UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-K

[x]  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 (FEE REQUIRED)
     For the fiscal year ended December 31, 1995

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934 (NO FEE Required)

                            COMMISSION FILE #0-9623

                                   UST CORP.
             (Exact name of registrant as specified in its charter)

MASSACHUSETTS                                      04-2436093
(State or other jurisdiction                       (I.R.S. Employer
of incorporation or organization)                  Identification No.)

40 COURT STREET, BOSTON, MASSACHUSETTS             02108
(Address of principal executive offices)          (Zip Code)

(617) 726-7000
(Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:
NONE

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.625

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

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

The number of shares of common stock held by  nonaffiliates of the registrant as
of  February  20,  1996  was  15,168,635  for  an  aggregate   market  value  of
$218,049,128.

At February 20, 1996,  there were issued and  outstanding  17,902,763  shares of
common stock, par value $0.625 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  registrant's  proxy  statement for the 1996 Annual  Meeting are
incorporated by reference in Items 10, 11, 12 and 13 of Part III.

                                       2
<PAGE>

<TABLE>
<S>     <C>                                                                                     <C>
                                     PART I

ITEM 1  Business                                                                                 3
ITEM 2  Properties                                                                              11
ITEM 3  Legal Proceedings                                                                       11
ITEM 4  Submission of Matters to a Vote of Security Holders                                     11

                                    PART II

ITEM 5  Market for the Registrant's Common Stock and Related Security Holder Matters            11
ITEM 6  Selected Financial Data                                                                 12
ITEM 7  Management's Discussion and Analysis of Financial Condition and Results of Operations   12
                Financial Condition at December 31,1995                                         13
                Results of Operations                                                           23
ITEM 8  Financial Statements and Supplementary Material                                         29
ITEM 9  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    52

                                    PART III

ITEM 10 Directors and Executive Officers of the Registrant                                      52
ITEM 11 Executive Compensation                                                                  54
ITEM 12 Security Ownership of Certain Beneficial Owners and Management                          54
ITEM 13 Certain Relationships and Related Transactions                                          55

                                    PART IV

ITEM 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K                         55
                Signatures                                                                      58
</TABLE>
2
<PAGE>

                                     PART I

ITEM 1. Business

General Description Of Business

UST Corp. (the "Company"),  a bank holding company  registered with the Board of
Governors of the Federal  Reserve  System (the  "Federal  Reserve  Board"),  was
organized  as a  Massachusetts  business  corporation  in 1967.  The  Company is
subject  to  examination   by,  and  is  required  to  file  reports  with,  the
Commissioner of Banks of the Commonwealth of Massachusetts  (the  "Massachusetts
Commissioner"). The Company's banking subsidiaries are USTrust and United States
Trust Company  ("USTC"),  each  headquartered in Boston and each a Massachusetts
trust  company,   and  UST  Bank/Connecticut   ("UST/Conn"),   headquartered  in
Bridgeport,  a Connecticut  trust  company.  All of the common stock of USTrust,
USTC,  and  UST/Conn is issued to and owned by the  Company.  In  addition,  the
Company  owns,  indirectly  through  its  banking   subsidiaries,   all  of  the
outstanding  stock of three active  nonbanking  subsidiaries,  all Massachusetts
corporations:  UST Leasing  Corporation,  UST Capital  Corp.  and JSA  Financial
Corporation.  

     The Company  engages in one line of business,  that of providing  financial
services  through  its  banking and  nonbanking  subsidiaries.  A broad range of
financial  services  is  provided  principally  to  individuals  and  small- and
medium-sized  companies  in New  England  including  those  located  in low- and
moderate-income   neighborhoods   within   the   Company's   defined   Community
Reinvestment  Act assessment  area. In addition,  an important  component of the
Company's  financial  services is the  provision  of trust and money  management
services to professionals,  corporate executives, nonprofit organizations, labor
unions, foundations,  mutual funds and owners of closely-held businesses most of
whom are located in the New England region.

     As of the close of business on  December  31,  1995,  the  Company's  total
assets were  approximately  $1.97 billion and USTrust,  the lead bank,  had over
$1.86 billion, or 94 percent of the Company's consolidated assets.

The Subsidiary Banks

USTrust and UST/Conn are engaged in a general  commercial  banking  business and
accept deposits which are insured by the Federal Deposit  Insurance  Corporation
("FDIC").  USTC,  which has full banking  powers and accepts  deposits which are
insured by the FDIC, focuses its activity on trust and money management, venture
capital  and  other  fee-generating  businesses.  Two of the  Company's  banking
subsidiaries are located in Massachusetts and one is located in Connecticut.

Recent Developments

Recent Operating History and Asset Quality Summary

The Company  reported net income of $15.0 million,  or $0.83 per share for 1995,
as  compared  with net  income  of $4.7  million,  or $0.27  per  share in 1994.
Nonperforming  assets at December  31, 1995,  consisting  of  nonaccrual  loans,
restructured loans,  accruing loans greater than 90 days past due and other real
estate owned, were $29.0 million, down from a level of $87.1 million at December
31, 1994. At year-end  1995, the reserve for possible loan losses stood at $56.0
million,  or 281 percent of  nonaccrual  loans and 193 percent of  nonperforming
assets.  For a more detailed  discussion,  refer to Management's  Discussion and
Analysis of Financial Condition and Results of Operations below.

Potential One-time FDIC Insurance Premium Assessment and Subsequent Reduction of
Premium Costs

Federal legislation was proposed in 1995 to recapitalize the Savings Association
Insurance  Fund which may result in a one-time  assessment  on certain  deposits
assumed by the Company in connection  with its 1990  acquisition  of Home Owners
Savings Bank,  F.S.B.,  a failed savings  association.  While the amount of such
potential  assessment  cannot be determined at this time, any assessment will be
charged against earnings during the period in which the enabling  legislation is
enacted. Under the proposed legislation,  subsequent to the one-time charge, the
insurance  premium charged on the former thrift  deposits would be reduced.  For
further  discussion,  refer to Note 12 to the  Notes to  Consolidated  Financial
Statements of this Form 10-K.

Regulatory Agreements and Orders

Between 1992 and  mid-1995,  the Company and its banking  subsidiaries  operated
under  regulatory  agreements and orders with state and federal bank  regulatory
authorities,  all of which were removed by September 30, 1995. For a description
of the foregoing  agreements and orders which, as noted above,  are no longer in
effect,  refer to the  Company's  Annual  Report on Form 10-K for the year ended
December  31,  1994.  

     In June 1995, in conjunction with the release of the agreements and orders,
USTrust's  Board of  Directors  adopted a resolution  pursuant to which  USTrust
agreed with the FDIC and Massachusetts 
3
<PAGE>

Commissioner, among other matters: (i) to continue to maintain a Tier 1 leverage
capital  ratio of at least 6  percent;  (ii) not to pay a dividend  which  would
cause the Bank's Tier 1 leverage capital ratio to fall below 6 percent; (iii) to
continue to implement  plans to reduce  nonperforming  assets and the  aggregate
level of insider loans;  and (iv) to provide a quarterly  progress report to the
FDIC and Massachusetts Commissioner.  USTC likewise has agreed with the FDIC and
Massachusetts  Commissioner not to declare or pay dividends should the effect of
the payment of such dividends cause USTC's Tier 1 leverage capital ratio to fall
below 6 percent.

Adoption of Stock Repurchase Program

In late 1995, the Board approved a stock  repurchase  program,  authorizing  the
Company to repurchase up to 500,000 shares,  or approximately 2.8 percent of the
Company's common stock outstanding,  subject to prevailing market conditions and
other factors. The repurchased shares will be held as treasury shares to be used
for general corporate purposes,  including employee benefit plans. Purchases may
be made on the open market or in privately negotiated transactions.  At the date
of this Report no shares had been repurchased under this program.

Adoption of Shareholder Rights Plan

In 1995,  the Company  adopted a  shareholder  rights plan (the "Rights  Plan"),
which is intended to strengthen  the Board of Director's  ability to fulfill its
fiduciary  duties to the  Company's  shareholders  in the event of an  attempted
takeover of the  Company.  It is similar to plans  adopted by a large  number of
public companies,  including many bank holding companies. 

     Under the Rights Plan, the Board declared a special  dividend  distribution
of one  preferred  share  purchase  right  for  each  outstanding  share  of the
Company's  common  stock.  This dividend was  distributed  on October 6, 1995 to
stockholders of record as of the close of business on that date. 

     The rights will become  exercisable  only if a person or group (i) acquires
15 percent or more of the common stock, (ii) announces a tender offer that would
result in  ownership  of 15  percent or more of the  common  stock,  or (iii) is
declared to be an "Adverse  Person" by the Board of Directors.  "Adverse Person"
includes  any  person or group  who owns at least 10  percent  of the  Company's
common  stock and  attempts an action that would  adversely  impact the Company.
Each right would entitle a stockholder to buy 1/100th of a share of a new series
of junior participating  preferred stock. 

     Once a person or group has  acquired 15 percent or more of the  outstanding
common  stock of the Company or is declared an "Adverse  Person" by the Board of
Directors, each right may entitle its holder (other than the acquiring person or
adverse person) to purchase, at an exercise price of $40, shares of common stock
of the Company (or of any  organization  that  acquires  the Company) at a price
equal to 50 percent of their current market price. Under certain  circumstances,
the Continuing Directors (as defined in the Rights Plan) may exchange the rights
for common stock (or  equivalent  securities) on a one-for-one  basis  excluding
rights held by the acquiring person or Adverse Person.  

     Until   declaration  of  an  Adverse  Person,  or  ten  days  after  public
announcement  that any  person or group has  acquired  15 percent or more of the
Company's  common stock, the rights are redeemable at the option of the Board of
Directors,  in certain cases with the  concurrence of the Continuing  Directors.
Thereafter,  they may be redeemed by the Continuing Directors in connection with
certain  acquisitions not involving any acquiring person or Adverse Person or in
certain circumstances  following a disposition of shares by the acquiring person
or Adverse  Person.  The  redemption  price is $.001 per right.  The rights will
expire on October 6, 2005, unless redeemed prior to that date.

Business Services

USTrust and UST/Conn provide  commercial  banking services,  including  deposit,
investment,  cash management,  payroll, wire transfer,  leasing, merchant credit
card and lending  services  throughout  New England.  Commercial  and industrial
lending takes the form  primarily of direct loans and includes  lines of credit,
revolving credits,  domestic and foreign letters of credit, term loans, mortgage
loans,  receivable,  inventory and equipment loans and other specialized lending
services.  Furthermore,  the  Company  provides  additional  services  to  small
business customers through utilization of government sponsored and assisted loan
programs and through the Company's Minority Enterprise Loan Program. Since 1994,
USTrust  has  been  certified  by the SBA as a  "Small  Business  Administration
Lender." USTC provides deposit services and other banking services,  but focuses
its activities on money  management,  venture  capital and other  fee-generating
services.  Through loan  participations,  each bank is able to provide credit to
businesses  in its area up to the  aggregate  limit  available to the  Company's
subsidiary  banks. At December 31, 1995, the combined  lending limit to a single
borrower of the subsidiary banks was approximately $31.5 million.

Consumer Services

Consumer  services  are  provided by USTrust and  UST/Conn to customers in their
respective  geographic  areas.  These  services  include  savings  and  checking
accounts, NOW and money market accounts, consumer 
4
<PAGE>

loans,  credit cards  (through a private  label  arrangement),  ATM cards,  safe
deposit box facilities and travelers' checks. Consumer loans include residential
first  mortgage  and home equity  loans and lines of credit,  automobile  loans,
personal loans and loans to finance education costs as well as open-ended credit
via cash reserve  facilities.  Automobile loans increased  substantially in 1995
and reached a level of  approximately  $197 million as of December 31, 1995. The
Company also makes available an Affordable Mortgage Program which is designed to
provide  certain  customers  of USTrust  and  UST/Conn  who may not  qualify for
traditional   mortgage  financing  with  an  alternate  means  of  financing  or
refinancing a residence.  The Company's  banking  subsidiaries,  which currently
have an aggregate of 32 offices,  maintain an automated  teller  machine  system
which through  membership in various networks  provides the Company's  customers
with access to their  accounts at locations  throughout  the world.  Most of the
Company's  proprietary  ATM machines  provide  information to customers in three
languages, English, Spanish and Portuguese, and also provide information adapted
for the visually impaired.

Investment Services

The  Investment  Group  located at USTrust and UST/Conn was formed in 1994.  The
Investment  Group,  through  Essex  National  Securities,   Inc.  ("Essex"),  an
unaffiliated, licensed broker-dealer, offers mutual funds (whose investments are
managed by nonaffiliated third parties), treasury bills, notes, corporate bonds,
state,  federal  and  municipal  bonds and  discount  brokerage  services to the
customers of USTrust and  UST/Conn.  Essex also offers  annuities to USTrust and
UST/Conn customers at branch locations.

Real Estate Services

USTrust and UST/Conn  provide a broad range of industrial  and  commercial  real
estate lending services, residential mortgage banking services and other related
financial services.

Asset and Money Management and Trust Services

Asset and money  management,  custodial and trust services are provided by USTC.
In addition,  USTC provides  services as executor,  administrator and trustee of
estates and acts, under the terms of agreements,  in various  capacities such as
escrow agent, bond trustee and trustee and agent of pension,  profit sharing and
other  employee  benefit  trusts.  At December 31, 1995,  the total assets under
management of USTC were approximately $2.9 billion.  Approximately  one-third of
total assets under management are those of clients who have requested that their
assets  be  managed  with  specified  social  as  well as  financial  investment
objectives  in mind.  In 1995,  USTC also became  investment  adviser to a newly
established balanced mutual fund, the Boston Managed Growth Fund.

Securities Portfolios Maintained by the Company

The subsidiary banks maintain securities portfolios consisting primarily of U.S.
Treasury, U.S. Government Agency, corporate and municipal securities. All of the
Company's  securities  are  deemed   "available-for-sale"   which  enhances  the
liquidity  position of the Company and allows for  flexibility  in management of
interest rate risk.  USTrust's  securities portfolio also includes certain other
equity  investments as allowed  within limits  prescribed by  Massachusetts  and
federal law. Such investments currently include,  among others, equity interests
in the Massachusetts Housing Investment Corporation's Limited Partnership Equity
Fund for  Affordable  Housing.  The  Treasury  Division of the Company  provides
securities  portfolio  advisory  services to the Company's  affiliated banks. In
early 1996,  USTrust's  application  to become a member of the Federal Home Loan
Bank of Boston was approved. This membership will provide USTrust with access to
an additional source of funds.

Principal Nonbanking Subsidiaries

UST Leasing  Corporation,  a subsidiary of USTrust organized in 1987, provides a
broad  range  of  equipment  leasing  services  to  corporations   headquartered
throughout the United States.  UST Leasing  Corporation offers a line of leasing
products  designed to meet the needs of the Company's  small business  customers
and other  business  entities with similar  needs.  As of December 31, 1995, UST
Leasing  Corporation's total assets were approximately $32 million.  

     UST Capital  Corp.,  organized in 1961 and acquired by the Company in 1969,
is a subsidiary of USTC and is a licensed Small Business  Investment Company. It
specializes  in  equity  and  long-term   debt  financing  for   growth-oriented
companies.  
5
<PAGE>

     UST Data Services Corp.  was formally  dissolved as a separate legal entity
as of  December  31,  1995  and  became  a  division  of  USTrust.  In  its  new
configuration,  it  continues  to  provide  a  full  range  of  electronic  data
processing,  deposit  and  other  operations  services  to the  Company  and its
affiliates.  

     UST  Securities   Corp.,  a   wholly-owned   subsidiary  of  USTrust,   was
incorporated  in 1995 and  commenced  its  operations  on January 1, 1996.  This
subsidiary  was  organized as a  Massachusetts  Securities  Corporation  to make
exclusively passive investments and serve USTrust by buying, selling, dealing in
and holding its securities. 

     JSA Financial  Corporation,  a wholly-owned  subsidiary of the Company, was
organized in 1959. On June 30, 1995, this subsidiary acquired approximately $5.1
million of  nonperforming  assets from  UST/Conn.  Since that date,  it has been
engaged in an active program to liquidate  those assets.  As of the date of this
Report,  the  value  of the  assets  remaining  on the  books  of JSA  Financial
Corporation is approximately $2 million.

Competitive Conditions

The Company's banking and nonbanking  subsidiaries face substantial  competition
throughout  Massachusetts  and  Connecticut.  This  competition  is  provided by
commercial  banks,  savings banks,  credit unions,  consumer finance  companies,
insurance  companies,   "nonbank  banks,"  mutual  funds,  government  agencies,
investment  management  companies,  investment advisors,  brokers and investment
bankers.  In  addition,  the  Company  anticipates  increased  competition  from
out-of-state  and foreign  banks and bank holding  companies  as those  entities
increase their usage of interstate  banking powers granted since 1983 as well as
by the 1994 enactment of the  Riegle-Neal  Interstate  Banking and Branching Act
(discussed   under   "Supervision   and   Regulation  of  the  Company  and  its
Subsidiaries" below). During the past six years several factors have resulted in
the development or establishment of fewer, but financially  stronger competitors
in the local markets  served by the  Company's  banking  subsidiaries.  The most
important of these factors include: (i) the closing by regulators of a number of
banks and bank holding companies in Eastern Massachusetts and Connecticut;  (ii)
the  acquisition  during the early 1990's of small- and  medium-sized  banks and
bank holding companies by the largest New England bank holding companies;  (iii)
the somewhat  improved  economic  conditions  during the  mid-1990's  within the
region; and (iv) most recently,  the merger of Fleet Financial Group and Shawmut
National  Corporation and the proposed merger of Bank of Boston  Corporation and
BayBanks,  Inc.,  which would result in the creation of two entities of what had
been four of the five largest bank holding companies in New England.

         Supervision and Regulation of the Company and its Subsidiaries

General

As a bank holding company registered under the Bank Holding Company Act of 1956,
as amended (the "BHC Act"), the Company is subject to substantial regulation and
supervision  by the Federal  Reserve  Board.  As  state-chartered  banks,  USTC,
USTrust  and  UST/Conn  (collectively,  the  "Subsidiary  Banks") are subject to
substantial regulation and supervision by the FDIC and the applicable state bank
regulatory  agencies.  Such  activities  are often  intended  primarily  for the
protection  of depositors or are aimed at carrying out broad public policy goals
that may not be  directly  related to the  financial  services  provided  by the
Company and its subsidiaries.  Federal and state banking and other laws impose a
number of requirements and restrictions on the business operations,  investments
and other activities of depository  institutions and their  affiliates.  Between
1992 and  mid-1995,  the  Company and its banking  subsidiaries  operated  under
regulatory  agreements  and  orders  with  state  and  federal  bank  regulatory
authorities;  all of the  agreements  and orders were removed by  September  30,
1995.  For a description of the foregoing  agreements  and orders,  refer to the
Company's  Annual  Report on Form 10-K for the year ended  December  31, 1994 at
pages 1-2.

General Supervision and Regulation

The Company, as a bank holding company under the BHC Act, is registered with the
Federal  Reserve  Board and is regulated  under the  provisions  of the BHC Act.
Under the BHC Act the  Company is  prohibited,  with  certain  exceptions,  from
acquiring direct or indirect  ownership or control of more than 5 percent of the
voting  shares  of any  company  which is not a bank and  from  engaging  in any
business other than that of banking, managing or controlling banks or furnishing
services to, or acquiring  premises for, its affiliated  banks,  except that the
Company  may engage in and own voting  shares of  companies  engaging in certain
activities  determined by the Federal  Reserve Board, by order or by regulation,
to be so closely  related to banking or to managing or controlling  banks "as to
be a proper  incident  thereto."  
6
<PAGE>

     The Company is  required  by the BHC Act to file with the  Federal  Reserve
Board an annual report and such additional  reports as the Federal Reserve Board
may require.  The Federal  Reserve Board also makes periodic  inspections of the
Company and its subsidiaries. The BHC Act requires every bank holding company to
obtain the prior  approval of the Federal  Reserve  Board  before it may acquire
substantially  all of the  assets of any bank,  or  ownership  or control of any
voting shares of any bank, if, after such acquisition,  it would own or control,
directly or  indirectly,  more than 5 percent of the voting shares of such bank.

     Because the Company is also a bank holding company under the  Massachusetts
General Laws, the  Massachusetts  Commissioner  has authority to require certain
reports  from the Company  from time to time and to examine the Company and each
of its subsidiaries.  The Massachusetts Commissioner also has enforcement powers
designed to prevent  banks from  engaging in unfair  methods of  competition  or
unfair or deceptive acts or practices  involving  consumer  transactions.  Prior
approval  of the  Massachusetts  Board of Bank  Incorporation  is also  required
before the  Company  may  acquire any  additional  commercial  banks  located in
Massachusetts   or  in  those  states  which  permit   acquisitions  of  banking
institutions  located in their states by Massachusetts  bank holding  companies.

     The Connecticut  General  Statutes  require that the Company furnish to the
Connecticut  Commissioner  such reports as the  Connecticut  Commissioner  deems
appropriate  to  the  proper   supervision  of  the  Company.   The  Connecticut
Commissioner  is also  authorized  to make  examinations  of the Company and its
Connecticut  subsidiaries  including UST/Conn, and to order the Company to cease
and desist from engaging in any activity which constitutes a serious risk to the
financial  safety,  soundness or  stability  of the Company or  UST/Conn,  or is
inconsistent with sound banking principles or the provisions of the banking laws
of  Connecticut.  

     The  location  of nonbank  subsidiaries  of the  Company is not  restricted
geographically  under the BHC Act. In 1989,  after the passage of the  Financial
Institutions  Reform,  Recovery  and  Enforcement  Act of 1989  ("FIRREA"),  the
Federal Reserve Board amended its  regulations  under the BHC Act to permit bank
holding  companies,  as a  nonbanking  activity,  to  own  and  operate  savings
associations  without  geographical  restrictions.  Furthermore,  in  1994,  the
Riegle-Neal  Interstate  Banking  and  Branching  Act of 1994  (the  "Interstate
Banking Act") was enacted. The Interstate Banking Act's provisions,  among other
things:  (i) permit bank holding  companies,  under  certain  circumstances,  to
acquire control of banks in any state, subject to (a) specified maximum national
and state deposit  concentration limits; (b) any applicable state law provisions
requiring  that the acquired  bank has to have been in existence for a specified
period of up to 5 years; (c) any applicable  nondiscriminatory  state provisions
that make an  acquisition  of a bank  contingent  upon a  requirement  to hold a
portion of such bank's assets  available for call by a  state-sponsored  housing
entity; and (d) applicable anti-trust laws; (ii) authorize interstate mergers by
banks in different states,  including branching through bank mergers,  beginning
June 1, 1997,  subject to the provisions noted in (i) and to any state laws that
"opt-in" as of an earlier  date or "opt-out" of the  provision  entirely;  (iii)
authorize states to enact legislation  permitting  interstate de novo branching;
and (iv)  provide for parity of treatment  for foreign  bank branch  activities.
Proposed  legislation has been filed in Massachusetts  which, if enacted,  would
cause  Massachusetts to "opt-in" prior to June 1, 1997. In 1995, the Connecticut
Legislature  enacted  legislation which caused Connecticut to "opt-in." The full
impact of the Interstate Banking Act will not be clear for the Company until the
Massachusetts  Legislature  has acted on the foregoing  legislation.  Unlike the
Company's  banking  subsidiaries,  national banks have used the power  available
under a federal  charter to move a bank's  headquarters  30 miles or less and by
that means have  accelerated  the pace of interstate  branching.  

