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



                                         EAGLE FINANCIAL CORP.
                                        ----------------------
                                              Registrant

                                        By:/s/ Robert J. Britton
                                          --------------------------------------
                                             Robert J. Britton
                                          Chief Executive Officer, President and
                                                   Chairman of the Board

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

<TABLE>
<CAPTION>
                                                                                        TITLE
                                                             ------------------------------------------------------

<S>                                                          <C>
By:/s/ Robert J. Britton                                     Chief Executive Officer, President and
-----------------------------------------                    Chairman of the Board (principal executive officer)
            Robert J. Britton

By:/s/ Mark J. Blum                                          Vice President, Chief Financial Officer and Secretary
-----------------------------------------                    (principal financial and accounting officer)
              Mark J. Blum

By:/s/ George T. Carpenter                                   Vice Chairman
-----------------------------------------
           George T. Carpenter

By:/s/ Ralph T. Linsley                                      Director
-----------------------------------------
            Ralph T. Linsley

By:/s/ Richard H. Alden                                      Director
-----------------------------------------
            Richard H. Alden

By:/s/ Theodore M. Donovan                                   Director
-----------------------------------------
           Theodore M. Donovan

By:/s/ Thomas V. LaPorta                                     Director
-----------------------------------------
            Thomas V. LaPorta

By:/s/ John F. McCarthy                                      Director
-----------------------------------------
            John F. McCarthy

By:/s/ Ernest J. Torizzo                                     Director
-----------------------------------------
            Ernest J. Torizzo

By:/s/ Steven E. Lasewicz                                    Director
-----------------------------------------
           Steven E. Lasewicz

By:/s/ Eugue R. Curcio                                       Director
-----------------------------------------
            Eugene R. Curcio
</TABLE>

                                      116

<PAGE>



INDEX TO EXHIBITS


EXHIBIT
NUMBER          IDENTITY OF EXHIBIT

3.1             Certificate of  Incorporation,  amended herein by reference from
                Pre-Effective  Amendment No. 2 to the Registrant's  Registration
                Statement  on Form  S-1  (No.  33-9166),  filed  with the SEC on
                December 24, 1986.

3.2             Bylaws,  as  amended to date  (incorporated  by  reference  from
                Eagle's Current Report on Form 8-K dated November 12, 1993).

10.1            Eagle Financial Corp. Stock Option Plan, (incorporated herein by
                reference  from Eagle's  Annual Report on Form 10-K for the year
                ended  September  30, 1987 as filed with the SEC on December 22,
                1987).

10.2            BFS Bancorp, Inc. Stock Option Plan,  (incorporated by reference
                from Eagle's  Registration  Statement on Form S-8 (No. 33-28403)
                filed with the SEC on April 28, 1989).

10.3            Eagle Financial Corp. 1988 Stock Option Plan,  (incorporated  by
                reference from Eagle's definitive Proxy Statement dated December
                21, 1988 for the 1989 Annual Meeting of  Shareholders,  as filed
                with the SEC on December 22, 1988).

10.4            Employment  Agreement dated April 1, 1994 among the Company, the
                Bank and  Ralph T.  Linsley,  (incorporated  by  reference  from
                Pre-effective  Amendment  No.  1 to the  Company's  Registration
                statement  on Form  S-2  (No.  33-54981)  filed  with the SEC on
                September 12, 1994).

10.5            Consulting  Agreement  dated August 25, 1988 between the Company
                and  Ralph  T.  Linsley  (incorporated  by  reference  from  the
                Company's  Annual  Report  on  Form  10-K  for  the  year  ended
                September 30, 1988, as filed with the SEC on December 29, 1988).

10.6            Employment  Agreement dated April 1, 1994 among the Company, the
                Bank and Robert J.  Britton  (incorporated  by  referenced  from
                Pre-effective  Amendment  No.  1 to the  Company's  Registration
                Statement on Form S-2 (Reg. No.  33-54981) filed with the SEC on
                September 12, 1994).

10.7            Employment  Agreement dated April 1, 1994 among the Company, the
                Bank and Ercole J. Labadia  (incorporated  by reference from the
                Company's Registration Statement on Form S-2 (Reg. No. 33-54981)
                filed with the SEC on August 9, 1994).

10.8            Employment  Agreement dated April 1, 1994 among the Company, the
                Bank  and  Mark J.  Blum  (incorporated  by  reference  from the
                Company's Registration Statement on Form S-2 (Reg. No. 33-54981)
                filed with the SEC on August 9, 1994).

10.9            Employment  Agreement dated April 1, 1994 among the Company, the
                Bank and Irene K. Hricko  (incorporated  by  reference  from the
                Company's Registration Statement on Form S-2 (Reg. No. 33-54981)
                filed with the SEC on August 9, 1994).

10.10           Employment Agreement dated April 1, 1994, among the Company, the
                Bank and Barbara S. Mills  (incorporated  by reference  from the
                Company's Registration Statement on Form S-2 (Reg. No. 33-54981)
                filed with the SEC on August 9, 1994).

10.11           The Bank deferred  compensation plan  (incorporated by reference
                from Pre-Effective Amendment No. 1 to the Company's Registration
                Statement on Form S-4 (No.  33-21122)  filed with the SEC on May
                17, 1988).



<PAGE>



10.12           Deferred   Compensation   Plan   for   Non-Employee    Directors
                (incorporated  by reference from the Company's  Annual Report on
                Form 10-K for the year ended  September  30, 1988, as filed with
                the SEC on December 29, 1988).

10.13           Outside  Directors  Post  Retirement  Plan,  dated July 26, 1994
                (incorporated  by  reference  from  the  Company's  Registration
                Statement on Form S-2 (Reg. No.  33-54981) filed with the SEC on
                August 9, 1994).

10.14           Guarantee and Pledge  Agreement  dated  November 1, 1990 between
                the  Company  and Bank of Boston  Connecticut  (incorporated  by
                reference from the Company's  Annual Report on Form 10-K for the
                year ended September 30, 1990, as filed with the SEC on December
                28, 1990).

10.15           Annual  Incentive  Plan  (incorporated  by  reference  from  the
                Company's Registration Statement on Form S-2 (Reg. No. 33-54981)
                filed with the SEC on August 9, 1994).

10.16           Amendment to Employment  Agreement dated July 26, 1994 among the
                Company,  the  Bank  and  Ralph  T.  Linsley   (incorporated  by
                reference  from  Pre-effective  Amendment No. 1 to the Company's
                Registration  Statement on Form S-2 (Reg.  No.  33-54981)  filed
                with the SEC on September 12, 1994).

10.17           Amendment to Employment  Agreement dated July 26, 1994 among the
                Company,  the  Bank  and  Robert  J.  Britton  (incorporated  by
                reference  from  Pre-effective  Amendment No. 1 to the Company's
                Registration  Statement on Form S-2 (Reg.  No.  33-54981)  filed
                with the SEC on September 12, 1994).

12              Computation of Ratio of Earnings to Fixed Charges

21              Subsidiaries of the Registrant.

23              Consent of KPMG Peat Marwick LLP.

27              Financial Data Schedule