     The  Subsidiary  Banks,  whose  deposits  are insured by the FDIC,  and the
subsidiaries  of such banks are subject to a number of regulatory  restrictions,
including certain restrictions upon: (i) extensions of credit to the Company and
the  Company's  nonbanking  affiliates   (collectively  with  the  Company,  the
"Affiliates");  (ii) the purchase of assets from Affiliates;  (iii) the issuance
of a guarantee or acceptance of a letter of credit on behalf of Affiliates;  and
(iv) investments in stock or other securities issued by Affiliates or acceptance
thereof as collateral for an extension of credit. In addition,  all transactions
among the Company and its direct and  indirect  subsidiaries  must be made on an
arm's length basis and valued on fair market  terms.  The  Subsidiary  Banks pay
deposit  insurance  premiums to the FDIC.  In 1995,  such  premiums were reduced
substantially.  As  noted  above,  however,  in 1996 a  one-time  charge  may be
assessed on certain  deposits assumed by the Company in connection with its 1990
acquisition of Home Owners Savings Bank, F.S.B. if federal legislation  proposed
in 1995 to recapitalize the Savings Association Insurance Fund is adopted. Refer
to "Recent Developments-Potential One-time FDIC Insurance Premium Assessment and
Subsequent  Reduction of Premium  Costs"  above.  

     Federal Reserve Board Policy requires bank holding  companies to serve as a
source of strength to their  subsidiary banks by standing ready to use available
resources to provide  adequate  capital funds to subsidiary banks during periods
of financial  stress or  adversity.  A bank  holding  company also can be liable
under  certain   provisions  of  the  Federal  Deposit   Insurance   Corporation
Improvement  Act  of  1991  
7
<PAGE>

("FDICIA") for the capital deficiencies of an undercapitalized  bank subsidiary.
In the event of a bank holding company's bankruptcy under Chapter 11 of the U.S.
Bankruptcy  Code,  the trustee will be deemed to have assumed and is required to
cure  immediately  any deficit under any  commitment by the debtor to any of the
federal  banking  agencies  to  maintain  the  capital of an insured  depository
institution,  and any claim for breach of such  obligation  will  generally have
priority over most other unsecured claims. Under the cross-guarantee  provisions
of the Federal Deposit Insurance Act, if any or all of the Subsidiary Banks were
placed in  conservatorship  or receivership,  the Company,  as sole stockholder,
would likely lose its investment in the applicable Subsidiary Bank or Subsidiary
Banks,  and,  in  addition,  its  investment  in its  other  Subsidiary  Bank or
Subsidiary Banks would be at risk. 

     The  Company  and  all  its   subsidiaries  are  also  subject  to  certain
restrictions  with  respect to engaging in the issue,  flotation,  underwriting,
public sale or distribution of certain types of securities.  In addition,  under
both Section 106 of the 1970  Amendments  to the BHC Act and  regulations  which
have been issued by the Federal Reserve Board,  the Company and its subsidiaries
are prohibited  from engaging in certain tie-in  arrangements in connection with
any extension of credit,  lease or sale of any property or the furnishing of any
service. Various consumer laws and regulations also affect the operations of the
Subsidiary  Banks.  

     The Subsidiary  Banks, two of which are chartered under  Massachusetts  law
and one of which is  chartered  under  Connecticut  law,  are subject to federal
requirements to maintain cash reserves against  deposits,  and to state mandated
restrictions  upon the nature and amount of loans which may be made by the banks
(including  restrictions  upon  loans  to  "insiders"  of the  Company  and  its
Subsidiary Banks) as well as to restrictions relating to dividends, investments,
branching and other bank  activities.  


     FDICIA prescribes the supervisory and regulatory actions that will be taken
against  undercapitalized  insured  depository  institutions for the purposes of
promptly resolving problems at such institutions at the least possible long-term
loss  to  the  FDIC.  Five  categories  of  depository  institutions  have  been
established  by  FDICIA  in  accordance   with  their  capital   levels:   "well
capitalized,"  "adequately  capitalized,"   "undercapitalized,"   "significantly
undercapitalized,"  and  "critically   undercapitalized."  The  federal  banking
agencies have adopted  uniform  regulations  to implement the prompt  regulatory
action provisions of FDICIA. 

     Under the uniform regulations, a well capitalized institution has a minimum
Tier 1  capital-to-total  risk-based assets ratio of 6 percent,  a minimum total
capital-to-total  risk-based  assets ratio of 10 percent and a minimum  leverage
ratio of 5 percent and is not subject to any written agreement, order or capital
directive.  An  adequately  capitalized  institution  meets  all of its  minimum
capital  requirements  under  the  existing  capital  adequacy  guidelines.   An
undercapitalized  institution  is one that  fails  to meet any one of the  three
minimum capital requirements. A significantly undercapitalized institution has a
Tier 1 capital-to-total risk-based assets ratio of less than 3 percent, a Tier 1
leverage  ratio of less than 3 percent  or a total  capital-to-total  risk-based
assets ratio of less than 6 percent. A critically  undercapitalized  institution
has a Tier 1 leverage ratio of 2 percent or less. An  institution  whose capital
ratios meet the criteria for a well capitalized institution may be classified as
an adequately  capitalized  institution due to qualitative  and/or  quantitative
factors other than capital adequacy.  An adequately  capitalized  institution or
undercapitalized  institution,  may under certain circumstances,  be required to
comply with supervisory  action as if it were in the next lower category.  

     USTC,  USTrust and UST/Conn are each classified as "well  capitalized."  In
June 1995,  USTrust's Board of Directors adopted a resolution  pursuant to which
USTrust  agreed  with the FDIC and  Massachusetts  Commissioner  to  continue to
maintain  a  Tier  1  leverage   capital  ratio  of  at  least  6  percent.   

     An undercapitalized institution is required to submit a capital restoration
plan for  acceptance  by the  appropriate  federal  banking  agency  and will be
subject to close  monitoring  of both its  condition and  compliance  with,  and
progress made pursuant to, its capital restoration plan. The capital restoration
plan will be accepted  only if: (i) it specifies the steps that will be taken to
become  adequately  capitalized and the activities in which the institution will
engage; (ii) it is based upon realistic  assumptions and it is likely to succeed
in restoring the institution's  capital;  (iii) it does not appreciably increase
the institution's risk exposure; and (iv) each holding company that controls the
institution provides  appropriate  assurances of performance and guaranties that
the  institution  will comply with the plan until the  institution is adequately
capitalized on an average basis for each of four consecutive quarters. Liability
under the guaranty is the lesser of (i) five percent of the institution's  total
assets at the time it became  undercapitalized  and (ii) the amount necessary to
bring the institution into compliance with all applicable  capital  standards as
of the time the institution  fails to comply with the plan. An institution  that
fails to  submit  an  acceptable  plan may be  placed  into  conservatorship  or
receivership   unless   its   capital   restoration   plan   is   accepted.   An
undercapitalized  institution  will also be  subject  to  restrictions  on asset
growth, acquisitions,  branching, new activities,  capital distributions and the
payment of management fees. 

     FDICIA  requires the  appropriate  regulatory  agencies to take one or more
specific  actions  against  significantly   undercapitalized   institutions  and
undercapitalized institutions that fail to submit acceptable capital restoration
plans,  which  actions  include  but are  not  limited  to:  (i)  requiring  the
institution to sell shares or other obligations to raise capital;  (ii) limiting
deposit interest rates; (iii) requiring the election of a new board of directors
and/or  dismissing  senior  executive  officers  and  directors  who  held  such
positions for more than 180 days before the institution became undercapitalized;
(iv)  prohibiting  receipt of deposits 

8
<PAGE>

from  correspondent  banks,  (v) requiring  divestiture or liquidation of one or
more  subsidiaries;  and  (vi)  requiring  the  parent  company  to  divest  the
institution  if  such  divestiture  will  improve  the  institution's  financial
condition  and  future  prospects.  In  addition,  an insured  institution  that
receives a less-than-satisfactory rating for asset quality, management, earnings
or liquidity may be deemed by its appropriate  federal  banking  regulator to be
engaging in an unsafe or unsound  practice  for  purposes of issuing an order to
cease and  desist  or to take  certain  affirmative  actions.  If the  unsafe or
unsound  practice  is likely to weaken  the  institution,  cause  insolvency  or
substantial  dissipation of assets or earnings or otherwise  seriously prejudice
the  interest of  depositors  or the FDIC,  a receiver or  conservator  could be
appointed.  Finally,  subject to certain  exceptions FDICIA requires  critically
undercapitalized  institutions to be placed into receivership or conservatorship
within 90 days after becoming critically  undercapitalized.  

     The Federal  Reserve  Board has  indicated  that it will  consult with each
federal banking agency  regulating the bank subsidiaries of a holding company to
monitor  required  supervisory  actions,  and based upon an  assessment of these
developments,  will take appropriate  action at the holding company level. Under
FDICIA,  federal bank  regulators are also required to see that changes are made
in the  operations  and/or  management of a bank or bank holding  company if the
financial  institution  is  deemed to be  "undercapitalized."  

     Under FDICIA, a depository institution that is "adequately capitalized" but
not "well capitalized" is generally  prohibited from accepting brokered deposits
and offering  interest rates on deposits higher than the prevailing rates in its
market. In addition,  "pass through" insurance coverage may not be available for
certain employee benefit accounts. 

     Additional  regulations adopted pursuant to FDICIA include: (i) real estate
lending  standards  for  depository   institutions,   which  provide  guidelines
concerning  loan-to-value  ratios for various types of real estate  loans;  (ii)
rules  requiring  depository  institutions  to develop  and  implement  internal
procedures  to evaluate  and  control  credit and  settlement  exposure to their
correspondent banks; (iii) rules implementing the FDICIA provisions prohibiting,
with certain  exceptions,  insured state banks from making equity investments or
engaging in  activities  of the types and amounts not  permissible  for national
banks; and (iv) rules and guidelines for enhanced financial  reporting and audit
requirements.  Rules currently proposed for adoption pursuant to FDICIA include:
(i) revisions to the risk-based capital guidelines regarding interest rate risk,
concentrations   of  credit  risk  and  the  risks   posed  by   "nontraditional
activities;" and (ii) rules addressing various "safety and soundness" standards.

     In late 1995, the Federal Reserve Board provided all bank holding companies
with new  guidelines  which  direct  examiners to provide  separate  supervisory
ratings for the risk management process of all bank holding companies.  Pursuant
to the  guidelines,  examiners will evaluate the entire spectrum of risks facing
the  Company  including,   but  not  limited  to,  credit,  market,   liquidity,
operational,  legal and reputational  risk. Under the guidelines,  examiners are
directed to place primary  consideration  on findings  relating to the following
elements:  (i)  active  board and senior  management  oversight;  (ii)  adequate
policies,  procedures and limits;  (iii) adequate risk measurement,  monitoring,
and management information systems; and (iv) comprehensive internal controls. In
December 1995, the Company established a Risk Management Committee to coordinate
the Company's  management of  applicable  risks.  

     The status of the Company as a  registered  bank  holding  company does not
exempt it from  certain  federal and state laws and  regulations  applicable  to
corporations generally, including, without limitation, certain provisions of the
federal  securities laws and the Massachusetts  corporate laws. With the passage
of FIRREA in 1989,  the Crime  Control  Act in 1990 and FDICIA in 1991,  federal
bank regulatory agencies, including the Federal Reserve Board and the FDIC, were
granted  substantially  broader enforcement powers to restrict the activities of
financial  institutions  and to impose or seek the imposition of increased civil
and/or  criminal  penalties upon financial  institutions,  the  individuals  who
manage or control such institutions and "institution affiliated parties" of such
entities.  

     Pursuant to the Community  Reinvestment Act ("CRA") and similar  provisions
of  Massachusetts  and  Connecticut  law,  regulatory   authorities  review  the
performance of the Company and its subsidiary  banks in meeting the credit needs
of the communities  served by the subsidiary  banks.  The applicable  regulatory
authorities  consider  compliance with this law in connection with  applications
for,  among  other  things,   approval  of  branches,   branch  relocations  and
acquisitions of banks and bank holding companies. USTrust and UST/Conn both have
received  "outstanding"  ratings  from the FDIC.  In 1995,  the FDIC adopted new
regulations  whereby  an  institution  that  offers a narrow  product  line to a
regional  or  broader  market  can  apply  for  status  as  a  "Limited  Purpose
Institution"  and be examined as such by the FDIC for CRA compliance.  USTC will
apply for this  status  since its focus is only upon trust and asset  management
activities. The Massachusetts Commissioner has continued to examine USTC for CRA
compliance, and currently rates USTC "satisfactory."

9
<PAGE>

     In  1994,  the  federal  Riegle   Community   Development   and  Regulatory
Improvement  Act of 1994 (the  "Community  Development  Act") was  enacted.  The
Community  Development  Act  established  financial  and  other  assistance  for
entities involved primarily in community development  activities.  The Community
Development Act's provisions also, among other items, (i) increased restrictions
on some types of high interest  loans;  (ii) improved small  business  access to
capital;  (iii)  required  federal  banking  agencies  to,  among other  things,
coordinate  examinations and establish uniform  regulations and guidelines where
appropriate;  and (iv)  amended  certain  requirements  on  insider  loans.  The
Community Development Act had the effect of reducing slightly certain regulatory
burdens on financial institutions,  including the Company's  subsidiaries.  

     From time to time various proposals are made in the United States Congress,
as well as state  legislatures,  which  would  alter the  powers  of,  and place
restrictions  on,  different  types  of bank  organizations  as well as bank and
nonbank  activities.  Such legislative  proposals  include  proposals related to
expansion  of  bank  powers  and  increased   consumer   compliance   disclosure
requirements. In 1995, federal legislation was proposed which, if adopted, would
have granted bank holding  companies  broader  powers with respect to securities
activities.  At this  time it does not  appear  that  such  legislation  will be
adopted,  at least in its current form. It is impossible to predict  whether any
of the current  proposals will be adopted and the impact of such adoption on the
business  of  the  Company  or its  subsidiaries.  

     Supervision, regulation and examination of the Subsidiary Banks by the bank
regulatory  agencies  are not  intended  for  the  protection  of the  Company's
security holders.

Governmental Policies, Economic Conditions and Credit Risk Concentration

The earnings and business of the Company's subsidiaries are and will be affected
by a number of external influences, including general economic conditions in the
United  States and  particularly  in New  England  and the  policies  of various
regulatory  authorities  of the United  States,  including  the Federal  Reserve
Board.  The  Federal  Reserve  Board  regulates  the supply of money and of bank
credit to influence  general  economic  conditions  within the United States and
throughout  the  world.  From time to time,  the  Federal  Reserve  Board  takes
specific steps to dampen  domestic  inflation and to control the country's money
supply. The instruments of monetary policy employed by the Federal Reserve Board
for these  purposes  (including  the  level of cash  reserves  banks,  including
nonmember  banks such as all three of the Company's  banking  subsidiaries,  are
required to maintain  against  deposits)  influence in various ways the interest
rates paid on interest-bearing  liabilities and the interest received on earning
assets,  and the overall  level of bank loans,  investments  and  deposits.  The
impact upon the future  business  and  earnings  of the  Company of  prospective
domestic economic  conditions,  and of the policies of the Federal Reserve Board
as well as other U.S. regulatory  authorities,  cannot be predicted  accurately.

     During the period  from 1990  through  1993,  the  Company's  primary  loan
market, the New England region,  suffered from a weak economic environment.  The
economic  climate  contributed  to a decline in real estate values and adversely
affected  the  net  worth  of  certain  borrowing  customers  of  the  Company's
subsidiary banks and the Company's  collateral  position with respect to certain
loans. The New England  regional  economy  improved  somewhat in the mid-1990's,
which aided the Company's loan workout efforts over the past several years.  The
New England region,  however,  still lags behind the economic growth experienced
in the other regions of the United States. In 1995, revenues of employers in the
Company's principal markets did not grow substantially and the level of creation
of net new  jobs was  low.  Most of the  Company's  loans  outstanding  are from
borrowers  located in  Community  Reinvestment  Act  delineated  communities  in
Massachusetts  and  Connecticut  and a  substantial  portion of these  loans are
various types of real estate loans;  still others have real estate as additional
collateral.  At  year-end  1995,  the  Company's  exposure  to credit  risk from
borrowers who had real estate as their primary  collateral support included $381
million of loans.  In addition to the foregoing,  during the second half of 1994
and early 1995 prevailing interest rates rose  substantially.  Although interest
rates  have  declined  modestly  during  the second  half of 1995,  any  renewed
increases in the Base Lending Rate used by the  Company's  subsidiary  banks may
have an adverse effect upon the ability of some borrowers to repay their loans.

General

No significant  portion of the loans or deposits of any of the Company's banking
subsidiaries  results  from one or  several  accounts,  the loss of which  would
materially  affect its  business.  The Company does not  experience  significant
seasonal fluctuations in its business.

Employees

As of December 31, 1995, the Company and its subsidiaries had  approximately 880
full-time and part-time employees.

10
<PAGE>

ITEM 2. Properties

USTrust  owns a  twelve-story,  89,014  square  foot  brick and  steel  building
constructed  in 1915 and  located at  Government  Center,  30-40  Court  Street,
Boston, Massachusetts which houses the banking premises of USTrust, USTC and the
offices of the  Company  and all of its  nonbanking  subsidiaries.  

     The  Company  currently  leases a  three-story  brick  office  building  of
approximately 37,900 square feet at 196 Broadway, Cambridge,  Massachusetts, all
of which is used by USTrust, as well as 29,003 square feet in an adjacent office
tower at 141  Portland  Street,  Cambridge,  Massachusetts.  USTrust also leases
approximately  26,080 square feet of space at 25-55 Court Street,  Boston, which
is used primarily to house staff support services.  In 1991, USTC sold the 25-55
Court Street, Boston, building to a third party,  unaffiliated with the Company.

     USTrust  owns ten branch  offices in Boston,  Canton,  Gloucester,  Milton,
Milton   Village,   Natick,   Norwood,   Randolph,   Stoughton  and  Swampscott,
Massachusetts.  The  remaining  branch  offices  of the  Company  occupy  leased
premises.

     The  1996  annual  leasehold  commitment  for all  premises  leased  by the
Company's  subsidiaries  totals $3,857,000 not including expenses related to tax
or  maintenance  escalation  provisions.  Refer  to Note 16 to the  Notes to the
Consolidated Financial Statements of this Form 10-K.

ITEM 3. Legal Proceedings

In the ordinary course of operations,  the Company and its  subsidiaries  become
defendants  in a variety of judiciary  and  administrative  proceedings.  In the
opinion  of  management,  however,  there is no  proceeding  pending,  or to the
knowledge  of  management  threatened,  which is likely to result in a  material
adverse  change in the  financial  condition  or  results of  operations  of the
Company and its subsidiaries.

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

None

                                    PART II

ITEM 5. Market for the Registrant's Common Stock and Related Security Holder 
        Matters

The common  stock of the  Company is traded  over the  counter  and its price is
quoted on the Nasdaq National  Market System.  During the period January 1, 1994
to December 31, 1995,  the range of high and low sales prices for the  Company's
common stock was as follows:

                             1995            1994
                         Low     High    Low     High
1st Quarter              9 3/4  11 3/8  10 1/2  13 1/2
2nd Quarter             10 1/2  13 1/2  12 5/8  14 3/8
3rd Quarter             13 1/4  15 1/2  11 1/4  13 1/2
4th Quarter             12 3/4  15 1/2   8 3/4  11 3/4

     Such over-the-counter market quotations reflect interdealer prices, without
retail markup, markdown or commission and may not represent actual transactions.

     The number of holders of record of common stock of the Company was 1,913 at
January 31, 1996.

     The  Company  did not pay cash  dividends  from  mid-1991  until the fourth
quarter of 1995. In December 1995, the Company paid a cash dividend of $0.05 per
share to each holder of its common stock.

     Future  dividends will depend upon the financial  condition and earnings of
the  Company  and its  subsidiaries,  their  need for funds  and other  factors,
including  applicable  government  regulations  and the  absence  of  regulatory
objection.  In June 1995,  USTrust's  Board of  Directors  adopted a  resolution
pursuant to which USTrust  agreed with the FDIC and  Massachusetts  Commissioner
not to pay a dividend which would cause the Bank's Tier 1 leverage capital ratio
to  fall  below  6  percent.   USTC  likewise  has  agreed  with  the  FDIC  and
Massachusetts  Commissioner not to declare or pay dividends should the effect of
the payment of such dividends cause USTC's Tier 1 leverage capital ratio to fall
below 6 percent.  Refer to the discussion of capital in Management's  Discussion
and Analysis of Financial Condition and Results of Operations below.

11
<PAGE>

ITEM 6. Selected Financial Data

Consolidated Summary of Selected Financial Data (1)

<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
(Dollars in thousands, except share amounts)                  1995          1994        1993          1992        1991
<S>                                                      <C>          <C>          <C>          <C>          <C>        
Earnings Data:
        Interest income                                  $   147,969  $   132,312  $   140,628  $   157,024  $   221,493
        Interest expense                                      52,535       40,213       47,944       68,970      134,640
                                                              ------       ------       ------       ------      -------
        Net interest income                                   95,434       92,099       92,684       88,054       86,853
        Provision for possible loan losses                    13,090       24,281       68,427       42,245       53,712
                                                              ------       ------       ------       ------       ------
        Net interest income after provision
                for possible loan losses                      82,344       67,818       24,257       45,809       33,141
        Noninterest income                                    29,970       30,334       36,723       42,359       43,636
        Noninterest expense                                   88,187       91,355       93,341       95,820       89,322
                                                              ------       ------       ------       ------       ------
        Income (loss) before income taxes                     24,127        6,797      (32,361)      (7,652)     (12,545)
        Income tax provision (benefit)                         9,169        2,051      (12,261)      (2,931)      (4,598)
                                                               -----        -----      -------       ------       ------ 
        Net income (loss)                                $    14,958  $     4,746   $  (20,100) $    (4,721)  $   (7,947)
                                                         ===========  ===========   ==========  ===========   ========== 
Per share data:
        Net income (loss)                                $       .83  $       .27   $    (1.31) $      (.34)  $     .(58)
        Cash dividends declared                          $       .05                                          $      .15
Weighted average common shares outstanding                18,068,203   17,780,032   15,362,251   13,984,190   13,793,617
Consolidated Average Balances(2):
        Total assets                                     $ 1,836,229  $ 1,881,429   $2,042,567  $ 2,270,874   $2,696,992
        Loans                                              1,265,098    1,283,464    1,435,665    1,584,390    1,784,302
        Deposits                                           1,474,636    1,527,113    1,635,178    1,826,738    2,172,984
        Funds borrowed(3)                                    185,666      192,115      244,775      268,519      350,367
        Stockholders' investment                             163,651      152,256      143,149      147,440      150,193
Consolidated Ratios:
        Net income (loss) to average total assets               .81%         .25%       (.98)%       (.21)%       (.30)%
        Net income (loss) to average
                stockholders' investment                       9.14%        3.12%     (14.04)%      (3.20)%      (5.29)%
        Average stockholders' investment to
                average total assets                            8.9%         8.1%         7.0%         6.5%         5.6%
        Net chargeoffs to average loans                         1.7%         1.9%         3.8%         2.6%         2.2%
        Reserve for possible loan losses to period end loans    4.4%         5.0%         4.8%         3.4%         3.0%
        Average earning assets to average total assets         94.8%        93.9%        93.0%        91.2%        87.5%
                                                                                                                      Not
        Dividend Payout Ratio                                   6.0%                                           meaningful
</TABLE>

(1)  This information should be read in connection with Management's  Discussion
     and Analysis of Financial  Condition and Results of Operations of this Form
     10-K with particular  reference to "Credit Quality and Reserve for Possible
     Loan Losses."

(2)  Average balances do not include the effect of fair value  adjustments under
     SFAS No.  115, "  Accounting  for  Certain  Investments  in Debt and Equity
     Securities."

(3)  Includes federal funds  purchased,  repurchase  agreements,  short-term and
     other borrowings.


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

Introduction

The operating results for the year ended December 31, 1995, are highlighted by a
substantial  improvement in earnings and continued progress in the resolution of
problem assets. Net income for 1995 was $15.0 million,  or $0.83 per share, well
above 1994 results of $4.7 million, or $0.27 per share, as costs associated with
problem assets,  including loan loss provisions and loan workout  expense,  were
significantly reduced. Refer to "Results of  Operations-Comparison  of 1995 with
1994"  for a  further  discussion.  

     Substandard  loans,  as determined by the  Company's  internal  credit risk
rating system,  peaked at $265 million at year-end 1993,  following a three-year
recessionary  period in the local  economy.  Such loans were reduced $82 million
during 1995 for a total  reduction  of over 80 percent,  or $221  million  since
1993, to $44 million at December 31, 1995.  Nonperforming assets,  consisting of
substandard  nonaccrual loans which are included in the aforementioned  figures,
restructured loans,  accruing loans 

12
<PAGE>

greater  than 90 days past due and other  real  estate  owned also  reflect  the
Company's successful efforts to reduce problem assets. Nonperforming assets were
decreased  $58  million in 1995 to $29  million  at year end.  During the fourth
quarter, the Company initiated a program for the accelerated  disposition of $20
million of such  substandard  and  nonperforming  assets.  These $20  million of
troubled  loans are  classified as loans  held-for-sale,  net of $6.9 million in
chargeoffs,  at  December  31,  1995.  Refer to "Credit  Quality and Reserve for
Possible Loan Losses" for a further discussion of asset quality. 

     This  discussion   should  be  read  in  conjunction   with  the  financial
statements,  notes,  and tables  included  elsewhere in this Form 10-K.  Certain
amounts  reported for prior periods have been  reclassified  to conform with the
1995 presentation.

                    Financial Condition at December 31, 1995

Assets

Total  assets at  December  31,  1995 were $1.97  billion,  an  increase of $166
million  from  $1.80  billion a year ago.  The asset  growth  was  primarily  in
securities which increased $174 million during the year.  Funding for the higher
level of  securities  was  provided by an increase  in deposits  and  short-term
borrowings.  Also  contributing  to the increase in securities was a $31 million
change  from a  gross  unrealized  loss  to an  unrealized  gain  on  securities
available-for-sale.  Refer to  "Securities"  herein  for a  further  discussion.
Slightly offsetting the higher level of securities were decreases in loans of $5
million,  other real estate owned of $7 million and excess funds sold  decreased
to zero from $10 million a year ago. 

     This year's  increase in total assets is in contrast to the downward  trend
in the level of assets over the past  several  years which was led by  declining
loan volume.  Presently  the Company  anticipates  a relatively  stable level of
total and interest-earning assets in the coming year. Loan growth is expected to
be funded by a combination of maturing  securities,  and  additional  short-term
borrowings or deposit growth, as needed.

Loans

The following table presents the composition of the loan portfolio:

<TABLE>
<CAPTION>
                                                                                  December 31,
(Dollars in thousands)                    1995                  1994                 1993                1992               1991
<S>                                    <C>                 <C>                 <C>                 <C>                 <C>         
Commercial and financial(1)            $    642,940        $    705,075        $    760,446        $    862,590        $    872,366
Commercial real estate:
        Construction                         16,937              13,109              35,295              50,427              71,264
        Developer, investor and land(1)     207,710             265,624             321,965             368,871             467,113
Consumer:
        Residential mortgage                 85,806              90,643              85,889              57,896              52,224
        Home equity                          70,066              64,068              63,188              67,010              67,179
        Indirect automobile installment(2)  197,148              90,255              31,848              42,786              83,039
        Other consumer(2)                    23,015              21,964              23,944              26,914              40,026
Lease financing                              28,455              25,945              26,348              28,312              31,561
                                             ------              ------              ------              ------              ------
                Total loans(3)            1,272,077           1,276,683           1,348,923           1,504,806           1,684,772

Reserve for possible loan losses            (56,029)            (64,088)            (64,465)            (50,478)            (50,100)
                                            -------             -------             -------             -------             ------- 
                                       $  1,216,048        $  1,212,595        $  1,284,458        $  1,454,328        $  1,634,672
                                       ============        ============        ============        ============        ============
</TABLE>

(1)  Certain  loans for  which the  principal  source of  repayment  is not real
     estate  collateral have been classified as commercial and financial for the
     1992 through 1995 presentations.  For 1991 these loans were included in the
     commercial real estate  category.  Information is not readily  available to
     reclassify loans for that year.

(2)  Indirect  automobile  installment  loans represent loans purchased  without
     recourse  from  automobile  dealers  subject to adherence to the  Company's
     underwriting standards. Automobile loans made directly to consumers are not
     significant and are included with other consumer loans.

(3)  Not included in the loan  balances at December 31, 1995 were $13 million in
     troubled  loans  held-for-sale,   recorded  at  net  realizable  value  and
     classified  as other  assets.  Refer to "Credit  Quality  and  Reserve  for
     Possible Loan Losses" for a discussion.

The Company's  commercial and commercial  real estate loan  portfolios have been
experiencing  a decline due to the  combination of normal  amortization  and the
aggressive reduction of problem loans through collection, chargeoff, third-party
refinancing,  or sale.  The future  outflow is  expected  to subside  due to the
significantly  reduced level of troubled  loans.  Commercial and commercial real
estate loan  portfolios are expected to experience  modest  growth,  tempered by
increasing   competition  for  small-to-middle   market  credits.  

13
<PAGE>

     The indirect  automobile loan portfolio has grown  considerably  since 1993
due to the Company's  increased marketing efforts supported by the automation of
this business unit's operations.  Indirect automobile loans grew 118 percent, or
$107 million in 1995,  compared  with growth of 183  percent,  or $58 million in
1994. The Company  anticipates  continued growth in this portfolio in the coming
year. In the aggregate,  the remaining loan and lease  portfolios,  home equity,
other  consumer and  equipment  lease  financing,  are expected to continue with
their current level of moderate growth.

Loan Maturity Distribution

The following table reflects the maturity and interest sensitivity of commercial
and financial, and commercial real estate loans at December 31, 1995:

<TABLE>
<CAPTION>
                                                             After 1 Year
(Dollars in thousands)                      1 Year or Less  through 5 Years  After 5 Years         Total
<S>                                        <C>             <C>             <C>             <C>            
Commercial and financial                   $       401,480 $       189,411 $       52,049  $       642,940
Commercial real estate:
        Construction                                 5,519          10,482            936           16,937
        Developer, investor and land                70,296         106,638         30,776          207,710
                                                    ------         -------         ------          -------
                                           $       477,295 $       306,531 $       83,761  $       867,587
                                           =============== =============== ==============  ===============
Interest sensitivity of above loans:
        With predetermined interest rates  $        90,125 $       116,069 $       44,600  $       250,794
        With floating interest rates               387,170         190,462         39,161          616,793
                                                   -------         -------         ------          -------
                                           $       477,295 $       306,531 $       83,761  $       867,587
                                           =============== =============== ==============  ===============
</TABLE>

     The  Company  does not have an  automatic  rollover  (renewal)  policy  for
maturing loans.  Renewal requests are reviewed and approved in substantially the
same  manner  as  applications  by  new  customers  for  extensions  of  credit.
Additionally,  any renewal of a loan rated Substandard or lower in the Company's
credit risk  rating  profile,  requires  the  Controlled  Loan  Department  head
approval  and for  certain  size loans and  circumstances,  the  approval of the
Senior Credit Committee and Board of Directors.

Securities

Securities  increased  $174 million  during the year to $576 million at December
31, 1995.  The growth in the  portfolio  reflects  purchases of U.S.  Government
agency securities, mortgage-backed and asset-backed securities. In addition, the
increase in securities reflects the change from an unrealized loss on securities
available-for-sale  of $29.0  million to an unrealized  gain of $1.7 million,  a
$30.7 million  improvement.  This improvement was the result of a lower interest
rate environment and corresponding  higher bond prices in 1995. The upward trend
this year  compares  with the sharp  decline  in bond  prices in 1994 due to the
rapid  rise in  interest  rates.  Refer to Note 2 to the  Notes to  Consolidated
Financial  Statements  for a  further  discussion  of the  unrealized  valuation
adjustment to market value of securities  available-for-sale  as required  under
Statement  of  Financial   Accounting   Standards  No.  115  ("SFAS  No.  115"),
"Accounting for Certain  Investments in Debt and Equity  Securities." 

     The  change  in   unrealized   valuation  to  market  value  on  securities
available-for-sale  also had the  positive  effect of  increasing  stockholders'
investment  by $24.6  million from a year ago. The  unrealized  loss reported as
part  of  stockholders'  investment  of  $23.6  million,  net of a $5.4  million
deferred tax benefit at December  31, 1994 changed to a unrealized  gain of $1.0
million,  net of a $.7 million  deferred tax  provision at December 31, 1995. 

     In the fourth quarter of this year the Company redesignated a $100 thousand
municipal  bond,  its  sole   held-to-maturity   designated  security,   to  the
available-for-sale  designation.  This  change  was in  response  to a  one-time
opportunity  permitted by the "Financial Accounting Standards Board" ("FASB") to
reassess the appropriateness of the designations of an institution's  securities
that are affected by FASB No. 115. As of December 31, 1995, the Company's entire
securities portfolio of $576 million was designated as  available-for-sale.  

     The  Company has a policy of  purchasing  securities  primarily  rated A or
better by Moody's Investors Services and U.S. Government  securities to minimize
credit risk.  All  securities,  however,  carry interest rate risk which affects
their  market  value  such  that as  market  yields  increase,  the value of the
Company's  securities  declines  and vice versa.  Additionally,  mortgage-backed
securities  carry  prepayment risk where expected yields may not be achieved due
to an inability to re-invest the proceeds from prepayment at comparable  yields.
Moreover,   such   mortgage-backed   securities   may  not  benefit  from  price
appreciation  in periods of declining  rates to the same extent as the remainder
of the  portfolio.  Refer  to  Note 2 to the  

14
<PAGE>

Notes to Consolidated  Financial Statements,  "Summary of Significant Accounting
Policies" of this Form 10-K for a further  discussion  of prepayment  risk.  The
following  table  sets  forth  the  book  value of the  securities  owned by the
Company:

<TABLE>
<CAPTION>
                                                                              December 31,
(Dollars in thousands)                                            1995             1994            1993
<S>                                                        <C>             <C>             <C>            
Available-for-sale:
        Mortgage-backed securities                         $       246,521 $       195,009 $       263,435
        U.S. Treasury securities and securities of other
                U.S. Government agencies and corporations          196,967         142,414         129,703
        Obligations of states and political subdivisions*            3,254           3,493           3,887
        Other securities                                           128,931          60,724         152,531
                                                                   -------          ------         -------
                        Total                              $       575,673 $       401,640 $       549,556
                                                           =============== =============== ===============
Held-to-maturity:
        Obligations of states and political subdivisions                   $           100
                                                                           ===============
*    Non-taxable
</TABLE>

The following table presents maturities for the Company's securities at December
31, 1995, and the approximate  weighted tax equivalent  yields (at the statutory
federal  tax rate of 35  percent).  Mortgage-backed  securities  are shown at or
based on their final  maturity but are expected to have shorter  average  lives.
Considering this, the Company estimates the average life of the entire portfolio
to be 2.3 years.  Yields  presented in this table have been  computed  using the
amortized cost of the securities.

<TABLE>
<CAPTION>
                                                                 Securities Maturing In
                                           1 Year       After 1-Yr.      5-Yrs.        10 Yrs.       Equity
                                           or Less       through 5      thru 10        or more       Securities  Total
(Dollars in thousands)                 Balance  Yield Balance  Yield Balance  Yield Balance  Yield Balance Yield Balance
<S>                                    <C>      <C>   <C>      <C>   <C>      <C>   <C>      <C>   <C>    <C>    <C>
Available-for-sale:
   Mortgage-backed securities                                        $ 38,521 6.47% $208,000 6.35%               $246,521
           U.S. Treasury securities and 
           securities of other U.S.
           Government agencies and
           corporations                $11,286  6.00% $161,244 5.81%   24,437 5.48%                               196,967
   Obligations of states and
           political subdivisions          560 10.55%      867 8.21%      867 8.96%      960 9.80%                  3,254
   All other securities                 10,527  8.96%   71,565 6.15%   44,894 5.98%                $1,945 22.78%  128,931
                                        ------          ------         ------       --------       ------        -------- 
                  Total               $22,373  7.51%  $233,676 5.92% $108,719 6.06% $208,960 6.36% $1,945 22.78% $575,673
                                      =======         ========       ========       ========       ======        ========
</TABLE>

At  December  31,  1995 the  Company  owned the  following  corporate  notes and
asset-backed securities,  whose aggregate fair value was in excess of 10 percent
of stockholders' investment.

<TABLE>
<CAPTION>
(Dollars in thousands)                                       Aggregate Market Value
<S>                                                                 <C>    
General Motors Acceptance Corporation Medium Term Notes             $20,440
Sears, Roebuck Medium Term Notes                                     20,333
Nissan Automobile Receivables Grantor Trust                          18,104
</TABLE>

The  corporate  notes are  unsecured.  The Nissan  asset-backed  securities  are
secured  by  automobile   loan   receivables.   Both  the  corporate  notes  and
asset-backed securities are of investment grade and carry the normal credit risk
associated with such instruments.

Liquidity and Funding

Liquidity  involves  the  Company's  ability to raise or gain access to funds in
order to fulfill its existing and anticipated financial  obligations.  It may be
provided through the maturity or sale of an entity's  assets,  such as loans and
securities available-for-sale,  liability sources such as increased deposits and
purchased  or  borrowed  funds,  and access to the  capital  markets.  While the
Company's   securities   portfolio   is   currently   classified   entirely   as
available-for-sale,  the Company has no present intention or need to sell 

15
<PAGE>

any of its securities or existing loan portfolio, other than a nominal volume of
fixed-rate  residential mortgage loans sold to investors as they are originated.
As discussed in the  "Introduction"  the Company has  classified  $13 million of
troubled  loans as  held-for-sale  at December 31,  1995.  

     At December 31, 1995,  liquidity,  which includes excess cash, excess funds
sold and unpledged securities, totaled approximately $317 million, or 16 percent
of total assets,  a $58 million  increase from 1994. 

    The funds needed to support the Company's loan and securities portfolios are
provided  through a combination of commercial and retail deposits and short-term
borrowings.  Total  deposits  increased  $22 million,  or 1.5 percent,  to $1.51
billion since December 31, 1994. NOW, money market and regular savings  deposits
decreased $104.1 million while time deposits increased $124.8 million reflecting
investors attraction to the Company's  competitively  aggressive  certificate of
deposit rates throughout much of the year. Demand deposits  experienced a slight
increase of $1.2 million during 1995.

     As  shown  in the  Consolidated  Statements  of Cash  Flows,  cash and cash
equivalents  decreased  $3.3 million  during 1995.  Cash  provided by operations
resulted  largely from net interest income from loans and  securities,  less the
net difference of noninterest  expense over noninterest income. Cash provided by
financing activities was due principally to the net increases in deposits and in
short-term borrowings,  offset in part by payments on other borrowings. Net cash
used by investing  activities  was due to an excess of  purchases of  securities
over the proceeds from the sales and maturities of  securities.  

     At December  31,  1995,  the parent  company had $1 million in cash and due
from banks and $5 million in short-term securities purchased under agreements to
resell, compared with $2.3 million in cash and due from banks and $16 million in
U.S. Treasury securities at December 31,1994.  During 1995, the Company paid the
remaining  principal  of $8 million  plus  accrued  interest  on its 8.5% Senior
Notes.

     For the year ended  December 31, 1995,  the Company  received a total of $3
million in dividends  from its asset  management  and trust  subsidiary,  United
States Trust Company  ("USTC"),  $1 million from USTrust and $1 million from JSA
Financial   Corporation   ("JSA"),  a  nonbanking   subsidiary  of  the  Company
specializing  in the  liquidation of problem  assets.  During the same period $1
million was contributed to UST  Bank/Connecticut  ("UST/Conn")  and $6.5 million
was  contributed  to JSA.  This  capital  contribution  to JSA  facilitated  the
purchase of $5.1 million in problem  assets from  UST/Conn and provided JSA with
additional operating capital.

Deposits

The following  table sets forth the  remaining  maturities  of  certificates  of
deposit in the amount of $100 thousand or more at December 31, 1995:

(Dollars in thousands)
Less than three months                            $       72,739
Three to six months                                       20,894
Six to twelve months                                      14,178
Over twelve months                                         4,615
                                                           -----
        Total                                     $      112,426
                                                  ==============

Short-term Borrowings

The Company's short-term borrowings consist primarily of federal funds purchased
and  securities  sold under  agreements to  repurchase.  These  instruments  are
generally overnight funds.

<TABLE>
<CAPTION>
                                December 31,                        For the Year Ended December 31,
                                    Weighted Average      Maximum Amount    Average Amount  Weighted Average
(Dollars in thousands)      Balance   Interest Rate      At Any Month End     Outstanding     Interest Rate
<S>                        <C>           <C>               <C>                 <C>                 <C>  
Federal funds purchased:
        1995               $ 57,406      5.63%             $ 58,013            $ 40,020            5.86%
        1994                 19,296      6.00%               35,061              29,090            4.14%
        1993                 35,913      3.25%               80,126              42,965            3.14%

Securities sold under 
 agreements to repurchase:
        1995               $172,689      4.73%             $172,689            $127,752            4.85%
        1994                126,597      4.48%              155,709             137,139            3.22%
        1993                158,618      2.31%              221,549             167,696            2.55%
</TABLE>

Interest Rate Risk

Volatility in interest rates  requires the Company to manage  interest rate risk
which  arises  from  differences  in the  timing  of  repricing  of  assets  and
liabilities.   Management   monitors   and   adjusts  the   difference   

16
<PAGE>

between  interest-sensitive  assets and  interest-sensitive  liabilities  ("GAP"
position) within various time frames.  An institution with more assets repricing
than  liabilities  within a given  time  frame  is  considered  asset  sensitive
("positive GAP") and in time frames with more liabilities  repricing than assets
it is liability sensitive ("negative GAP"). Within GAP limits established by the
Board of Directors, the Company seeks to balance the objective of insulating the
net  interest  margin  from  rate  exposure  with that of  taking  advantage  of
anticipated changes in rates in order to enhance income. The Company's policy is
to limit its one-year  cumulative  GAP position to 2.5 times  equity,  presently
equal to  approximately  22 percent of total  assets.  The  Company  manages its
interest rate GAP primarily by lengthening or shortening the maturity  structure
of its securities portfolio.  

     The  Company's  GAP  presentation  may not  reflect  the  degrees  to which
interest-earning  assets  and core  deposit  costs  respond to changes in market
interest rates. The Company's  rate-sensitive  assets consist primarily of loans
tied to the prime rate and to a lesser extent the London Interbank  Offered Rate
("LIBOR").  As interest  rates rose during the first quarter of 1995,  the prime
rate and, therefore, the Company's yield on earning assets increased faster than
the rate paid on interest-bearing  liabilities.  After a period of interest rate
stability experienced within the second quarter, interest rates decreased during
the last half of 1995,  effecting a reduced  prime rate.  This had a predictable
effect on the  Company's  margin  with the yield on  earning  assets  decreasing
faster than the rate paid on interest-bearing  liabilities.  

     The following  table  summarizes the Company's GAP position at December 31,
1995.  The  majority  of loans  are  included  in 0-30 days as they  reprice  in
response to changes in the interest rate environment.  Interest-bearing deposits
are classified  according to their expected  interest rate  sensitivity.  Actual
sensitivity of these deposits is reviewed  periodically and adjustments are made
in the Company's GAP analysis as management  deems  appropriate.  Securities and
noninterest-bearing  demand deposits are categorized according to their expected
lives based on published industry prepayment estimates in the case of securities
and current management  estimates for demand deposits.  Securities are evaluated
in conjunction with the Company's asset/liability management strategy and may be
purchased  or sold in response to expected or actual  changes in interest  rates
and credit risk,  prepayment risk, loan growth and similar factors.  The reserve
for possible loan losses is included in the "Over 1 Year" category of loans.  At
December 31,  1995,  the  one-year  cumulative  GAP position was negative at $57
million, or approximately 3 percent of total assets.

<TABLE>
<CAPTION>
                                                                       Interest Sensitivity Periods
(Dollars in millions)                           0-30 Days     31-90 Days      91-365 Days     Over 1 Year         Total
<S>                                           <C>             <C>             <C>             <C>             <C>          
Loans, net of reserve                         $       728     $       24      $        93     $       371     $       1,216
Securities                                             20             25              108             423               576
Other assets                                           23              2                              152               177
                                                       --              -              ---             ---               ---
                Total assets                  $       771     $       51      $       201     $       946     $       1,969
                                              -----------     ----------      -----------     -----------     =============
                                                                                                             
Interest-bearing deposits                     $       315     $       50      $       333     $       442     $       1,140
                                                                                                              
Borrowed funds                                        243                                                               243
Noninterest-bearing demand deposits                   123                                             250               373
Other liabilities and Stockholders' equity             16                                             197               213
                                                       --           ----           ------          ------             -----  
                Total liabilities and equity  $       697     $       50      $       333     $       889     $       1,969
                                              -----------     ----------      -----------     -----------     =============
                                              
GAP for period                                $        74     $        1      $      (132)    $        57
                                              ===========     ----------      -----------     -----------
Cumulative GAP                                                $       75      $       (57)    $         0
                                                              ==========      ===========     ===========
As a percent of total assets                        3.76%          3.81%          (2.89)%
</TABLE>

Capital

There are three capital requirements which banks and bank holding companies must
meet. Two requirements take into consideration risks inherent in assets for both
on- and off-balance sheet items on a risk weighted basis ("risk-based  assets").
Risk  weightings  are as determined by banking  regulators for the industry as a
whole. Under these requirements,  the Company must meet minimum Tier 1 and Total
risk-based  capital ratios (capital,  as defined in the regulations,  divided by
risk-based assets) of 4 percent and 8 percent,  respectively.  Tier 1 capital is
essentially  shareholders'  investment,  net of  intangible  assets  and  Tier 2
capital is the  allowable  portion of the loan loss  reserve  (as  defined)  and
discounted  subordinated  debt.  Total capital is the  combination of Tier 1 and
Tier 2. The third  requirement is a leverage  capital  ratio,  defined as Tier 1
capital  divided by total average assets,  net of intangibles.  All but the most
highly-rated banks are required to maintain a minimum of 4 percent.  The Company
has not been notified of a specific requirement above the minimum.

17
<PAGE>

     At December 31, 1995 and 1994, the Company's consolidated risk-based assets
were $1.63  billion and $1.52  billion,  respectively.  The  capital  ratios and
regulatory minimum requirements applicable to the Company were:

<TABLE>
<CAPTION>
                                                   December 31, 1995                              December 31, 1994
                                         Amount                 Percent                  Amount                 Percent
                                             Minimum                 Minimum                 Minimum                 Minimum
(Dollars in millions)                Actual  Required        Actual  Required        Actual  Required        Actual  Required
<S>                                  <C>      <C>            <C>       <C>           <C>      <C>             <C>      <C>  
Tier 1 capital                       $167.4   $ 65.3         10.24%    4.00%         $149.7   $ 61.0          9.82%    4.00%
Total (Tier 1 and Tier 2) capital     187.8    127.7         11.75%    8.00%          169.5    118.5         11.45%    8.00%
Tier 1 leverage capital               167.4     75.8          8.83%    4.00%          149.7     71.3          8.27%    4.00%
</TABLE>

     Capital ratios have been calculated consistent with regulatory policy which
excludes the impact of SFAS No. 115 and the recording of an unrealized gain/loss
on securities available-for-sale.  However, as required, any net unrealized loss
on marketable equity securities has been deducted from Tier 1 capital.

     The Tier 1 leverage capital ratios and regulatory minimum  requirements for
the Company's subsidiary banks at December 31, 1995 and 1994 were:

<TABLE>
<CAPTION>
                                                  December 31, 1995*                              December 31, 1994
                                         Amount                 Percent                  Amount                 Percent
                                             Minimum                 Minimum                 Minimum                 Minimum
(Dollars in millions)                Actual  Required        Actual  Required        Actual  Required        Actual  Required
<S>                                  <C>      <C>            <C>       <C>           <C>      <C>             <C>      <C>  
USTrust                              $141.7   $107.3          7.92%    6.00%         $129.2   $102.6           7.55%    6.00%
USTC                                    5.0       .9         32.99%    6.00%            4.3       .7          39.46%    6.00%
UST/Conn                                9.1      4.4          8.31%    4.00%            6.7      6.3           6.40%    6.00%

*    Refer to "Former  Agreements  with Bank  Regulatory  Agencies"  below for a
     discussion of regulatory capital  requirements for the Company's subsidiary
     banks.
</TABLE>

     The Company and each of its subsidiary  banks are in compliance  with their
respective capital requirements.

     In the fourth quarter of 1995 the Company declared and paid a cash dividend
of $0.05 per share to stockholders for a total dividend of $888 thousand. During
this year the Company  received  dividends from  subsidiaries of $3 million from
USTC,  $1 million from USTrust and $1 million  from JSA  Financial  Corporation.
During the same period the Company  contributed  as capital to its  subsidiaries
totaling $1 million to UST/Conn and $6.5 million to JSA Financial Corporation.

     In 1995,  the  Company's  Board of  Directors  approved a stock  repurchase
program and the  Company  adopted a  shareholder  rights  plan,  refer to Part I
Recent  Developments,  "Adoption of Stock Repurchase  Program," and "Adoption of
Shareholder Rights Plan," respectively, of this Form 10-K for a discussion.

Former Agreements with Bank Regulatory Agencies

On July 21,  1995,  the  Company  was  released  from the  terms of its  Written
Agreement originally entered into on August 3, 1992, by the Federal Reserve Bank
of Boston  ("FRB-Boston")  and the Office of the  Massachusetts  Commissioner of
Banks ("Massachusetts Commissioner"). For a discussion of the Agreement which is
no longer in effect,  refer to the Company's  Annual Report on Form 10-K for the
fiscal year ended December 31, 1994.

     In June 1995,  the  Company's  Massachusetts-based  and largest  subsidiary
bank,  USTrust,  was  released  by the  Federal  Deposit  Insurance  Corporation
("FDIC")  and the  Massachusetts  Commissioner  from the  terms of its Cease and
Desist Order, originally issued in January 1992. In conjunction with the release
of the Order,  USTrust's  Board of Directors  adopted a  resolution  pursuant to
which USTrust agreed,  among other matters: (i) to continue to maintain a Tier 1
leverage  capital ratio of at least 6 percent;  (ii) not to pay a dividend which
would  cause the Bank's Tier 1 leverage  capital  ratio to fall below 6 percent;
(iii) to  continue to  implement  plans to reduce  nonperforming  assets and the
aggregate  level of  insider  loans;  and (iv) to provide a  quarterly  progress
report to the FDIC and the Massachusetts  Commissioner.  For a discussion of the
Order which is no longer in effect, refer to the Company's Annual Report on Form
10-K  for the  fiscal  year  ended  December  31,  1994.  The  Company's  second
Massachusetts-based banking subsidiary,  USTC, was released from a similar Order
in 1994,  and has also agreed not to declare or pay dividends  should the effect
of the payment of such dividends  cause USTC's Tier 1 leverage  capital ratio to
fall below 6 percent.  On  September  14,  1995,  UST/Conn  was  released by the
Commissioner  of Banks  for the  State  of  Connecticut  from  the  terms of its
Stipulation and Agreement, originally issued in

18
<PAGE>

June 1991. For a discussion of the Agreement which is no longer in effect, refer
to the Company's  Annual Report on Form 10-K for the fiscal year ended  December
31, 1994.

Credit Quality and Reserve for Possible Loan Losses

Improving  credit quality has been a major  strategic focus of the Company since
1993.  The  success of the  program is  evidenced  by the  Company's  aggressive
reduction in the level of problem  assets in 1994 and this year. At December 31,
1995,  substandard  loans were $44 million compared with $126 million a year ago
and a peak of $265 million at the end of 1993. Loans reported as substandard for
the purpose of this  discussion  include  loans  classified  as  Substandard  or
Doubtful,  as  determined  by the  Company in its  internal  credit  risk rating
system. Under the Company's  definition,  Substandard loans are characterized by
the  distinct  possibility  that  some  loss  will be  sustained  if the  credit
deficiencies are not corrected.  The Substandard  classification,  however, does
not  necessarily  imply  ultimate loss for each  individual  loan so classified.
Loans  classified as Doubtful have all the  weaknesses  inherent in  Substandard
loans with the added  characteristic  that the weaknesses make collection of 100
percent of the  assets  questionable  and  improbable.

     At December 31, 1995, Substandard and Doubtful loans were $42.9 million and
$.9 million,  respectively.  Substandard loans include $24.5 million of accruing
commercial and commercial  real estate loans,  of which 99 percent were current,
and $18.4 million in loans that were on nonaccrual and included in nonperforming
assets.  All of the loans rated  Doubtful  were on  nonaccrual  and  included in
nonperforming assets. Also, at December 31, 1995, loans rated Special Mention in
the Company's internal credit risk rating profile amounted to $1.6 million,  all
of which  were  current.  This  compares  with $16  million a year ago.  Special
Mention loans, as defined by the Company, have potential weaknesses that deserve
management's close attention.  If left uncorrected,  these potential  weaknesses
may result in deterioration of the repayment prospects for the assets.

     As of  year-end  1995,  approximately  65  percent of loans  classified  as
Substandard or Doubtful were  collateralized with real estate, and the remainder
were collateralized  with accounts  receivable,  inventory,  equipment and other
business assets.  Of the loans secured by real estate,  approximately 45 percent
were collateralized by owner-occupied  commercial  properties,  approximately 40
percent  were  collateralized  by  commercial  real  estate   development,   and
approximately  10 percent by residential  real estate.  The remaining loans were
collateralized by real estate under construction and raw land.

19
<PAGE>

Nonperforming Assets

The  following  table  displays the  Company's  total  nonperforming  assets and
measures performance regarding key indicators of asset quality:

<TABLE>
<CAPTION>
                                                                              December 31,
(Dollars in thousands)                                           1995    1994    1993     1992     1991
<S>                                                             <C>     <C>     <C>      <C>      <C>     
Nonperforming assets:
        Nonaccruals:(1)
                Commercial and financial                        $14,531 $36,754 $ 28,511 $ 55,893 $ 44,453
                Commercial real estate:
                        Construction                                 44     551    1,025   16,558   12,830
                        Developer, investor and land              3,114  18,447   25,475   24,461   32,706
                Consumer:
                        Residential                                 956   3,373    3,601    2,518    3,636
                        Home equity                                 741     656      190    1,240    2,625
                        Indirect automobile installment             446     134       40      271      945
                        Other consumer                               98      29      540      550      246
                Lease financing
                                                                ------- ------- -------- -------- --------
        Total nonaccrual                                         19,930  59,944   59,382  101,491   97,441 
        Accruing loans 90 days or more                              257   1,409      557    1,091    8,554  
        Other real estate owned  (OREO),                          3,015   9,958   11,270   28,644   43,470
        Restructured loans(1)(3)                                  5,783  15,757   41,477   44,899   36,311
                                                                  -----  ------   ------   ------   ------
Total nonperforming assets                                      $28,985 $87,068 $112,686 $176,125 $185,776
                                                                ======= ======= ======== ======== ========
Reserve for possible loan losses                                $56,029 $64,088 $ 64,465 $ 50,478 $ 50,100
Net chargeoffs                                                  $21,149 $24,658 $ 54,440 $ 41,867 $ 39,620 
OREO reserve(4)                                                 $   568 $ 1,044 $  4,635 $    389
Ratios:
Reserve to nonaccrual loans                                      281.1%  106.9%   108.6%    49.7%    51.4%
Reserve to total of nonaccrual loans, accruing loans 90 days
        or more past due and restructured loans                  215.7%   83.1%    63.6%    34.2%    35.2%
Reserve to period-end loans                                        4.4%    5.0%     4.8%     3.4%     3.0%
Nonaccrual loans to period-end loans                               1.6%    4.7%     4.4%     6.7%     5.8%
Nonaccrual loans and accruing loans over 90 days past due
        to period-end loans                                        1.6%    4.8%     4.4%     6.8%     6.3%
Nonperforming assets to period-end loans and OREO                  2.3%    6.8%     8.3%    11.5%    10.7%
Nonperforming assets to total assets                               1.5%    4.8%     5.5%     8.1%     7.9%
Net chargeoffs to average loans                                    1.7%    1.9%     3.8%     2.6%     2.2%
OREO reserve to OREO(4)                                           15.9%    9.5%    29.1%     1.3%

(1)  The amount of interest on December  31, 1995  nonaccrual  and  restructured
     loans that would have been recorded had the loans been paying in accordance
     with their original  terms during 1995 was  approximately  $3,131,000.  The
     amount of interest income on these loans included in net income in 1995 was
     approximately $2,522,000.

(2)  Other real estate owned  ("OREO")  represents  assets to which title to the
     collateral  has been taken through  foreclosure  or in settlement of loans.
     Other real estate owned is recorded at the lower of the recorded investment
     in the loan or fair value minus  estimated  costs to sell ("net  realizable
     value").  Prior to 1992,  other real estate owned was recorded at the lower
     of  recorded  investment  in the loan or fair  value.  Included in OREO are
     automobiles owned which are vehicles  repossessed for reason of nonpayment.
     The balance is stated at the lower of the recorded  investment  in the loan
     or net realizable value.

(3)  Restructured   loans  are  those  where  interest  rates  and/or  principal
     repayments  have been  restructured to defer or reduce payments as a result
     of financial difficulties of the borrower.

(4)  Prior to  December  1992,  when the  Company  adopted  AICPA  Statement  of
     Position 92-3,  OREO was reduced to its fair value by direct charges to the
     asset. Since then, the Company, like other bank holding companies, has used
     reserves to indicate the net realizable value of its OREO.
</TABLE>

     The  improvement  in credit  quality  is also  exhibited  in the  Company's
successful  reduction of  nonperforming  assets.  During 1995, these assets were
reduced 67 percent , or $58.1  million to $29.0  million.  Nonperforming  assets
were 1.5 percent of total assets at December 31, 1995  compared with 4.8 percent
and 5.5  percent at  year-end  1994 and 1993,  respectively.  The lower level of
nonperformers  has 

20
<PAGE>

also directly contributed to the decreasing amount of net chargeoffs recorded by
the Company.  This year net chargeoffs were $21.1 million compared with 1994 and
1993 chargeoffs of $24.7 million and $54.4 million,  respectively.  The 1995 net
chargeoffs  included a charge of $6.9  million  recorded  in  connection  with a
program for the accelerated  disposition of $20 million in troubled assets which
are  classified  as loans  held-for-sale  at  December  31,  1995.  The  Company
continues to consider further accelerated disposition programs for the remaining
balance of troubled loans. 

     At December 31, 1995, total impaired loans were $25.7 million, comprised of
$1.4 million that required a reserve for possible loan losses of $.3 million and
$24.3 million that did not require a related reserve. Impaired loans, as defined
in  Statement  of Financial  Accounting  Standards  No. 114 ("SFAS No. 114") are
loans recognized by the Company as nonaccrual and restructured.  Refer to Note 5
to the  Notes to  Consolidated  Financial  Statements  of this  Form  10-K for a
further  discussion  on SFAS No.  114.  

     The  reserve  for  possible  loan losses  decreased  from $64.1  million at
year-end  1994 to $56.0 million this year.  Provisions  for possible loan losses
were recorded at amounts relatively  consistent with the level of net chargeoffs
throughout  much of the year.  The  exception  was the late fourth  quarter $6.9
million  charge  related to the  accelerated  disposition  program.  Despite the
decrease in the reserve balance, the reserve coverage  continually  strengthened
throughout  1995 equaling 281 percent of  nonaccrual  loans at year end compared
with 108 percent last year and 109 percent in 1993.

Credit Quality Monitoring

Credit quality within the commercial and commercial  real estate loan portfolios
of each  subsidiary  is  quantified  by an internal  credit  risk rating  system
designed to parallel  regulatory  criteria and categories of loan risk.  Lenders
monitor  their  loans to ensure  appropriate  rating  assignments  are made on a
timely  basis.  Risk  ratings and overall  loan  quality are also  assessed on a
regular  basis by an  independent  Loan Review  Department  which reports to the
Company's  Board of  Directors  and its Asset  Quality  Committee.  Loan  Review
personnel conduct ongoing portfolio trend analyses and individual credit reviews
to evaluate loan risk and compliance with corporate  lending  policies.  Results
and recommendations from this process provide senior management and the Board of
Directors and its Asset Quality  Committee with independent  information on loan
portfolio  condition.  The Asset Quality  Committee,  which reports to the Audit
Committee of the Company's  Board of Directors,  monitors asset quality  monthly
and  actively  reviews the large  credit  exposures.  

     The  Company's   commercial   lending,   credit  and  loan   administration
departments  are  charged  with  ensuring   compliance  with  lending  policies,
procedures  and  administrative  guidelines  for the  commercial  portfolio.  In
addition,   an  Appraisal   Department  reviews  third-party  real  estate  loan
collateral  appraisals  to ensure  adherence  to  federal  requirements  and the
Company's  lending  policies.   There  is  a  Controlled  Loan  Department  with
specialized  expertise in handling  most of the Company's  nonaccrual  and other
troubled  loans.  In  order  to  ensure  the  effectiveness  of  credit  quality
monitoring systems,  monitoring controls are periodically reviewed and tested by
the  Company's  Internal  Audit  Department.  

     The credit quality of the lease financing receivables portfolio is measured
by the same credit  rating  system  described  above.  Consumer  loan quality is
evaluated on the basis of delinquent  data due to the large number of such loans
and  relatively  small size of individual  credits.  Historical  trend  analysis
reports  are  reviewed on a monthly  basis by senior  lending  officers  and the
Company's Board of Directors.  

     Past  due  nonconsumer   loans,   nonaccrual   loans,   and  troubled  debt
restructurings  are reviewed at least  quarterly by a Special  Assets  Committee
whose  membership  includes the Chief  Executive  Officer of the  Company,  Loan
Review  Department  management and the most senior lending officers in the major
lending and credit-related divisions.  Loans are placed on nonaccrual when there
is doubt as to the  collectibility  of interest or  principal or if loans are 90
days or more past due unless  they are both well  secured  and in the process of
collection.  In every  case,  a loan  reaching  180 days  past due is  placed on
nonaccrual.

Reserve for Possible Loan Losses

The  Company  maintains  a reserve for  possible  loan  losses to absorb  future
chargeoffs  of loans and  leases  in the  existing  portfolio.  The  reserve  is
increased when a loan loss provision is recorded in the income statement. When a
loan, or portion thereof, is considered uncollectible, it is charged against the
reserve.  Recoveries on amounts previously  charged-off are added to the reserve
when  collected.  Adequacy of the reserve for possible loan losses is determined
using a consistent,  systematic  methodology which analyzes the size and risk of
the loan and  lease  portfolio  on a monthly  basis.  Factors  in this  analysis
include   historical  loss  experience  and  asset  quality,   as  reflected  by
delinquency  trends,  nonaccrual and restructured loans and the Company's credit
risk rating  profile.  Consideration  is also given to the current and  expected
economic  conditions and in particular how such  conditions  affect the types of
credits in the  portfolio  and the market  area in  general.  This  analysis  is
documented  using a  combination  of  numerical  and  qualitative  analysis  and
includes sensitivity testing and a written conclusion.

21
<PAGE>

     No portion of the reserve is restricted to any loan or group of loans,  and
the entire reserve is available to absorb future realized losses. The amount and
timing of realized  losses and future reserve  allocations may vary from current
estimates.  An  allocation  of the loan loss  reserve and ratio of loans in each
category to total loans at December 31, 1991 through 1995 is presented below:

<TABLE>
<CAPTION>
                                                                    December 31,
                       1995                    1994                    1993                    1992                    1991
                          Loans as a              Loans as a              Loans as a              Loans as a              Loans as a
              Allocation  Percent of  Allocation  Percent of  Allocation  Percent of  Allocation  Percent of  Allocation  Percent of
(Dollars in     Amount   Total Loans    Amount   Total Loans    Amount   Total Loans    Amount   Total Loans     Amount  Total Loans
thousands)
<S>             <C>        <C>          <C>         <C>        <C>         <C>         <C>        <C>           <C>          <C>  
Amount of loan
 loss reserve:
Commercial and
 financial      $20,055    50.6%        $30,962     55.3%      $38,123     56.3%       $25,702    57.3%         $23,568      51.8%
Commercial 
 real estate:
  Construction      495     1.3%            538      1.0%        1,648      2.6%         1,399     3.4%           1,781       4.2%
  Developer, 
  investor and
  land            4,802    16.3%          8,885     20.8%       12,426     23.9%         8,453    24.5%           9,913      27.7%
Consumer*         8,515    29.6%          6,028     20.9%        5,470     15.2%         4,762    12.9%           5,324      14.4%
Lease financing     356     2.2%            130      2.0%          132      2.0%           142     1.9%             158       1.9%
Unallocated      21,806                  17,545                  6,666                  10,020                    9,356
                 ------   -----         -------    -----       -------    -----        -------   -----           ------     -----   
    Total       $56,029   100.0%        $64,088    100.0%      $64,465    100.0%       $50,478   100.0%         $50,100     100.0%
                =======   =====         =======    =====       =======    =====        =======   =====          =======     ===== 

*    Consumer loans include indirect automobile  installment loans,  residential
     mortgages and home equity lines of credit,  credit cards,  and check credit
     loans.
</TABLE>

A summary of loan loss  experience for the years ended December 31, 1991 through
1995 is presented below:

<TABLE>
<CAPTION>
                                                                                            December 31,
(Dollars in thousands)                                           1995            1994           1993            1992            1991
<S>                                                       <C>             <C>             <C>             <C>             <C>    
Reserve for loan losses at beginning of period         $      64,088  $       64,465  $       50,478  $       50,100  $       36,008
Chargeoffs:
                Commercial and financial                       8,823          15,320          29,789          24,012          17,613
                Commercial real estate:
                        Construction                             511             197           1,705             924           2,242
                        Developer, investor and land          16,531          13,483          23,387          10,788          10,366
                Consumer:
                        Residential mortgage                   1,845             897             686           1,250           2,839
                        Home equity*                             403             119             370             673
                        Indirect automobile installment          844             806           1,981            2,181          5,366
                        Other consumer                           117             237             280            3,386          2,890
                Lease financing  
                                                          ----------       ---------       ---------       ----------       --------
                        Total chargeoffs                      29,074          31,059          58,198           43,214         41,316
                                                              ------          ------          ------           ------         ------
Recoveries:
                Commercial and financial                       4,236           4,319           1,628              688            735
                Commercial real estate:
                        Construction                             181              32              24                9
                        Developer, investor and land           1,799           1,034             928                              56
                Consumer:
                        Residential mortgage                     982              62              11               36             78
                        Home equity*                              46              48             101               66
                        Indirect automobile installment          642             820           1,046              219            564
                        Other consumer                            39              86              20              329            263
                Lease financing
                                                         -----------      ----------     -----------         --------       --------
                        Total recoveries                       7,925           6,401           3,758            1,347          1,696
                                                               -----           -----           -----            -----          -----
Net chargeoffs                                                21,149          24,658          54,440           41,867         39,620
Provisions charged to operations                              13,090          24,281          68,427           42,245         53,712
                                                              ------          ------          ------           ------         ------
Reserve for loan losses at end of period               $      56,029  $       64,088  $       64,465  $        50,478  $      50,100
                                                       =============  ==============  ==============  ===============  =============
Average loans                                          $   1,265,098  $    1,283,464  $    1,435,665  $     1,584,390  $   1,784,302
                                                       =============  ==============  ==============  ===============  =============
Ratio of net chargeoffs to average loans                        1.7%            1.9%            3.8%             2.6%           2.2%

*    This  information  is available  separately  for 1992-1995  only.  The 1991
     information is included in the other consumer category.
</TABLE>

22
<PAGE>

                             Results of Operations

Comparison of 1995 with 1994

For the year ended December 31, 1995, net income was $15.0 million, or $0.83 per
share, a substantial increase over the $4.7 million,  $0.27 per share, earned in
1994.  The  improvement  in earnings  was the direct  result of a $11.2  million
reduction in the provision for possible loan losses from $24.3 million last year
to $13.1  million for 1995.  In addition,  a stronger  net  interest  margin and
notable  reductions in noninterest  expense,  particularly  foreclosed asset and
workout expense and FDIC deposit  insurance  assessments,  also contributed to a
higher  level of net income.  This  year's  stronger  earnings  results are also
reflected  in an improved  return on average  stockholders'  investment  of 9.14
percent  compared with 3.12 percent last year, and an improved return on average
assets of .81 percent compared with .25 percent in 1994. A comparative  analysis
for return on average assets and return on average  stockholders'  investment is
shown below:

<TABLE>
<CAPTION>
Return on Average Assets -- Component Analysis 
Year Ended December 31,                                         1995    1994
<S>                                                            <C>     <C>   
Net interest income                                             5.20%   4.90% 
Provision for possible loan losses                              (.72)  (1.29)
                                                                ----   ----- 
Net interest income after provision for possible loan losses    4.48    3.61
Noninterest income                                              1.63    1.61
Noninterest expense                                            (4.80)  (4.86)
                                                               -----   ----- 
Income before income tax                                        1.31     .36
Income tax provision                                             .50     .11
                                                                 ---     ---
        Net income                                               .81%    .25%
                                                                 ===     === 
</TABLE>

<TABLE>
<CAPTION>
Return on Average Stockholders' Investment -- Component Analysis
Year Ended December 31,                                         1995    1994
<S>                                                            <C>     <C>    
Net interest income                                             58.32%  60.49%
Provision for possible loan losses                              (8.00) (15.95)
                                                                -----  ------ 
Net interest income after provision for possible loan losses    50.32   44.54
Noninterest income                                              18.31   19.92
Noninterest expense                                            (53.89) (60.00)
                                                               ------  ------ 
Income before income tax                                        14.74   4.46
Income tax provision                                             5.60    1.34
                                                                 ----    ----
        Net income                                               9.14%   3.12%
                                                                 ====    ==== 
</TABLE>

Net Interest Income Analysis

     The Company's net interest income on a fully taxable  equivalent  basis was
$96.4 million,  $3.3 million higher than the $93.1 million in 1994. The increase
reflects  the  positive  effect  on net  interest  income  of a higher  level of
interest rates in 1995 compared with 1994. The average  interest rate spread was
relatively  level with 1994 while the  average  interest  rate margin was higher
than a year ago.  Partially  offsetting  the effect of a stronger  interest rate
margin was a decline in the volume of earning assets,  particularly loans, and a
shift by deposit  customers from savings products to higher cost certificates of
deposit  during the year.  

23
<PAGE>

     The table below presents the following information:  average earning assets
(including nonaccrual loans) and average interest-bearing liabilities supporting
earning  assets;  and  interest  income  and  interest  expense  expressed  as a
percentage  of the  related  asset  or  liability.  The  average  balances  and,
therefore,  the  rates  presented  do not  include  the  effect  of  fair  value
adjustments under SFAS No. 115 " Accounting for Certain  Investments in Debt and
Equity Securities."

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                           1995                           1994                         1993
                                                Average            Average     Average            Average   Average          Average
(Dollars in thousands)                         Balance   Interest    Rate      Balance  Interest   Rate     Balance  Interest  Rate
<S>                                          <C>         <C>         <C>    <C>         <C>        <C>   <C>        <C>        <C>  
Assets
Cash and due from banks                      $   89,490                     $   95,717                   $  100,755
Excess funds sold and other                      51,908  $  3,047    5.87%      24,095  $  1,197   4.97%      2,704 $     96   3.55%
Securities:
 Taxable                                        418,484    25,746    6.15      452,700    27,206   6.01     450,998   29,303   6.50 
 Non-taxable(1)                                   5,097       750   14.71        5,559       557  10.02      11,175      819   7.33 
                                                  -----       ---                -----       ---             ------      ---        
 Total securities                               423,581    26,496    6.26      458,259    27,763   6.06     462,173   30,122   6.52
Loans(1)                                      1,265,098   119,375    9.44    1,283,464   104,322   8.13   1,435,665  111,586   7.77 
Reserve for possible loan  losses               (63,039)                       (64,063)                     (64,531)
                                                -------                        -------                      ------- 
 Net loans                                    1,202,059                      1,219,401                    1,371,134
Other assets                                     69,191                         83,957                      105,801
                                                 ------  --------               ------  --------            ------- --------
         Total assets/interest income        $1,836,229  $148,918    8.11%  $1,881,429  $133,282   7.08% $2,042,567 $141,804   6.94%
                                             ==========  ========           ==========  ========         ========== ========        

Liabilities and Stockholders' Investment
Deposits:
Noninterest-bearing demand                   $  336,931                     $  350,405                   $  346,980
Interest-bearing demand
 (NOW accounts)                                 158,636  $  2,176    1.37%     163,841 $   2,343   1.43%    144,255 $  2,693   1.87%
Money market                                    237,580     6,580    2.77      288,489     6,372   2.21     346,314    8,429   2.43 
Regular savings                                 254,496     7,104    2.79      311,139     7,745   2.49     320,357    9,338   2.91 
Time                                            486,993    26,823    5.51      413,239    16,447   3.98     477,272   19,840   4.16 
                                                -------    ------              -------    ------            -------   ------        
         Total interest-bearing deposits      1,137,705    42,683    3.75    1,176,708    32,907   2.80   1,288,198   40,300   3.13 
                                                -------                        -------                      -------           
         Total deposits                       1,474,636                      1,527,113                    1,635,178
Short-term borrowings                           179,260     9,281    5.18      180,325     6,240   3.46     227,944    6,239   2.74 
Other borrowings                                  6,406       571    8.91       11,790     1,066   9.04      16,831    1,405   8.35 
Other liabilities                                12,276                          9,945                       19,465
Stockholders' investment                        163,651                        152,256                      143,149
                                                -------    ------              -------    ------            -------   ------        
         Total liabilities and stockholders'
                 investment/interest expense $1,836,229  $ 52,535    2.86%  $1,881,429 $  40,213   2.14% $2,042,567 $ 47,944   2.35%
                                             ==========  ========           ========== =========         ========== ========        
Earning assets-- interest income             $1,740,587  $148,918    8.56%  $1,765,818 $ 133,282   7.55% $1,900,542 $141,804   7.46%
Interest-bearing liabilities-- interest
        expense                              $1,323,371    52,535    3.97%  $1,368,823    40,213   2.94% $1,532,973   47,944   3.13%
                                                           ------                         ------                      ------        
Net interest spread(2)                                               4.59%                         4.61%                       4.33%
Net interest margin(3)                                   $ 96,383    5.54%             $  93,069   5.27%            $ 93,860   4.94%
                                                         ========                      =========                    ========        

(1)  Interest on loans to and  obligations of states and political  subdivisions
     is not  subject to  federal  income  tax.  In order to make  pretax  yields
     comparable to taxable loans and investments, a tax equivalent adjustment is
     utilized.  The adjustment is based on a 35 percent  federal income tax rate
     in 1995 and 1993,  and 34 percent  in 1994 and  includes  applicable  state
     taxes, net of federal tax benefit.

(2)  Net interest  spread is the excess of the interest rate on average  earning
     assets over the interest rate on average interest-bearing liabilities.

(3)  Net  interest  margin is the excess of the  interest  earned over  interest
     expense divided by average earning assets.
</TABLE>

     Interest rates moved downward in the second half of 1995 following a period
of rapid  interest  rate rise from early 1994 through the first quarter of 1995.
The result of this year's higher level of interest  rates was an  improvement in
yield on earning  assets of 101 basis points from 7.55 percent last year to 8.56
percent  this  year.  The  cost  of  interest-bearing  liabilities,  principally
deposits,  increased  by 103 basis  points from 2.94  percent  last year to 3.97
percent in 1995.  Yields on  prime-based  loans and excess funds,  which reprice
daily,  reached  their  peak in the first  quarter  of this  year and  decreased
steadily  throughout the remainder of the year  consistent  with the movement of
interest rates.

     While the Company initially  refrained from increasing deposit rates in the
rising  interest rate  environment  of 1994, to satisfy  liquidity  needs and in
response to  competition  for  deposits,  more  aggressive  deposit  pricing was
adopted  in late 1994 and the first  quarter of this  year.  Beginning  with the
second quarter and  continuing  through the rest of 1995, the Company moved to a
less  competitive  

24
<PAGE>

pricing  policy.  The  result was a rising  cost of  deposits
earlier this year which subsided during the latter half of the year. The Company
anticipates  that deposit  rates will be  relatively  level in the first half of
1996 and move downward in the second half in response to lower  interest  rates.

     This year's  interest rate spread of 4.59 percent was  approximately  equal
with the 1994  spread of 4.61  percent  as the rise in yield on  earning  assets
equaled the increase in cost of interest-bearing  liabilities.  The net interest
rate margin  improved 27 basis  points to 5.54 percent  reflecting  the positive
impact of an equal rise in rates on the larger balance of average earning assets
which totaled $1.74 billion  compared with  interest-bearing  liabilities  which
totaled  $1.32  billion.  Also  contributing  to the increased net interest rate
margin was a reduction  in  interest-bearing  liabilities  of $45 million  which
exceeded a decrease in interest-earning assets by $20 million. The net effect on
net  interest  income from  changes in rates in 1995  compared  with 1994 was an
increase of $5.5  million. 

     Despite  the  year-to-year  increase  in  interest  rate  margin  and level
interest  rate  spread,  both spread and margin  were in a downward  trend since
peaking at historical  highs in the first quarter of this year. The narrowing of
rate and margin is expected to continue due to declining  interest rates,  which
will reduce yield on interest earning assets,  particularly  loans. In the short
term, rates on new deposits are expected to remain relatively stable with little
impact on margin and spread.

     Average earning assets  decreased $25 million from $1.77 billion in 1994 to
$1.74 billion in 1995.  The decrease  reflects  declines in average loans of $18
million and securities of $35 million which was partially  offset by an increase
in  lower  yielding  excess  funds  of  $28  million.  Average  interest-bearing
liabilities  decreased $45 million from last year to $1.32 billion. In addition,
interest-bearing  liabilities experienced a shift in the mix of average deposits
from savings and money market  deposits to higher cost  certificates of deposit.
Regular savings, NOW and money market deposits decreased $113 million while time
deposits increased $74 million.  Further changes in the mix from savings deposit
products  to higher  cost time  deposit  products  would  negatively  impact net
interest income. The net effect on net interest income from changes in volume of
loans, deposits and other  interest-bearing  balances in 1995 compared with 1994
was a decrease  of $2.2  million.

     The  following  table  attributes  changes in interest  income and interest
expense   to  changes  in   interest   rates  and   changes  in  the  volume  of
interest-earning  assets  and  interest-bearing  liabilities  for the year ended
December 31, 1995 when compared with the year ended  December 31, 1994.  Changes
attributable to both rate and volume are allocated on a weighted basis.

<TABLE>
<CAPTION>
                                                                   Increase (Decrease) From Year Ended December 31, 1994
                                                     Year Ended                        Amount Due to Changes in
(Dollars in thousands)                            December 31, 1995   Total Change       Volume          Rate
<S>                                                 <C>             <C>             <C>             <C>           
Interest income:
        Interest and fees on loans*                 $       119,375 $       15,053  $       (1,512) $       16,565
        Interest and dividends on securities:
                Taxable                                      25,746         (1,460)         (2,093)            633
                Non-taxable*                                    750            193             (50)            243
        Interest on excess funds sold and other               3,047          1,850           1,599             251
                                                              -----          -----           -----             ---
                        Total interest income*              148,918         15,636          (2,056)         17,692
                                                            -------         ------          ------          ------
Interest expense:
        Interest on NOW,  money market and
                regular savings deposits                     15,860           (600)         (2,599)          1,999
        Interest on time deposits                            26,823         10,376           3,293           7,083
        Interest on short-term borrowings                     9,281          3,041             (37)          3,078
        Interest on other borrowings                            571           (495)           (480)            (15)
                                                                ---           ----            ----             --- 
                        Total interest expense               52,535         12,322             177          12,145
                                                             ------         ------             ---          ------
Net interest income                                 $        96,383  $       3,314  $       (2,233) $        5,547
                                                    ===============  =============  ==============  ==============

*    Fully taxable  equivalent at the federal  income tax rate of 35 percent and
     includes applicable state taxes net of federal benefit.  The tax equivalent
     adjustment  on loans  was  approximately  $.7  million  and on  non-taxable
     securities was approximately $.2 milion.
</TABLE>

Noninterest Income

Total  noninterest  income was $30.0  million in 1995, a slight  decrease of $.3
million from 1994.  Asset  management  fees decreased $1.1 million due to timing
differences in the  recognition  of fee income in 1994 and a slight  decrease in
the level of assets under management this year compared to last year. Offsetting
the lower asset  management  fees were increases in corporate  services  income,
residual income on maturing  equipment leases and higher realized gains from the
sale of primarily equity securities held by an investment company subsidiary.

25
<PAGE>

Noninterest Expense

Total  noninterest  expense was reduced  $3.2  million in 1995 to $88.2  million
compared to a year ago due largely to decreases in foreclosed  asset and workout
expense and deposit  insurance  assessments.  The lower level of problem  assets
this year resulted in a $3.0 million  decrease in  foreclosed  asset and workout
expense.  Further  declines in loan workout expense are expected as the level of
problem assets is reduced.  Deposit insurance assessments decreased $1.5 million
in 1995 due to the reduction in insurance  premium  rates by the FDIC.  Refer to
Note 12 to the Notes to Consolidated  Financial  Statements,  "Deposit Insurance
Assessment," for a further discussion of deposit insurance.  

     Salary  and  employee  benefits  increased  $1.6  million  in 1995 to $44.3
million.  The  increase  was  largely  due to a full  year of  asset  management
revenue-sharing  provisions in 1995 compared with only a half-year  provision in
1994.   Refer  to  the  paragraph   below  for  a  further   discussion  of  the
revenue-sharing  provisions.  Included in salary and  employee  benefits was $.7
million and $1.0 million in expenses  related to severance  agreements  for 1995
and 1994,  respectively.  

     In late 1994 and early 1995,  the Company and senior  executives  of USTC's
Asset  Management  Division  negotiated and entered into  employment  agreements
designed to maximize the  profitability  and grow the assets under management of
the asset  management  business.  The  agreements  are  designed to increase the
foregoing executives' participation in the value created in the asset management
business and, in a change-in-control  situation,  increase the likelihood that a
prospective  purchaser  will  retain the  services  of the  executives.  Certain
provisions  of the  agreements  became  effective  July  1,  1994,  and  contain
revenue-sharing  provisions which permit the Asset Management  Division to use a
specified  percentage  of its base  revenues  for the payment of expenses of the
operation,  including  incentive  compensation.  

     Other noninterest expense was reduced $.6 million in 1995 to $23.0 million.
Included in other  noninterest  expense were  provisions  recorded in connection
with space  consolidation,  including  the  writedown to market value of Company
facilities offered for sale and the writeoff of leases on abandoned  facilities,
lease  subsidies  and  leasehold   improvements.   The  facility   consolidation
provisions  were $1.9  million in 1995  compared  with $.5  million in 1994.  In
addition,  this year the Company  accelerated  the  amortization of certain core
deposit  intangible  assets after  conducting  a review of the  expected  future
economic  benefits  derived from these assets and their current carrying amount.
The  amount  of  accelerated  amortization  expense  recorded  this year was $.6
million  which  resulted in an  increase in  amortization  of  intangible  asset
expense of $.4 million compared with 1994.  Excluding such special items,  other
noninterest  expense was reduced over 10 percent,  or $2.6 million, in 1995. The
largest  reductions  were in legal and  consulting  $1.2  million  and all other
noninterest  expense of $1.2  million.  The  decrease  in all other  noninterest
expense was due to reductions  across numerous expense  categories,  the largest
were declines in appraisal  fees,  litigation  expense and audit fees. The major
components of other noninterest expense were:

<TABLE>
<CAPTION>
                                               Year Ended December 31,
(Dollars in thousands)                            1995          1994
<S>                                             <C>           <C>    
Furniture and equipment                         $ 3,572       $ 3,476
Legal and consulting                              2,356         3,553
Advertising and promotion                         2,123         2,307
Facility consolidation provisions                 1,895           480
Amortization of intangibles                       1,798         1,367
Service bureau and other data processing          1,274         1,173
All other                                         9,951        11,171
                                                  -----        ------
        Total other noninterest expense         $22,969       $23,527
                                                =======       =======
</TABLE>

Income Taxes

The Company  recorded  income taxes of $9.2 million in 1995  compared  with $2.1
million in 1994. The increase is the direct result of the  significantly  higher
level of pre-tax  income  recorded  this year.  Refer to Note 13 to the Notes to
Consolidated  Financial Statements of this Form 10-K for a further discussion of
income  taxes.  

     In 1993 the Company adopted Statement of Financial Accounting Standards No.
109 " Accounting  for Income  Taxes." This Standard  changed the  accounting for
deferred income taxes to the "liability  method." This change, a one-time event,
increased  net  income  by  $750  thousand  in  January  1993  representing  the
cumulative  effect of adopting the new standard on the balance  sheet.  Refer to
Note 2 to the Notes to Consolidated Financial Statements of this Form 10-K for a
further  discussion of this matter.  

     As of December 31, 1995,  included in other assets was a deferred tax asset
of  approximately  $7.0  million,  net of a valuation  allowance of $.2 million,
which is expected to be  realized  against  future  taxable  income.  Management
believes  that it is more  likely  than not that the  Company  will  realize the
benefit of these deferred assets.

Fair Value of Financial Instruments

The methods and  assumptions  used by the Company to estimate  the fair value of
each  class of  financial  instruments  as of  December  31,  1995 and 1994,  in
accordance  with  SFAS No.  107,  "Disclosures  about  Fair  

26
<PAGE>

Value  of  Financial  Instruments,"  are  discussed  in Note 19 to the  Notes to
Consolidated  Financial Statements of this Form 10-K.  Financial  instruments do
not include all of the assets and  liabilities  recorded on a company's  balance
sheet. Therefore,  the aggregate fair value amounts of the financial instruments
do not  represent  the  underlying  value of a  company.  

     As a result of those assumptions and valuation methodologies, the estimated
fair value of Financial  Instrument  assets and liabilities of the Company as of
December  31, 1995 was $1.91  billion and $1.76  billion,  or $43 million and $4
million in excess of carrying value,  respectively.  The estimated fair value of
Financial  Instrument  assets and  liabilities as of December 31, 1994 was $1.71
billion and $1.66  billion,  or $16 million and $3 million in excess of carrying
value,  respectively.  The  increase  in excess of fair value over the  carrying
value of  Financial  Instrument  assets of $27  million  is  attributed,  in the
opinion of management,  to the large decline in substandard  loans and resulting
reduction in credit risk,  and the effect of lower market  interest rates from a
year ago.  The slight  increase in excess of fair value over  carrying  value of
Financial Instrument liabilities,  is attributed,  in the opinion of management,
to the decline in market  interest  rates at  December  31,  1995,  particularly
deposit rates, compared with a year ago.

Comparison of 1994 with 1993

Net Interest Income Analysis

Net interest income on a fully taxable  equivalent basis decreased slightly from
$93.9  million in 1993 to $93.1 million in 1994.  The decrease  reflects a lower
volume of  interest-earning  assets  offset by an  improvement  in interest rate
spread and margin.  Spread and margin  benefited  from interest  rate  increases
throughout  the year.  

     After a decline  in yield on  earning  assets,  principally  loans,  in the
fourth quarter of 1993 and early 1994, yields,  driven by higher interest rates,
rose  considerably  throughout  the  remainder  of the year.  The  result was an
improvement in yield on earning assets from 7.46 percent in 1993 to 7.55 percent
in  1994.  The  cost  of  interest-bearing  liabilities,  principally  deposits,
remained relatively stable during 1994 until the fourth quarter when the Company
adopted  more  aggressive   deposit  pricing.   The  cost  of   interest-bearing
liabilities  for the year was 2.94 percent  compared  with 3.13 percent in 1993.
The increased yield on earning assets,  which outpaced  increases in the cost of
interest-bearing  liabilities,  produced an  improvement in interest rate spread
and margin from 4.33  percent and 4.94  percent in 1993 to 4.61 percent and 5.27
percent,  respectively,  in 1994.  The net effect  from  changes in rates was an
increase in net interest  income of $5.1 million.  

     Average loans  outstanding in 1994 were $1.28  billion,  a decrease of $152
million from 1993. Average  interest-bearing  deposits were $1.18 billion,  $111
million  below the 1993  level.  The  effect  from  changes  in volume of loans,
deposits  and other  interest-bearing  balances  was a decrease in net  interest
income of $5.9  million.  

     The  following  table  attributes  changes in interest  income and interest
expense   to  changes  in   interest   rates  and   changes  in  the  volume  of
interest-earning  assets  and  interest-bearing  liabilities  for the year ended
December 31, 1994 when compared with the year ended  December 31, 1993.  Changes
attributable to both rate and volume are allocated on a weighted basis.

<TABLE>
<CAPTION>
                                                                               Increase (Decrease) From Year Ended December 31, 1993
                                                        Year Ended                                   Amount Due to Changes in
(Dollars in thousands)                                December 31, 1994       Total Change         Volume             Rate
<S>                                                       <C>             <C>             <C>                     <C>           
Interest income:
        Interest and fees on loans*                       $       104,322 $       (7,264) $       (12,208)        $       4,944
        Interest and dividends on securities:
                Taxable                                            27,206         (2,097)             110                (2,207)
                Non-taxable*                                          557           (262)            (499)                  237
        Interest on excess funds sold and other                     1,197          1,101            1,048                    53
                                                                    -----          -----            -----                    --
                Total interest income*                            133,282         (8,522)         (11,549)                3,027
                                                                  -------         ------          -------                 -----
Interest expense:
        Interest on NOW,  money market and regular savings         16,460         (4,000)          (1,147)               (2,853)
        Interest on time deposits                                  16,447         (3,393)          (2,576)                 (817)
        Interest on short-term borrowings                           6,240              1           (1,455)                1,456
        Interest on other borrowings                                1,066           (339)            (448)                  109
                                                                    -----           ----             ----                   ---
                Total interest expense                             40,213         (7,731)          (5,626)               (2,105)
                                                                   ------         ------           ------                ------ 
Net interest income                                       $        93,069 $         (791) $        (5,923)        $       5,132
                                                          =============== ==============  ===============         =============

*    Fully taxable  equivalent at the federal  income tax rate of 34 percent and
     includes applicable state taxes net of federal benefit.  The tax equivalent
     adjustment  on loans  was  approximately  $.8  million  and on  non-taxable
     securities was approximately $.2 million.
</TABLE>

27
<PAGE>

Noninterest Income

Total  noninterest  income was $30.3 million in 1994, a decrease of $6.4 million
from 1993.  Gains from the sale of  securities  decreased  $3.1  million,  asset
management fees decreased $1.4 million and service  charges on deposit  accounts
decreased  $.5 million due to decline in fee-based  deposit  accounts as well as
higher average individual  customer account balances which reduced the amount of
fees  assessed.  Residual  income on maturing  equipment  leases  decreased  $.8
million.  

     Other  noninterest  income of $1.4 million  declined $.5 million from 1993.
Income  recognized  in  connection  with home equity  loans  purchased  from the
Resolution Trust Corporation decreased $.4 million.  These loans were originally
purchased at a  substantial  discount in 1991 and have  returned  principal on a
schedule  closer to the original  contractual  amount.  These decreases to other
noninterest  income were  partially  offset by fees derived from sales of mutual
funds, a new product introduced in May 1994.

Noninterest Expense

Total  noninterest  expense  decreased  $2  million  to $91.4  million  in 1994.
Foreclosed asset and workout expense declined $10.4 million as a result of lower
writedowns of other real estate owned.  Salary and employee  benefits  increased
$4.2 million over 1993. In 1994 salary and employee  benefits  included expenses
related  to  severance  agreements  of $1  million  and  a  $1.2  million  Asset
Management Division revenue-sharing provision. Refer to "Comparison of 1995 with
1994"  under  Noninterest  Expense  for a  discussion  of  USTC  revenue-sharing
provisions.  The increase in salary and employee  benefits  also  reflected  the
addition of a qualified  mutual fund sales staff and  increases in  professional
staff to improve  loan  administration  and  monitoring  of credit  quality.  In
addition,  the rise  reflects  normal  merit  raises and  employee  benefit cost
increases. FDIC deposit insurance premiums declined $.4 million as a result of a
lower level of deposits compared with 1993. 

     Other  noninterest  expense  increased $4.0 million in 1994,  reflecting $1
million in increased  legal fees, $1 million in advertising  and promotion,  $.4
million in  collateral  appraisal  fees,  $.5 million in facility  consolidation
provisions  and $.9 million in fees for  consulting  services by certain  former
Company  executives.  The higher other noninterest expense also stems from a $.8
million reduction in the Company's reserve for litigation  recorded in 1993. The
increases  were  partially  offset by a reduction  in the cost of  property  and
casualty  insurance of $.4 million.  The major  components of other  noninterest
expense were:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
(Dollars in thousands)                               1994              1993
<S>                                            <C>              <C>          
Legal and consulting                           $        3,553   $       1,801
Furniture and equipment                                 3,476           3,614
Advertising and promotion                               2,307           1,280
Amortization of intangibles                             1,367           1,367
Service bureau and other data processing                1,173           1,151
Special provisions for litigation                                        (750)
Other                                                  11,651          11,059
                                                       ------          ------
        Total other noninterest expense        $       23,527   $      19,522
                                               ==============   =============
</TABLE>

28
<PAGE>

ITEM 8. Financial Statements and Supplementary Material






<TABLE>
<CAPTION>
Index to Financial Statements
Financial Statements                                                                                                    Page
<S>                                                                                                                     <C>
Report of Independent Public Accountants                                                                                30
Consolidated Balance Sheets-- December 31, 1995 and 1994                                                                31
Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993                                  32
Consolidated Statements of Changes in Stockholders' Investment for the years ended December 31, 1995, 1994 and 1993     33
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993                              34
Notes to Consolidated Financial Statements                                                                              35
</TABLE>

29
<PAGE>

                    Report of Independent Public Accountants



To the Stockholders and Board of Directors of UST Corp.:

We have audited the  accompanying  consolidated  balance  sheets of UST Corp. (a
Massachusetts  corporation)  and  Subsidiaries as of December 31, 1995 and 1994,
and the related  consolidated  statements  of income,  changes in  stockholders'
investment  and cash  flows  for each of the  three  years in the  period  ended
December  31,   1995.   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  consolidated  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
consolidated  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 UST Corp.
and  Subsidiaries  as of December  31,  1995 and 1994,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting  principles.

     As  explained  in  Note 2 to the  consolidated  financial  statements,  the
Company  changed its method of accounting  for income taxes and  investments  by
adopting Statement of Financial  Accounting  Standards No. 109,  "Accounting for
Income  Taxes"  and  Statement  of  Financial   Accounting  Standards  No.  115,
"Accounting for Certain  Investments in Debt and Equity  Securities,"  effective
January 1, 1993 and December 31, 1993, respectively.


/s/ Arthur Andersen LLP

Arthur Andersen LLP

Boston, Massachusetts
January 29, 1996

<PAGE>

30
<TABLE>
<CAPTION>
Consolidated Balance Sheets
                                                                                                 December 31,
(Dollars in thousands, except share amounts)                                                  1995         1994
<S>                                                                                        <C>          <C>       
Assets
Cash, due from banks and interest-bearing deposits (Note 3)                                $   89,799   $   93,079
Excess funds sold                                                                                           10,000
Securities (Notes 2 and 4):
        Securities available-for-sale:
                Mortgage-backed securities                                                    246,521      195,009
                U.S. Treasury, corporate notes and other                                      329,152      206,631
                                                                                              -------      -------
                        Total securities available-for-sale                                   575,673      401,640
        Securities held-to-maturity                                                                            100
                                                                                             --------          ---
                        Total securities                                                      575,673      401,740
Loans (Notes 5, 15, and 17):
        Loans-- net of unearned discount of $33,419 in 1995 and $18,604 in 1994             1,272,077    1,276,683
        Reserve for possible loan losses                                                      (56,029)     (64,088)
                                                                                              -------      ------- 
                        Total loans, net                                                    1,216,048    1,212,595
Premises, furniture and equipment, net (Note 6)                                                31,840       32,403
Loans held-for-sale (Note 2)                                                                   13,098
Intangible assets, net                                                                          4,650        6,445
Other real estate owned, net (Note 7)                                                           3,015        9,958
Other assets (Notes 10 and 13)                                                                 34,965       37,012
                                                                                               ------       ------
                        Total Assets                                                       $1,969,088   $1,803,232
                                                                                           ==========   ==========

Liabilities and Stockholders' Investment
Deposits:
        Demand                                                                             $  372,917   $  371,716
        Interest-bearing demand (NOW accounts)                                                166,011      168,434
        Money market                                                                          210,924      271,898
        Regular savings                                                                       244,680      285,350
        Time:
                Certificates of deposit over $100 thousand                                    112,426       79,373
                Other                                                                         405,779      314,035
                                                                                              -------      -------
                        Total deposits                                                      1,512,737    1,490,806
Short-term borrowings (Note 8)                                                                242,962      158,989
Other borrowings (Note 9)                                                                         143        9,964
Other liabilities (Note 10)                                                                    39,578       10,839
                                                                                               ------       ------
                        Total liabilities                                                   1,795,420    1,670,598
Commitments and contingencies (Notes 16 and 17) 
Stockholders'  investment (Notes 2, 4, 9, 11, and 14):
        Preferred stock $1 par value; Authorized -- 4,000,000 shares; Outstanding -- None  
Common  stock  $.625  par  value;  Authorized  --  30,000,000 shares;
             Outstanding-- 17,843,582 and 17,614,792 shares in 1995 and 1994, respectively     11,152       11,009
        Additional paid-in capital                                                             74,158       72,129
        Retained earnings                                                                      87,253       73,183
        Unrealized gain (loss) on securities available-for-sale, net of tax                       961      (23,601)
        Deferred compensation and other                                                           144          (86)
                                                                                                  ---          --- 
        Total stockholders' investment                                                        173,668      132,634
                                                                                              -------      -------
                        Total Liabilities and Stockholders' Investment                     $1,969,088   $1,803,232
                                                                                           ==========   ==========

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>

31
<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Income
                                                                                               Year Ended December 31,
(Dollars in thousands, except share amounts)                                          1995               1994           1993
<S>                                                                             <C>             <C>             <C>            
Interest income:
        Interest and fees on loans                                              $       118,666 $       103,526 $       110,673
        Interest and dividends on securities:
                Taxable                                                                  25,746          27,206          29,242
                Non-taxable                                                                 204             215             265
                Dividends                                                                   306             168             352
        Interest on excess funds and other                                                3,047           1,197              96
                                                                                          -----           -----              --
                        Total interest income                                           147,969         132,312         140,628
                                                                                        -------         -------         -------
Interest expense:
        Interest on deposits                                                             42,683          32,907          40,300
        Interest on short-term borrowings                                                 9,281           6,240           6,239
        Interest on other borrowings                                                        571           1,066           1,405
                                                                                            ---           -----           -----
                        Total interest expense                                           52,535          40,213          47,944
                                                                                         ------          ------          ------
        Net interest income                                                              95,434          92,099          92,684
Provision for possible loan losses (Note 5)                                              13,090          24,281          68,427
                                                                                         ------          ------          ------
        Net interest income after provision for possible loan losses                     82,344          67,818          24,257
                                                                                         ------          ------          ------
Noninterest income:
        Asset management fees                                                            13,276          14,419          15,798
        Corporate services income                                                         8,529           8,198           8,365
        Service charges on deposit accounts                                               4,637           4,893           5,356
        Securities gains, net (Note 4)                                                    1,802           1,105           4,222
        Lease residual income                                                               682             362           1,148
        Other                                                                             1,044           1,357           1,834
                                                                                          -----           -----           -----
                        Total noninterest income                                         29,970          30,334          36,723
                                                                                         ------          ------          ------
Noninterest expense:
        Salary and employee benefits (Note 10)                                           44,287          42,650          38,467
        Net occupancy expense                                                             7,672           7,837           7,419
        Foreclosed asset and workout expense (Note 7)                                     5,784           8,820          19,187
        Credit card processing expense                                                    4,408           3,955           3,815
        Deposit insurance assessment (Note 12)                                            3,067           4,566           4,931
        Other (Note 12)                                                                  22,969          23,527          19,522
                                                                                         ------          ------          ------
                        Total noninterest expense                                        88,187          91,355          93,341
                                                                                         ------          ------          ------
Income (loss) before income taxes                                                        24,127           6,797         (32,361)
        Income tax provision (benefit) (Note 13)                                          9,169           2,051         (11,511)
                                                                                          -----           -----         ------- 
Net income (loss) before change in accounting method                                     14,958           4,746         (20,850)
Cumulative effect of change in method of accounting for income taxes (Note 2)                                              (750)
                                                                                        -------         -------            ---- 
                        Net income (loss)                                       $        14,958 $         4,746 $       (20,100)
                                                                                =============== =============== =============== 
Per share data:
        Net income (loss)                                                       $           .83 $           .27    $      (1.31)
        Cash dividends declared                                                 $           .05
Weighted average number of common shares (Note 11)                                   18,068,203      17,780,032      15,362,251

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Changes in Stockholders' Investment
                                                                  Common Stock                              Unrealized   Deferred
                                                                                    Additional    Retained  Gain/(Loss Compensation)
(Dollars and shares in thousands)                                Shares   Amount Paid-in Capital Earnings on Securities) and Other)
<S>                                                              <C>     <C>         <C>         <C>         <C>         <C>        
Balance December 31, 1992                                        14,037  $   8,773   $   47,694  $   88,537  $   (17)    $   (1,107)
        Net loss                                                                                    (20,100)
        Common stock sales (Note 14)                              3,155      1,972       21,271
        Stock option exercises and stock issued under restricted
                stock plans (Notes 10 and 11)                        96         59          622
        Cumulative effect of change in method of accounting
                for investment securities, net of tax (Note 2)                                                 3,335
        Change in unrealized loss on equity securities                                                            17
        Reduction in ESOP loan guarantee (Note 9)                                                                               321
        Activity in Directors Deferred Compensation Program,
                net (Note 11)                                        17         11          107                               1,324
                                                                     --         --          ---       -----     ----          -----
Balance December 31, 1993                                        17,305     10,815       69,694      68,437    3,335            538
        Net income                                                                                    4,746
        Stock option exercises and stock issued under restricted
                stock plans (Notes 10 and 11)                       258        162        2,108                                (664)
        Change from net unrealized gain to loss on securities
                available-for-sale, net of tax (Note 2)                                                       (26,936)
        Reduction in ESOP loan guarantee (Note 9)                                                                               322
        Activity in Directors Deferred Compensation Program,
                net (Note 11)                                        52         32          327                                (282)
                                                                     --         --          ---        ----      ----          ---- 
        Balance December 31, 1994                                17,615     11,009       72,129      73,183   (23,601)          (86)
                Net income                                                                           14,958
                Stock option exercises and stock issued under
                     restricted stock plans (Notes 10 and 11)       223        139        1,987                                (171)
                Change from net unrealized loss to gain on
                     securities available-for-sale, net of
                     tax (Note 2)                                                                              24,562
                Reduction in ESOP loan guarantee (Note 9)                                                                       321
                Activity in Directors Deferred Compensation
                     Program, net (Note 11)                           6          4           42                                  80
                Cash dividends declared                                                                (888)
                                                                    ---        ---          ---        ----     -----          ----
        Balance December 31, 1995                                17,844  $  11,152   $   74,158  $   87,253  $    961   $       144
                                                                 ======  =========   ==========  ==========  ========   ===========

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>

33
<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
                                                                                                 Year Ended December 31,
(Dollars in thousands)                                                                    1995            1994            1993
<S>                                                                                 <C>             <C>             <C>             
Cash flows from operating activities:
        Net income (loss)                                                           $       14,958  $       4,746   $       (20,100)
        Adjustments to reconcile net income (loss) to net cash provided by
                operating activities:
                Cumulative effect of change in accounting method                                                               (750)
                Provision for possible loan losses                                          13,090         24,281            68,427
                Depreciation and amortization                                                5,244          5,295             5,029
                Amortization of gain on sale/leaseback                                        (372)          (384)             (384)
                Amortization of security premiums and discounts, net                           481            732             1,344
                Securities gains, net                                                       (1,802)        (1,105)           (4,222)
                (Gain) loss on sale of other real estate owned, net                           (450)          (384)            1,075
                Writedowns of other real estate owned                                        2,035          2,360            10,346
                Deferred income tax (benefit) expense                                       (1,558)         7,134            (4,494)
                Increase in accruals and other, net                                         13,668         13,149            22,099
                                                                                            ------         ------            ------
                        Net cash provided by operating activities                           45,294         55,824            78,370
Cash flows (used) provided by investing activities:
        Sales and maturities of investment securities                                                                         5,584
        Purchase of investment securities                                                                                    (1,063)
        Proceeds from sales of securities held for sale                                                                     321,517
        Proceeds from sales of securities available-for-sale                                56,019         61,669 
        Proceeds from maturities of securities available-for-sale                           25,599        196,943
        Purchases of securities held for sale                                                                              (387,472)
        Purchases of securities available-for-sale                                        (223,026)      (144,794)
        Purchases of securities held-to-maturity                                                             (100)
        Net decrease (increase) in excess funds sold                                        10,000         11,000           (20,700)
        Net (increase) decrease in loans                                                   (21,689)        37,735            72,247
        Proceeds from other real estate owned                                               10,503          8,753            13,693
        Purchases of premises and equipment                                                 (2,884)        (3,670)           (1,268)
                                                                                            ------         ------            ------ 
                        Net cash (used) provided by investing activities                  (145,478)       167,536             2,538
Cash flows provided (used) by financing activities:
        Net decrease in nontime deposits                                                  (102,866)       (91,940)          (90,408)
        Net increase (decrease) in certificates of deposit                                 124,797        (58,052)          (60,725)
        Net increase (decrease) in short-term borrowings                                    83,973        (67,279)           24,217
        Payments on other borrowings                                                        (9,500)        (4,000)           (4,000)
        Cash dividends paid                                                                   (888)
        Issuance of common stock for cash, net                                               1,388            792            23,677
                                                                                             -----            ---            ------
                        Net cash provided (used) by financing activities                    96,904       (220,479)         (107,239)
                                                                                            ------       --------          -------- 
        (Decrease) increase in cash and cash equivalents                                    (3,280)         2,881           (26,331)
        Cash and cash equivalents at beginning of year                                      93,079         90,198           116,529
                                                                                            ------         ------           -------
        Cash and cash equivalents at end of year                                    $       89,799  $      93,079   $        90,198
                                                                                    ==============  =============   ===============
Supplemental disclosure of cash flow information:
 Cash paid during the year for:
                Interest                                                            $       51,730  $      39,853   $        48,959
                                                                                    ==============  =============   ===============
                Income taxes                                                        $        7,768  $       2,204   $         1,210
                                                                                    ==============  =============   ===============
Noncash transactions:
        Transfers from investment portfolio to securities held for sale                                             $         7,103
        Transfers from securities held-to-maturity to securities available-for-sale $          100                  ===============
                                                                                    ==============
        Transfers from other assets to securities available-for-sale                $          499  $         300
                                                                                    ==============  =============
        Transfers from loans to other real estate owned                             $        6,175  $      24,872   $        35,827
                                                                                    ==============  =============   ===============
        Transfers from loans to loans held-for-sale, net                            $       13,098
                                                                                    ==============
        Financed other real estate owned sales                                      $          565  $      14,732   $        24,885
                                                                                    ==============  =============   ===============
        Common stock issuance                                                       $          784  $       1,837   $           365
                                                                                    ==============  =============   ===============

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>

34
<PAGE>

         Notes to Consolidated Financial Statements, December 31, 1995

(1) Nature of Operations

UST Corp. is a bank holding company with three principal  banking  subsidiaries:
USTrust and United States Trust Company ("USTC"),  each headquartered in Boston,
Massachusetts,   and  UST   Bank/Connecticut   ("UST/Conn"),   headquartered  in
Bridgeport,  Connecticut.  UST Corp. and its banking and nonbanking subsidiaries
(the  "Company")  is engaged in a single line of  business,  that of providing a
broad range of financial  services  principally  to  individuals  and small- and
medium-sized companies in the New England region. Included in these services are
commercial banking, consumer services, trust and money management, and equipment
leasing.  The  Company  through  its  banking  subsidiaries  operates 28 banking
branches in the greater  Boston  area and 4 banking  branches in the  Bridgeport
area.

(2) Summary of Significant Accounting Policies

The  accounting  and reporting  policies of the Company  conform with  generally
accepted accounting principles and general practice in the banking industry. The
preparation  of financial  statements  in  conformity  with  generally  accepted
accounting  principles  requires the Company to make  estimates and  assumptions
that affect the reporting and  disclosure of assets and  liabilities,  including
those that are of a contingent  nature, at the date of the financial  statements
and the reported  amounts of revenues and expenses during the reporting  period.
Actual results could differ from those estimates. The significant accounting and
reporting policies of the Company are summarized below.

Principles of Consolidation

The consolidated  financial statements include the accounts of UST Corp. and its
wholly-owned  subsidiaries.  All material intercompany balances and transactions
have been eliminated.  The parent company only financial statements contained in
Note  18  reflect  investments  in  subsidiaries  using  the  equity  method  of
accounting.  
     Certain  reclassifications have been made to prior year balances to conform
with  the  current  year  presentation.  Assets  owned by  others  and held in a
fiduciary  or agency  capacity  are not  included  in the  consolidated  balance
sheets.

Securities

On December  31, 1993,  the Company  adopted  Statement of Financial  Accounting
Standards No. 115 (SFAS No. 115),  "Accounting  for Certain  Investments in Debt
and Equity  Securities."  This Statement  addresses the accounting and reporting
for investments in equity securities that have readily  determinable fair values
and for all investments in debt securities. Under this statement such securities
are classified as held-to-maturity,  trading, or available-for-sale.  

     Securities  Held-to-Maturity  -- Debt securities  which  management has the
positive   intent  and  ability  to  hold  to   maturity   are   classified   as
held-to-maturity,  and are  carried at cost  adjusted  for the  amortization  of
premium or the  accretion of  discount. 

     Trading Securities -- Debt and equity securities with readily  determinable
market  values that are bought and held  principally  for the purpose of selling
them in the near term are  classified as trading  securities  and are carried at
fair value,  with unrealized gains and losses included in current  earnings.  At
December 31, 1995 and 1994, the Company had no securities classified as trading.

     Securities  Available-for-Sale -- Debt and equity securities not classified
as either  held-to-maturity or trading are classified as available-for-sale  and
carried at fair value, with unrealized  after-tax gains and losses reported as a
separate   component  of  stockholders'   investment.   At  December  31,  1995,
stockholders' investment was increased by an unrealized gain related to SFAS No.
115 of $961,000  net of taxes of $721,000. 

     Securities that do not have readily  determinable market values are carried
at cost and  classified  in other  assets.  At December 31, 1995 and 1994,  such
securities   amounted  to   $4,201,000   and   $3,908,000,   respectively.   

     For  mortgage-backed  securities,  the Company  recalculates  the effective
yield on the investment to reflect the actual  prepayment  results and estimated
future  prepayments.  The net investment in these  securities is adjusted to the
amount that would have existed had the new estimated  average life and effective
yield been applied since the acquisition of the securities. Such adjustments are
charged or  credited  to  interest  income in the  current  period.  

     The Company  determines the securities sold by the specific  identification
method.  The amount of taxes paid on gains is dependent upon the overall results
of operations of the subsidiary incurring the gain.

35
<PAGE>

Premises, Furniture and Equipment

Premises,   furniture  and  equipment  are  stated  at  cost,  less  accumulated
depreciation and amortization.  The Company provides for depreciation  using the
straight-line  method by charges to expense in amounts estimated to amortize the
cost over the estimated useful lives of the respective assets as follows:

Buildings and building improvements     10-40 years
Furniture and equipment                  3-10 years

     Leasehold  improvements are amortized over the life of the lease agreements
plus one renewal period.

Loan Income and Fees

Most  installment  loans  and  certain  commercial  time  loans  are  made  on a
discounted basis. The unearned discount  applicable to such loans is recorded as
income monthly by use of the actuarial method.  Interest income on nondiscounted
loans is accrued based on the principal amount of loans  outstanding.  

     Loans are placed on nonaccrual,  with the reversal of all accrued  interest
receivable,  when  there  is  doubt  as to the  collectibility  of  interest  or
principal  or if loans  are 90 days or more past due  unless  they are both well
secured and in the process of  collection.  In every case,  a loan  reaching 180
days past due is placed on nonaccrual.  Interest received on nonaccrual loans is
applied to principal if  collection of principal is doubtful;  otherwise,  it is
reflected in interest income on a cash basis.

Reserve for Possible Loan Losses

The  reserve  for  possible  loan  losses is  maintained  at a level  considered
adequate by  management  to provide for possible  losses from loans,  leases and
commitments  to  extend  credit.  Adequacy  of  the  reserve  is  determined  by
management  using a consistent  methodology  which analyzes the size and risk of
the loan  portfolio on a monthly  basis.  Factors in this analysis  include past
loan loss  experience and asset  quality,  as reflected by trends of delinquent,
nonaccrual and restructured  loans and the Company's credit risk rating profile.
Consideration is also given to the current and expected economic conditions and,
in particular,  how such conditions affect the types of credits in the portfolio
and the market area in general.  This analysis is documented using a combination
of numerical and  qualitative  analysis and includes  sensitivity  testing and a
written conclusion.  The reserve is based on estimates,  and ultimate losses may
vary from current estimates.  These estimates are reviewed  periodically and, as
adjustments  become  necessary,  they are  reported  in  earnings in the current
period.

Loans Held-For-Sale

In  December  1995,  the Company  transferred  certain  loans to an  accelerated
disposition  portfolio,  "Loans  held-for-sale."  Such loans were transferred at
their estimated disposition values less estimated cost of disposal.  The excess,
if any, of the loan balance over the estimated  disposition value less estimated
cost of disposal was charged to the reserve for possible loan losses.

Other Real Estate Owned

Other real  estate  owned  ("OREO")  includes  properties  which the Company has
acquired  through  foreclosure  or in settlement of loans.  All OREO is held for
sale and  carried at the lower of the loan  value or fair value of the  property
acquired,  less estimated costs to sell ("net realizable value"). At the time of
foreclosure,  the  excess,  if any,  of the loan value  over the net  realizable
value, is charged to the reserve for possible loan losses. The carrying value of
OREO is  reviewed  periodically.  Subsequent  declines  in the fair value of the
property and net operating  results of the property are included in  noninterest
expense, "Foreclosed asset and workout expense."

Income Taxes

The Company  provides  for income  taxes in  accordance  with the  comprehensive
income tax  allocation  method.  This method  recognizes  the tax effects of all
income and expense transactions in each year's statement of income regardless of
the year in which the  transactions  are reported for tax purposes.  

     The Company  follows the deferral  method of accounting  for investment tax
credits.  Under the deferral  method,  the credit is reflected as a reduction of
tax expense  ratably over the period during which the asset is  depreciated  for
financial reporting purposes.  

     The Company adopted SFAS No. 109, "Accounting for Income Taxes," on January
1, 1993. This statement  requires the use of the "liability method" of providing
deferred  income  taxes under which the amount of deferred  taxes on the balance
sheet is  adjusted  whenever  tax  rates or  provisions  of  income  tax law are
changed.  This change in accounting  principle  increased net income $750,000 in
January  1993,  representing  the  cumulative  effect of the new standard on the
balance sheet at the date of adoption.

36
<PAGE>

Earnings (Loss) Per Share

Earnings per share is computed  using the weighted  average  number of shares of
common stock and common stock equivalents outstanding.  Common stock equivalents
consist  primarily of dilutive  outstanding  stock  options  computed  under the
treasury stock method.  Average  dilutive common stock  equivalents were 382,206
for 1995 and  379,059  for  1994.  Loss per share  computations  for 1993 do not
include common stock  equivalents  due to their  antidilutive  effect.  The dual
presentation  of primary and fully  diluted  earnings per share is not presented
since the difference from earnings per share is not material.

Intangible Assets

Intangible assets include goodwill and core deposit intangibles which are stated
at cost less accumulated amortization. Cost of purchased businesses in excess of
net assets acquired  ("goodwill")  includes amounts being amortized over twenty-
and forty-year periods.  Amortization expense was $122,500 in each of 1995, 1994
and 1993.  Values  assigned to deposits of purchased  businesses  ("core deposit
intangibles")  are  being  amortized  over  seven-  and  thirteen-year  periods.
Amortization  expense was $1,675,500 in 1995 and $1,245,000 in 1994 and 1993. 

     On a periodic  basis,  the Company  reviews its  goodwill  and core deposit
intangible assets for events or changes in circumstances  that may indicate that
the carrying amount of the assets may not be  recoverable,  and, if appropriate,
reduces the carrying amount through a charge to other noninterest expense.

Retirement Benefits

In December  1990,  the FASB issued SFAS No.  106,  "Employers'  Accounting  for
Postretirement  Benefits  Other Than  Pensions."  SFAS No. 106 is effective  for
fiscal years  beginning after December 15, 1992. This Statement did not have any
impact on the Company's financial position or results of operations. 

     In November 1992, the FASB issued SFAS No. 112, "Employers'  Accounting for
Postemployment  Benefits."  SFAS No. 112 is effective for fiscal years beginning
after December 15, 1993. This Statement did not have any impact on the Company's
financial position or results of operations.

Statements of Cash Flows

For the purpose of reporting cash flows, cash and cash equivalents  include cash
on hand, amounts due from banks and interest-bearing deposits.

Recent Accounting Developments

The FASB issued in March 1995,  SFAS No. 121,  "Accounting for the Impairment of
Long-lived  Assets and for Long-lived  Assets to be Disposed of." This Statement
requires a review for impairment of long-lived  assets and certain  identifiable
intangibles  to be held and used by an  entity  whenever  events or  changes  in
circumstances  indicate  that  the  carrying  amount  of the  asset  may  not be
recoverable.  An impairment would be estimated if the sum of the expected future
cash flows to result from the use and eventual  disposition of the asset is less
than the  carrying  amount  of the  asset.  This  Statement  does  not  apply to
financial  instruments,  core deposit intangibles,  mortgage and other servicing
rights,  or deferred  tax assets.  This  Statement  would apply for fiscal years
beginning  after December 15, 1995.  While the effect on the Company has not yet
been determined,  the adoption of this Statement could have a material impact on
the Company's  results of operations in future periods.  

     As  an  amendment  to  SFAS  No.  65,   "Accounting  for  Mortgage  Banking
Activities," the FASB issued in May 1995, SFAS No. 122, "Accounting for Mortgage
Servicing  Rights."  This  Statement  amends  certain  SFAS  No.  65  provisions
prohibiting  the  capitalization  of mortgage  loan  servicing  rights  acquired
through loan  origination  activities,  by requiring  that both  originated  and
purchase  mortgage loan servicing rights be capitalized.  In addition,  FASB No.
122 requires all  capitalized  mortgage  loan  service  rights be evaluated  for
impairment based on their fair values.  This Statement would apply prospectively
for fiscal  years  beginning  after  December  15,  1995.  The  adoption of this
Statement is not expected to have a material impact on the Company's  results of
operations.

37
<PAGE>

(3) Restrictions on Cash and Due From Banks

At December 31, 1995 and 1994, cash and due from banks included  $34,830,000 and
$34,173,000,  respectively,  to satisfy the reserve  requirements of the Federal
Reserve Board.

(4) Securities

A comparison of the amortized  cost,  estimated fair value and gross  unrealized
gains and losses as of December 31, 1995 and  December  31, 1994 for  securities
available-for-sale and held-to-maturity follows:

<TABLE>
<CAPTION>
                                                                                              1995
                                                                                     Gross           Gross
                                                                   Amortized       Unrealized      Unrealized           Fair
(Dollars in thousands)                                                Cost           Gains           Losses             Value
<S>                                                             <C>             <C>             <C>             <C>            
Securities available-for-sale:
        Mortgage-backed securities:
                FHLMC                                           $       155,916 $       1,486   $       (411)   $       156,991
                FNMA                                                     89,239           799           (508)            89,530
                                                                         ------           ---           ----             ------
                        Total mortgage-backed securities                245,155         2,285           (919)           246,521
        U.S. Treasury and federal agencies                              197,641           570         (1,244)           196,967
        Asset-backed securities                                          85,157           443                            85,600
        Corporate debt securities                                        40,499           323             (2)            40,820
        States and municipalities                                         3,169            85                             3,254
        Marketable equity securities                                      1,806           159            (20)             1,945
        Foreign governments                                                 390                                             390
        All other securities                                                176                                             176
                                                                --------------- -------------   --------------  ---------------
                        Total securities available-for-sale     $       573,993 $       3,865   $       (2,185) $       575,673
                                                                =============== =============   ==============  ===============
</TABLE>

<TABLE>
<CAPTION>
                                                                                              1994
                                                                                     Gross           Gross
                                                                   Amortized       Unrealized      Unrealized           Fair
(Dollars in thousands)                                                Cost           Gains           Losses             Value
<S>                                                             <C>             <C>             <C>             <C>            
Securities available-for-sale:
  Mortgage-backed securities:
    FHLMC                                                       $       132,241 $       97      $       (8,765) $       123,573
    FNMA                                                                 77,761         45              (6,370)          71,436
                                                                         ------         --              ------           ------
       Total mortgage-backed securities                                 210,002        142             (15,135)         195,009
  U.S. Treasury and federal agencies                                    154,823          5             (12,414)         142,414
  Corporate debt securities                                              59,716        208              (1,611)          58,313
  States and municipalities                                               3,577         49                (133)           3,493
  Marketable equity securities                                            1,954        120                (254)           1,820
  Foreign governments                                                       425                                             425
  All other securities                                                      166                                             166
                                                                            ---     ------                 ---           ------
       Total securities available-for-sale                      $       430,663 $      524     $       (29,547) $       401,640
                                                                =============== ==========     ===============  ===============
Securities held-to-maturity:
  States and municipalities                                     $           100                $            (3) $            97
                                                                ===============                ===============  ===============
        Total securities held-to-maturity                       $           100                $            (3) $            97
                                                                ===============                ===============  ===============
</TABLE>

38
<PAGE>

The amortized cost and estimated  fair value of debt  securities at December 31,
1995 and 1994, by  contractual  maturity,  are shown in the table below.  Actual
maturities  are  expected to differ from  contractual  maturities  because  some
borrowers have the right to prepay without penalty.  Mortgage-backed  securities
are shown at their  final  maturity  but are  expected to have  shorter  average
lives. Equity securities,  which have no contractual maturity,  are presented in
the aggregate.

<TABLE>
<CAPTION>
                                                                                        1995                    1994
                                                                               Amortized    Estimated   Amortized   Estimated
(Dollars in thousands)                                                            Cost     Fair Value      Cost    Fair Value
<S>                                                                           <C>         <C>         <C>         <C>        
Securities available-for-sale:
Mortgage-backed securities:
        Due after 5 years through 10 years                                    $    38,276 $    38,521 $    26,144 $    25,967
        Due after 10 years                                                        206,879     208,000     183,858     169,042
                                                                                  -------     -------     -------     -------
                Total mortgage-backed securities                                  245,155     246,521     210,002     195,009
All other debt securities:
        Due in 1 year or less                                                      22,052      22,197      22,706      22,624
        Due after 1 year through 5 years                                          233,296     233,676     168,449     159,047
        Due after 5 years through 10 years                                         70,594      70,198      25,935      21,575
        Due after 10 years                                                            914         960       1,451       1,399
                                                                                      ---         ---       -----       -----
                Total debt securities                                             572,011     573,552     428,543     399,654
                Total marketable equity securities and all other securities         1,982       2,121       2,120       1,986
                                                                                    -----       -----       -----       -----
                Total                                                         $   573,993 $   575,673 $   430,663 $   401,640
                                                                              =========== =========== =========== ===========
Securities held-to-maturity:
        Due after 1 year through 5 years                                                              $       100 $        97
                                                                                                      =========== ===========
                Total                                                                                 $       100 $        97
                                                                                                      =========== ===========
</TABLE>

     Proceeds from sales of debt securities  available-for-sale during 1995 were
$53,474,000  and $60,061,000  during 1994.  Gross gains of $132,000 for 1995 and
$79,000 for 1994 and gross  losses of  $229,000  for 1995 and none for 1994 were
realized  on  those  sales.   Net  gains  on  all  securities  were  $1,802,000,
$1,105,000,  and $4,222,000 for 1995,  1994,  and 1993,  respectively.  The 1995
gains were comprised principally from the sale of equity securities. 

     At December 31, 1995,  securities  carried at $215,276,000  were pledged to
secure public and trust deposits, securities sold under agreements to repurchase
and for other purposes as required by law.

(5) Loans

The composition of the loan portfolio (net of unearned discount) at December 31,
1995 and 1994 was as follows:

<TABLE>
<CAPTION>
(Dollars in thousands)                              1995           1994
<S>                                            <C>            <C>       
Commercial and financial                       $  642,940     $  705,075
Commercial real estate:
        Construction                               16,937         13,109
        Developer, investor and land              207,710        265,624
Consumer:
        Residential mortgage                       85,806         90,643
        Home equity                                70,066         64,068
        Indirect automobile installment           197,148         90,255
        Other consumer                             23,015         21,964
Lease financing                                    28,455         25,945
                                                   ------         ------
                                                1,272,077      1,276,683

Reserve for possible loan losses                  (56,029)       (64,088)
                                                  -------        ------- 
                                               $1,216,048     $1,212,595
                                               ==========     ==========
</TABLE>

39
<PAGE>

Most of the Company's  lending  activity is with  customers  located  within the
states of  Massachusetts  and  Connecticut.  At  year-end  1995,  the  Company's
exposure to credit risk  principally  secured by  commercial  real estate,  home
equity and residential real estate included $381 million of loans. Refer to Note
17 for additional discussion of concentration of credit risk.

Reserve for Possible Loan Losses

Analysis  of the  reserve  for  possible  loan  losses for the three years ended
December 31, 1995, 1994 and 1993 is as follows:

<TABLE>
<CAPTION>
(Dollars in thousands)                            1995            1994           1993
<S>                                         <C>            <C>            <C>            
Balance at beginning of period              $       64,088 $       64,465 $       50,478

Loans charged-off                                  (29,074)       (31,059)       (58,198)
Recoveries on loans previously charged-off           7,925          6,401          3,758
                                                     -----          -----          -----
Net chargeoffs                                     (21,149)       (24,658)       (54,440)

Provisions charged to operations                    13,090         24,281         68,427
                                                    ------         ------         ------
Balance at end of period                    $       56,029 $       64,088 $       64,465
                                            ============== ============== ==============
</TABLE>

     In June 1993 the Company recorded a special $30 million  provision for loan
losses which is included in the above table.

Impaired Loans

The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting  Standards  No. 114 ("SFAS No.  114"),  "Accounting  by Creditors for
Impairment  of a Loan," which the Company  adopted on January 1, 1995.  SFAS No.
114 requires,  among other things,  that creditors measure impaired loans at the
present value of expected future cash flows,  discounted at the loan's effective
interest  rate or, as a practical  expedient,  at the loan's  observable  market
price or the fair value of the  collateral if the loan is collateral  dependent.
For  purposes  of this  Statement,  a loan  is  considered  impaired  when it is
probable  that a creditor  will be unable to collect all amounts due,  including
interest, according to the contractual terms of the loan agreement. SFAS No. 114
as amended by SFAS No. 118,  allows  creditors to use their existing  methods of
recognizing  interest income on impaired loans.  

     Loans  recognized by the Company as nonaccrual and  restructured  have been
classified  "impaired  loans" by the Company in accordance with SFAS No. 114. At
December 31, 1995,  total impaired  loans were $25.7 million,  comprised of $1.4
million  that  required  reserves of $.3 million and $24.3  million that did not
require a related  reserve  since there was no dollar  impairment as measured by
the Statement's  provisions.  The average recorded  investment in impaired loans
for the year ended  December 31, 1995 was $45 million.  The reserve for possible
loan losses has not required an  additional  loan loss  provision as a result of
the adoption of this  Statement.  The methodology  used in the required  reserve
calculation  utilized the fair value of  collateral.  

     SFAS No. 114 also requires that  in-substance  foreclosures  be reported as
part of loans and the in-substance  foreclosure valuation reserve be included in
the reserve for possible loan losses. The effect at January 1, 1995, the date of
adoption  of SFAS No.  114, on the  Company's  balance  sheet was an increase to
loans of $10.6  million,  an increase to the reserve for possible loan losses of
$2.1  million  and a decrease  in other real estate  owned of $8.5  million.  In
addition,  prior period balances have been reclassified to reflect loans,  OREO,
reserve  for  possible  loan  losses,   loan  loss  provision  and  in-substance
foreclosure  writedown expense on a basis comparable to the classification  that
would have been used under  SFAS No.  114.  There was no effect on net income of
the Company as a result of the adoption of this Statement. 

     Nonaccrual  loans were $19.9 million and $59.9 million at December 31, 1995
and December 31, 1994,  respectively.  Accruing  restructured loans totaled $5.8
million and $15.8 million at December 31, 1995 and 1994,  respectively.  For the
years  ended  December  31,  1995 and 1994,  the  amount of  interest  income on
nonaccrual and  restructured  loans that would have been recognized if the loans
had been paying in accordance  with their  original  terms,  was  $3,131,000 and
$6,259,000,  respectively, while the amount recognized as interest income in the
same periods was $2,522,000 and $3,188,000, respectively.

40
<PAGE>

(6) Premises, Furniture and Equipment

A summary of the accounts as of December 31, 1995 and 1994 is as follows:

<TABLE>
<CAPTION>
(Dollars in thousands)                              1995             1994
<S>                                           <C>             <C>          
Land                                          $       2,746   $       2,839
Buildings and leasehold improvements                 33,037          34,861
Furniture and equipment                              15,343          15,450
                                                     ------          ------
                                                     51,126          53,150
Accumulated depreciation and amortization           (19,286)        (20,747)
                                                    -------         ------- 
                                              $      31,840   $      32,403
                                              =============   =============
</TABLE>

     Depreciation  and  amortization  expenses  reflected  in  the  consolidated
statements of income were  $3,445,000,  $3,927,000 and $3,662,000 in 1995,  1994
and 1993, respectively.

     On  January  3,  1991,  the  Company  sold  one  of  its  buildings  to  an
unaffiliated  third party for $8.2  million.  A portion of the  building  houses
certain functions of the Company which were leased back from the purchaser. This
transaction  resulted in a gain of  approximately $5 million of which $3 million
was recognized in 1991 with the difference  amortized to income over the life of
the lease.

(7) Other Real Estate Owned

Other real estate owned is stated net of valuation  allowances.  Analysis of the
valuation  allowances for the three years ended December 31, 1995, 1994 and 1993
is as follows:

<TABLE>
<CAPTION>
                                                  Year Ended December 31,
(Dollars in thousands)                         1995          1994        1993
<S>                                    <C>            <C>            <C>        
Balance at beginning of period         $       1,044  $       4,635  $       389
Chargeoffs                                    (2,511)        (5,951)      (6,100)
Provisions charged to operations               2,035          2,360       10,346
                                               -----          -----       ------
Balance at end of period               $         568  $       1,044  $     4,635
                                       =============  =============  ===========
</TABLE>

     The net cost of other real estate owned  included in  foreclosed  asset and
workout  expense  in  the  income  statement  was  $3,596,000,   $5,348,000  and
$17,087,000 in 1995, 1994 and 1993, respectively. These costs include provisions
charged to operations to reflect reductions in net realizable value, net gain or
loss on sales and cost of maintaining and operating the properties.

(8) Short-term Borrowings

Short-term borrowings consisted of the following at December 31, 1995 and 1994:

<TABLE>
<CAPTION>
(Dollars in thousands)                                  1995           1994
<S>                                                 <C>             <C>    
Federal funds purchased                             $  57,406      $ 19,296
Securities sold under agreements to repurchase        172,689       126,597
Treasury tax and loan note account                     12,867        13,096
                                                       ------        ------
                                                    $ 242,962      $158,989
                                                    =========      ========
</TABLE>

     The weighted average interest rates at December 31, 1995 and 1994 were 4.98
percent  and 4.74  percent,  respectively.  The average  outstanding  short-term
borrowings were  $179,260,000 in 1995 and  $180,325,000 in 1994. The approximate
weighted  average  interest  rates during the year were 5.18 percent in 1995 and
3.46 percent in 1994. The maximum amount of short-term borrowings outstanding at
any month  end was  $242,962,000  in 1995 and  $212,174,000  in 1994.  

41
<PAGE>

(9) Other Borrowings

Other borrowings consisted of the following at December 31, 1995 and 1994:

<TABLE>
<CAPTION>
(Dollars in thousands)                                                                                  1995   1994
<S>                                                                                                     <C>   <C>
UST Corp.
        8.5% Senior Notes due in installments from 1992 - 1996                                                $8,000
        Guaranteed ESOP debt at 84% of the prime rate,  as established, due in installments to 1996     $143     464
UST Capital Corp.
        11.505% note to the Small Business Administration due 1995                                             1,500
                                                                                                        ----   -----
                                                                                                        $143  $9,964
                                                                                                        ====  ======
</TABLE>

     Payments  required under the above  obligations were $5,821,000 in 1995 and
the balance of $143,000  due in 1996.  In  addition to the  required  payment in
1995, the Company elected to prepay the final $4,000,000 installment due in 1996
on the 8.5% Senior Notes.  Effective  with this payment the Company was released
from all terms and conditions of the Note agreement. 

     The Company has an employee  stock  ownership  plan  ("ESOP")  which covers
substantially  all of its  employees.  The plan is  administered  by a committee
designated  by the Board of  Directors  and is  maintained  in a separate  trust
established  for that purpose.  The trustee  obtained  third-party  financing to
purchase  shares of UST Corp.  common stock and UST Corp.  has  guaranteed  this
debt. The purchased shares are allocated to the participants on a pro-rata basis
over the period in which they are earned.

(10) Employee Benefit Plans

The Company has a noncontributory,  defined benefit retirement plan covering all
employees who meet specified age and employment  requirements.  The Company also
has a nonqualified,  unfunded supplemental retirement plan, which covers certain
officers of the Company.  The plans provide  pension  benefits that are based on
the employee's  compensation  during the highest four  consecutive  years before
retirement.  The  following  summary  sets forth each plan's  funded  status and
amounts included in the Company's consolidated balance sheets as of December 31,
1995 and 1994:

<TABLE>
<CAPTION>
                                                                                Qualified Plan              Supplemental Plan
(Dollars in thousands)                                                        1995           1994           1995         1994
<S>                                                                     <C>            <C>            <C>            <C>        
Actuarial present value of benefit obligations:
        Vested benefit obligation                                       $       15,124 $       10,980 $       1,186  $       949
        Nonvested benefit obligation                                               402            309            26            5
                                                                                   ---            ---            --            -
        Accumulated benefit obligation                                          15,526         11,289         1,212          954
        Effect of projected future compensation levels                           3,863          2,959           330           89
                                                                                 -----          -----           ---           --
Projected benefit obligation for service rendered to date                       19,389         14,248         1,542        1,043
Plan assets, primarily listed stocks and U.S. bonds                             20,514         16,811
                                                                                ------         ------        ------       ------
Excess (deficiency) of plan assets over projected benefit obligation             1,125          2,563        (1,542)      (1,043)
Unrecognized loss (gain)                                                         2,753          1,924          (197)        (442)
Unrecognized prior service asset (obligation)                                     (683)          (751)          292          443
Unrecognized net transition asset                                               (1,354)        (1,625)
                                                                                ------         ------        ------      -------
Prepaid (accrued) costs included in other assets (other liabilities)    $        1,841  $       2,111  $     (1,447) $    (1,042)
                                                                        ==============  =============  ============  =========== 
</TABLE>

     The actuarial assumptions used for both plans were as follows:

<TABLE>
<CAPTION>
                                                    1995    1994
<S>                                                 <C>     <C> 
Discount rate                                       7.0%    8.5%
Rate of increase of future compensation levels      4.0%    5.0% 
Expected rate of return on plan assets              9.0%    9.0%
</TABLE>

42
<PAGE>

     Net pension cost for 1995, 1994 and 1993 included the following components:

<TABLE>
<CAPTION>
(Dollars in thousands)                               1995             1994           1993
<S>                                             <C>            <C>            <C>        
Service cost benefit earned during the period   $       862    $       1,050  $       880
Interest cost on projected benefit obligation         1,377            1,265        1,179
Return on plan assets                                (4,248)             325       (1,232)
Net amortization and deferral                         2,805           (1,789)        (463)
                                                      -----           ------         ---- 
        Net pension cost                         $      796    $         851  $       364
                                                 ==========    =============  ===========
</TABLE>

     The Company  has an Employee  Savings  Plan which  qualifies  as a deferred
salary  arrangement under Section 401(k) of the Internal Revenue Code. Under the
Plan,  which  originated  in  January  1994 and was  amended  in  October  1995,
participating  employees  may defer a portion up to 10  percent of their  pretax
earnings not to exceed the Internal Revenue Service annual contribution  limits.
The Company matches each eligible employee's contribution up to 5 percent of the
employee's earnings. The rate of matching is 100 percent for the first 1 percent
of each employee's  contribution  and a rate of 25 percent for  contributions of
greater than 1 percent up to the 5 percent maximum.  The Company made a matching
contribution  of $273,000  and  $198,000,  respectively,  in 1995 and 1994.  

     The Company also has an ESOP for  substantially  all  employees.  Under the
plan,  the  Company  contributes  either  a  fixed  amount  or a  percentage  of
compensation  of all  participants.  

     Certain key  employees  are awarded  shares of the  Company's  common stock
through the Company's  Restricted  Stock  Ownership Plan adopted in 1989 and the
restricted  stock  program of the Stock  Compensation  Plan  adopted in 1992 and
amended in 1994.  Under these  restricted  stock plans 498,570  shares of common
stock have been granted. The shares vest to the employee over varying schedules.
In 1995,  53,229 restricted shares vested under this plan. At December 31, 1995,
there were 84,666 unvested restricted shares outstanding.

Expenses relating to the plans were as follows:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                Employee                            Employee Savings
(Dollars in thousands)          Pension     Stock Ownership     Restricted Stock        Plan 401(k)
<C>                              <C>             <C>                 <C>                   <C> 
1995                             $796            $425                $490                  $273
1994                              851             425                 558                   198
1993                              364             319                 399
</TABLE>

(11) Stock Options

The Company has a Stock  Compensation  Plan adopted in 1992 and amended in 1994,
under  the  terms of which  the  Company  may  issue  incentive  stock  options,
nonqualified stock options and shares of restricted stock. At December 31, 1995,
112,069  shares of the  Company's  common stock  remained  available  for future
grants to officers and key  employees.  The Company's  Stock  Compensation  Plan
provides  that the number of shares of common stock  reserved for future  grants
under the plan be  increased by an amount equal to 1.25 percent of the number of
shares  outstanding  on the first day of each fiscal  year.  As a result,  as of
January 1, 1996,  223,045  additional  common shares will be reserved for future
grants.  The Company  records stock  compensation  in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." 

43
<PAGE>

The following  table presents the activity for the employee stock option program
under the Stock  Compensation  Plan for the years ended December 31, 1995, 1994,
and 1993:

<TABLE>
<CAPTION>
                            Number of Shares
                              Under Option  Option Price Per Share    Total
<S>                           <C>              <C>                <C>        
Outstanding December 31, 1992   583,886        $ 5.00 - $ 9.13    $ 3,596,343
Granted in 1993                 300,000        $ 7.50 - $12.00      2,700,000
Canceled in 1993               (161,331)       $ 6.07 - $ 9.18     (1,434,063)
Exercised in 1993               (65,696)                $ 6.07       (398,869)
                                -------                 ------       -------- 
Outstanding December 31, 1993   656,859        $ 5.00 - $12.00      4,463,411
                                -------        ------   ------      ---------

Granted in 1994               1,004,500        $ 9.00 - $13.38     10,459,688
Canceled in 1994               (283,337)       $ 6.07 - $13.38     (3,542,162)
Exercised in 1994              (123,108)       $ 6.07 - $ 8.62       (760,209)
                               --------        ------   ------       -------- 
Outstanding December 31, 1994 1,254,914        $ 5.00 - $12.00     10,620,728
                              ---------        ------   ------     ----------

Granted in 1995                 164,100        $10.75 - $14.13      2,207,700
Canceled in 1995                (26,365)       $ 6.07 - $ 9.75       (228,862)
Exercised in 1995              (147,956)       $ 5.00 - $ 9.75     (1,028,062)
                               --------        ------   ------     ---------- 
Outstanding December 31, 1995 1,244,693        $ 5.00 - $14.13    $11,571,504
                              =========        ======   ======    ===========

Options exercisable at:
        December 31, 1993       290,492        $ 5.00 - $ 8.62    $ 1,770,462
        December 31, 1994       721,936        $ 5.00 - $12.00    $ 5,910,636
        December 31, 1995       838,614        $ 5.00 - $14.13    $ 7,112,906
</TABLE>

     In December 1994, the Board of Directors  authorized an option substitution
program  permitting  employees to surrender options with an option price of more
than $9.75 (the fair market  value) in exchange for new options on a one-for-one
basis.  Outstanding options for 273,500 were exchanged under the program. 

     In May 1995,  the  stockholders  approved  the 1995 Stock  Option  Plan for
Directors  under which each eligible  director  would receive  option grants for
7,500 shares at fair value.  A total of 150,000  shares of the Company's  common
stock has been  reserved for issuance  under this Plan. As of December 31, 1995,
118,200  shares  were  granted  and  outstanding.  

     The Company has a Directors Deferred Compensation Program under which up to
250,000 shares of the Company's  common stock may be granted to Directors of the
Company or its banking  subsidiaries who choose to receive their Director's fees
or stipend in shares of the Company in lieu of cash.

(12) Noninterest Expense

Deposit Insurance Assessment

On August 8, 1995, the Federal Deposit Insurance  Corporation  ("FDIC") voted to
reduce  insurance  premiums paid to the Bank  Insurance Fund ("BIF") by the best
managed  and  capitalized  banks to 4 cents per $100 of  deposits  from the then
current  rate of 23 cents per $100 of  deposits.  Premiums  for savings and loan
associations  ("Thrifts")  insured by the  Savings  Association  Insurance  Fund
("SAIF")  remain  unchanged,  ranging  from 23 cents  for the best  managed  and
capitalized  Thrifts  to 31 cents per $100 of  deposits  for those  institutions
which  present  a  higher  risk to the  insurance  fund.  In 1990,  the  Company
purchased  the  deposits  of  a  failed  Thrift  institution.  Accordingly,  the
Company's  deposit  insurance  premiums  reflect a  combination  of SAIF and BIF
assessments.  In the third  quarter  of this year the  Company  received  a $700
thousand rebate of deposit  insurance  premiums paid earlier in 1995 as a result
of the  aforementioned  action  to reduce  premium  rates on  insured  deposits.

     Proposed Federal  legislation may result in a one-time assessment on Thrift
deposits that would supplement the weaker Thrift deposit insurance fund followed
by a merger of SAIF and BIF. The amount of such a one-time  assessment cannot be
determined  at this  time but could  have a  material  impact  on the  operating
results  of the  Company.  Under the  proposed  legislation,  subsequent  to the
one-time  charge,  the insurance  premium  charged on the former Thrift deposits
would be reduced.

44
<PAGE>

Other Noninterest Expense

The major components of other noninterest expense were:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
(Dollars in thousands)                          1995             1994          1993
<S>                                      <C>             <C>             <C>          
Furniture and equipment                  $       3,572   $       3,476   $       3,614
Legal and consulting                             2,356           3,553           1,801
Advertising and promotion                        2,123           2,307           1,280
Facility consolidation provisions                1,895             480
Amortization of intangibles                      1,798           1,367           1,367
Service bureau and other data processing         1,274           1,173           1,151
All other                                        9,951          11,171          10,309
                                                 -----          ------          ------
        Total other noninterest expense $       22,969  $       23,527  $       19,522
                                        ==============  ==============  ==============
</TABLE>

(13) Income Taxes

The income tax provision  (benefit)  included in the consolidated  statements of
income consisted of the following:

<TABLE>
<CAPTION>
                                                Year Ended December 31,
(Dollars in thousands)                  1995            1994           1993
<S>                               <C>            <C>            <C>             
Current tax expense (benefit)*:
        Federal                   $       7,860  $      (6,230) $        (8,302)
        State                             2,867          1,147            1,285
                                          -----          -----            -----
                                         10,727         (5,083)          (7,017)
                                         ------         ------           ------ 
Deferred tax expense (benefit):
        Federal                          (1,735)         6,588           (4,448)
        State                               177            546              (46)
                                            ---            ---              --- 
                                         (1,558)         7,134           (4,494)
                                         ------          -----           ------ 
                 Total            $       9,169  $       2,051  $       (11,511)
                                  =============  =============  =============== 

*    The 1995 current  provision  does not reflect $286 thousand of tax benefits
     related to stock  options  exercised  that have been  credited  directly to
     additional paid-in capital.
</TABLE>

     At December 31, 1995 and 1994,  cumulative net deferred income tax benefits
amounting  to  $6,983,000  and  $11,679,000  were  included in the  consolidated
balance sheets as other assets.  Additionally,  at December 31, 1995, there were
current  taxes  payable of $1,810,000  included in other  liabilities,  while at
December 31, 1994, there were tax refund  receivables of $2,998,000  included in
other assets.

     The components of the net deferred tax asset were as follows:

<TABLE>
<CAPTION>
                                                                              December 31,
(Dollars in thousands)                                                     1995           1994
<S>                                                                  <C>            <C>           
Book reserve for loan losses in excess of tax                        $      23,117  $       26,175
Alternative minimum tax credit                                               6,768           4,988
Investment tax credits                                                       5,498           4,730
Deferred  compensation  benefits not deducted for tax                        1,449           1,264 
Securities mark to market  adjustment  deferred for tax                     (1,198)         (1,779)
Book writedowns on foreclosed  real estate,  not deducted for tax              240             323
Net  operating  losses*                                                                     12,207
Tax deductions on leveraged  leases deferred for book                      (14,919)        (17,226)
Loan  mark to  market  adjustment  for tax                                 (12,990)        (11,228) 
Pension  expense deducted for tax not book                                    (741)           (850) 
Tax basis in partnership  investment  less than book                          (704)           (708) 
Cumulative tax depreciation in excess of book                                 (583)           (675)
Tax basis in core  deposits  less  than book                                  (355)           (850)  
Valuation  allowance (state)                                                  (181)           (365) 
Valuation  allowance  (federal)*                                                            (6,017) 
Other,  net                                                                  1,582           1,690
                                                                             -----           -----
                Total deferred tax asset                             $       6,983  $       11,679
                                                                     =============  ==============

*    The  federal  valuation  allowance  in 1994 was  related  primarily  to the
     unrealized loss on securities available-for-sale.  This amount was reversed
     during 1995 as the market value of the securities  portfolio  increased and
     the tax effect on the unrealized loss component of stockholders' investment
     decreased. 
</TABLE>

45
<PAGE>

     The  provisions  for income  taxes  differ  from the  amounts  computed  by
applying the U.S.  statutory federal tax rate of 35 percent in 1995 and 1993 and
34 percent in 1994 to income (loss) before income taxes principally due to:

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
(Dollars in thousands)                                               1995           1994             1993
<S>                                                            <C>            <C>            <C>             
Tax (benefit) at statutory rate                                $       8,444  $       2,311  $       (11,326)
Increases (reductions) from:
        Tax-exempt income on investment securities and loans            (596)          (676)            (832)
        State income taxes, net of federal income tax benefit          1,979          1,118              818
        Low income housing credits                                      (724)          (911)            (862)
        Other, net                                                        66            209              691
                                                                          --            ---              ---
Tax expense (benefit) recorded                                 $       9,169  $       2,051  $       (11,511)
                                                               =============  =============  =============== 
</TABLE>

(14) Capital and Former Regulatory Agreements

In 1993,  the  Company  sold  500,000  shares of its  common  stock in a private
placement for a cash price of $3,750,000.  Substantially all of the net proceeds
of that placement were used to repay principal on the Company's  long-term debt.
Also in 1993,  the Company  sold 2.87  million  shares of its common  stock in a
European offering.  These shares were placed with more than sixty  institutional
investors  and the  offering was made under  Regulation  S of the United  States
Securities  and  Exchange  Commission.  Net  proceeds  of  this  placement  were
approximately $21 million.

Dividends

The Company and its banking subsidiaries' ability to pay dividends is subject to
certain limitations imposed by statutes of the Commonwealth of Massachusetts and
the State of  Connecticut,  and  limitations  imposed  by bank and bank  holding
company  regulators.  Massachusetts  statutes  restrict  the amount of dividends
payable by banks to be the balance of their undivided profits, net of any amount
transferred to capital in excess of par value.  In the case of Connecticut  law,
the limit is undivided  profits plus  reserve for possible  loan losses.  In any
event,  it is not likely that bank and bank  holding  company  regulators  would
allow  an   institution   to  dividend  any  amounts  which  would  reduce  that
institution's capital to below the minimum capital requirement in effect at that
time.  Refer to "Former  Agreements  with Bank  Regulatory  Agencies"  below for
additional discussion on dividend  restrictions. 

     In the  fourth  quarter  of  1995,  the  Company  declared  and paid a cash
dividend  of  $0.05  per  share to  stockholders  for a total  dividend  of $888
thousand. During the year the Company received dividends from subsidiaries of $3
million from USTC,  $1 million  from  USTrust and $1 million from JSA  Financial
Corporation,  a  nonbanking  subsidiary.  During  1995 the  Company  contributed
capital to its subsidiaries  totaling $1 million to UST/Conn and $6.5 million to
JSA Financial Corporation.

Shareholder Rights Plan

On September 22, 1995, the Company declared a special  dividend  distribution of
one preferred share purchase right for each  outstanding  share of the Company's
common stock.  This dividend was  distributed on October 6, 1995 to stockholders
of record as of the close of  business  on that  date.  

     The rights will become  exercisable  only if a person or group (i) acquires
15 percent or more of the Company's common stock,  (ii) announces a tender offer
that would  result in ownership  of 15 percent or more of the common  stock,  or
(iii) is declared to be an "Adverse Person" by the Company's Board of Directors.
"Adverse  Person"  includes  any person or group who owns at least 10 percent of
the Company's  common stock and attempts an action that would  adversely  impact
the Company. Each right would entitle a stockholder to buy 1/100th of a share of
a new series of junior participating preferred stock. 

     Once a person or group has  acquired 15 percent or more of the  outstanding
common stock of the Company or is declared an "Adverse  Person" by the Company's
Board of Directors,  each right may entitle its holder (other than the acquiring
person or Adverse  Person) to purchase,  at an exercise price of $40,  shares of
common stock of the Company (or any organization that acquires the Company) at a
price  equal  to 50  percent  of  their  current  market  price.  Under  certain
circumstances,  the  Continuing  Directors  (as defined in the rights  plan) may
exchange the rights for common stock (or equivalent securities) on a one-for-one
basis excluding  rights held by the acquiring  person or Adverse  Person.  

     Until   declaration  of  an  Adverse  Person,  or  ten  days  after  public
announcement  that any  person or group has  acquired  15 percent or more of the
Company's common stock, the rights are redeemable at the option of the Company's
Board of Directors,  in certain  cases with the  concurrence  of the  Continuing

46
<PAGE>

Directors.  Thereafter,  they may be redeemed  by the  Continuing  Directors  in
connection  with certain  acquisitions  not involving  any  acquiring  person or
Adverse Person or in certain circumstances  following a disposition of shares by
the acquiring person or Adverse Person. The redemption price is $.001 per right.
The rights will expire on October 6, 2005,  unless  redeemed prior to that date.
Distribution of the rights is not taxable to stockholders.

Stock Repurchase Program

On  October  17,  1995,  the  Company's  Board  of  Directors  approved  a stock
repurchase program.  Under the program,  the Company is authorized to repurchase
up to 500,000  shares,  which was  approximately  2.8  percent of the  Company's
common stock  outstanding  on the date of  authorization.  The stock  buyback is
authorized  to take  place  from  time to time,  subject  to  prevailing  market
conditions.  Purchases may be made on the open market or in privately negotiated
transactions.  Shares  repurchased  are to be held as treasury shares to be used
for general corporate purposes, including employee benefit plans.

Former Agreements with Bank Regulatory Agencies

On July 21,  1995,  the  Company  was  released  from the  terms of its  Written
Agreement originally entered into on August 3, 1992, by the Federal Reserve Bank
of Boston  ("FRB-Boston")  and the Office of the  Massachusetts  Commissioner of
Banks ("Massachusetts Commissioner"). For a discussion of the Agreement which is
no longer in effect,  refer to the Company's  Annual Report on Form 10-K for the
fiscal  year  ended   December   31,   1994.   

     In June 1995,  the  Company's  Massachusetts-based  and largest  subsidiary
bank,  USTrust,  was  released  by the  Federal  Deposit  Insurance  Corporation
("FDIC")  and the  Massachusetts  Commissioner  from the  terms of its Cease and
Desist Order, originally issued in January 1992. In conjunction with the release
of the Order,  USTrust's  Board of Directors  adopted a  resolution  pursuant to
which USTrust agreed,  among other matters: (i) to continue to maintain a Tier 1
leverage  capital ratio of at least 6 percent;  (ii) not to pay a dividend which
would  cause the Bank's Tier 1 leverage  capital  ratio to fall below 6 percent;
(iii) to  continue to  implement  plans to reduce  nonperforming  assets and the
aggregate  level of  insider  loans;  and (iv) to provide a  quarterly  progress
report to the FDIC and the Massachusetts  Commissioner.  For a discussion of the
Order which is no longer in effect, refer to the Company's Annual Report on Form
10-K  for the  fiscal  year  ended  December  31,  1994.  The  Company's  second
Massachusetts-based banking subsidiary,  USTC, was released from a similar Order
in 1994;  and has also agreed not to declare or pay dividends  should the effect
of the payment of such dividends  cause USTC's Tier 1 leverage  capital ratio to
fall below 6 percent.  On  September  14,  1995,  UST/Conn  was  released by the
Commissioner  of Banks  for the  State  of  Connecticut  from  the  terms of its
Stipulation and Agreement,  originally  issued in June 1991. For a discussion of
the Agreement which is no longer in effect, refer to the Company's Annual Report
on Form 10-K for the fiscal year ended  December  31,  1994.  

     All banks and bank holding  companies are required to meet certain  capital
requirements.  The Company's Tier 1 capital, Total risk-based capital and Tier 1
leverage  capital ratios at December 31, 1995 were 10.24 percent,  11.75 percent
and 8.83  percent,  respectively.  The Tier 1  leverage  capital  ratios for the
Company's subsidiary banks, USTrust, USTC and UST/Conn, were 7.92 percent, 32.99
percent and 8.31 percent,  respectively.  The Company  believes its consolidated
capital ratios and the capital ratios of its  subsidiary  banks exceed  required
minimums.

(15) Related Party Transactions

In the ordinary  course of business,  the Company's  banking  subsidiaries  have
granted loans to certain of the Company's directors and executive officers.  All
such  transactions are made on substantially  the same terms as those prevailing
at the same  time for  individuals  not  affiliated  with  the  Company  and its
subsidiaries  and at the time they were  granted did not  involve  more than the
normal risk of collectibility.  At December 31, 1995, none of these transactions
were on  nonaccrual  status,  nor did they involve  delinquent  or  restructured
loans.  However,  at December 31, 1995,  loans to directors of the Company or to
their  affiliated  companies in the amount of  approximately  $6 million (all to
Director  Francis X. Messina and his related  interests) were  characterized  as
Substandard,  in the Company's internal risk rating system.  Under the Company's
definition, Substandard loans are characterized by the distinct possibility that
some  loss will be  sustained  if the  credit  deficiencies  are not  corrected.
However,  the Substandard  classification  does not imply ultimate loss for each
individual loan so classified.

47
<PAGE>

An analysis of loans  outstanding in excess of $60,000 to directors and officers
related to the foregoing entities at December 31, 1995 is as follows:

<TABLE>
<CAPTION>
(Dollars in thousands)
<S>                                     <C>    
Balance, December 31, 1994              $46,626
Additions                                     1
Repayments                              (27,883)
                                        ------- 
Balance, December 31, 1995              $18,744
                                        =======
</TABLE>

(16) Commitments and Contingencies

Commitments  for  leased  premises  expire at various  dates  through  2010.  At
December 31, 1995,  minimum rental  commitments for noncancelable  leases are as
follows:

<TABLE>
<CAPTION>
(Dollars in thousands)
<C>                            <C>     
1996                           $  3,857
1997                              3,707
1998                              3,343
1999                              2,820
2000                              2,667
thereafter                        3,819
                                  -----
        Total                  $ 20,213
                               ========
</TABLE>

     As part of a space  consolidation  program,  the  Company  recorded  a $1.3
million  provision in 1995 for future  lease  commitments  on  abandoned  leased
facilities.  The 1995 provision  will reduce the amount of  noninterest  expense
recorded in future periods for lease commitments listed in the above table. Rent
expense  for the  years  ended  December  1995,  1994 and  1993 was  $3,927,000,
$4,133,000,  and $3,932,000,  respectively.  

     In the ordinary course of business, the Company and its subsidiaries become
defendants  in a variety of  judicial  and  administrative  proceedings.  In the
opinion of  management  there is no proceeding  pending,  or to the knowledge of
management threatened,  which in the event of an adverse decision,  would result
in a material adverse change in the financial condition or results of operations
of the Company.

(17) Financial Instruments With On- and Off-Balance Sheet Risk

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  financial  instruments  include  commitments  to extend  credit,  standby
letters  of credit and  financial  guarantees.  Those  instruments  involve,  to
varying  degrees,  elements of credit risk in excess of the amount  contained in
the balance sheet. The contract or notional amounts of those instruments reflect
the extent of  involvement  the Company has in  particular  classes of financial
instruments.   

     The Company's exposure to credit loss in the event of nonperformance by the
other party to the  financial  instrument  or  commitments  to extend credit and
standby letters of credit and financial guarantees written is represented by the
contractual  notional  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. 

     The Company  generally  requires  collateral  or other  security to support
financial instruments with credit risk.

<TABLE>
<CAPTION>
                                                                              Contract or Notional Amount
(Dollars in thousands)                                                December 31, 1995    December 31, 1994
<S>                                                                    <C>                  <C>            
Financial instruments whose contract amount represents credit risk:
        Commitments to extend credit                                   $       387,000      $       308,000
        Standby letters of credit and financial guarantees written              48,000               64,000
        Commercial letters of credit                                             3,000                2,000
        Foreign exchange                                                         1,000                1,000
</TABLE>

     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 during its
term.  Commitments  generally have fixed expiration  

48
<PAGE>

dates or other termination  clauses and may require payment of a fee. Since many
of the  commitments  are expected to expire  without being fully drawn upon, the
total commitment amounts do not necessarily  represent future cash requirements.
The Company evaluates each customer's credit worthiness on a case-by-case basis.
Of the total  commitments  to extend credit,  approximately  $70 million and $76
million  were secured by real estate at December 31, 1995 and December 31, 1994,
respectively.  

     The amount of collateral  obtained is based on  management's  evaluation of
the credit risk. Collateral held on commitments and loans varies but may include
cash, accounts receivable, inventory, property, plant and equipment. 

     Standby and commercial  letters of credit and financial  guarantees written
are conditional  commitments  issued by the Company to guarantee the performance
of, or payment by, a customer to a third party.  Those  guarantees are primarily
issued to support private  borrowing  arrangements.  The credit risk involved in
issuing  letters of credit is essentially the same as that involved in extending
loan  facilities to customers.  The Company holds various  collateral to support
these  commitments  including  (but not limited to) cash,  account  receivables,
inventory,  property,  plant and  equipment.  The extent of collateral  held for
those commitments varies from zero to one hundred percent.  Of the total standby
and commercial letters of credit, approximately $12 million and $15 million were
secured  by real  estate  at  December  31,  1995 and  1994,  respectively.  

     The Company's  primary loan market is the New England  region.  Most of the
loans outstanding are from eastern  Massachusetts  and a substantial  portion of
these  loans are  various  types of real estate  loans;  still  others have real
estate as  additional  collateral.  Approximately  95 percent  of the  Company's
outstanding  commercial  and real estate loans are  collateralized.  

     The Company enters into foreign currency exchange contracts  exclusively as
a service to its customers.  Contracts are purchased on the open market and have
offsetting  customer  agreements.  The  Company is exposed to credit risk in the
event  the  customer  fails to  deliver  or take  delivery  of the  agreed  upon
currency. 

     The Company's  securities  portfolio  consists  largely of  mortgage-backed
securities.  These  securities  carry  prepayment  risk  due  to the  fact  that
prevailing  interest rates could decline.  Under such circumstances an unusually
high  percentage of homeowners may choose to refinance  their first mortgages to
take  advantage of these lower rates with the result that,  under the  Company's
accounting  policy,  adjustments  reducing gross  unamortized  premiums would be
required.  Refer to Note 2, Securities Policies.  

     In  October  1994,  the  Financial  Standards  Board  issued  Statement  of
Financial  Accounting  Standards  No. 119 (SFAS No.  119),  "  Disclosure  about
Derivative Financial Instruments and Fair Value of Financial Instruments," which
is  effective  for fiscal years  ending  after  December 15, 1994.  SFAS No. 119
requires certain disclosures about derivative  financial  instruments  including
futures,  forward swap and option contracts and other financial instruments with
similar  characteristics.  As of December  31,  1995,  there were no  derivative
financial  instruments held by the Company  requiring  disclosure under SFAS No.
119.

(18) Parent Company Financial Information

Summarized  information  relative to the balance sheets at December 31, 1995 and
1994 and  statements  of income and cash flows for the three years in the period
ended  December 31, 1995 of UST Corp.  (parent  company  only) are  presented as
follows:

<TABLE>
<CAPTION>
Balance Sheets -- Parent Company Only
                                                                              December 31,
(Dollars in thousands)                                                   1995              1994
<S>                                                               <C>                <C>            
Assets:
        Cash, due from banks and interest-bearing deposits        $           952    $         2,258
        Securities purchased under agreements to resell                     5,000
        Securities available-for-sale                                                         15,957
        Investment in banking subsidiaries                                161,920            124,548
        Investment in nonbanking subsidiaries                               5,139                 46
        Premises, furniture and equipment, net                                 76                 69
        Other assets                                                        3,645              3,084
                                                                            -----              -----
                Total assets                                      $       176,732    $       145,962
                                                                  ===============    ===============
Liabilities and Stockholders' Investment:
        Other borrowings                                          $           143    $         8,464
        Other liabilities                                                   2,921              4,864
        Stockholders' investment                                          173,668            132,634
                                                                          -------            -------
                Total liabilities and stockholders' investment    $       176,732    $       145,962
                                                                  ===============    ===============
</TABLE>

49
<PAGE>

<TABLE>
<CAPTION>
Statements of Income -- Parent Company Only
                                                                             Year Ended December 31,
(Dollars in thousands)                                              1995            1994               1993
<S>                                                          <C>             <C>             <C>             
Dividend income                                              $        5,000  $       3,000   $         5,250
Undistributed equity in net income (loss) of subsidiaries            10,518          2,492           (24,065)
Other income                                                          4,216            731               292
                                                                      -----            ---               ---
                                                                     19,734          6,223           (18,523)
Expenses                                                              4,776          1,477             1,577
                                                                      -----          -----             -----
     Net income (loss)                                       $       14,958  $       4,746   $       (20,100)
                                                             ==============  =============   =============== 
</TABLE>

<TABLE>
<CAPTION>
Statements of Cash Flows -- Parent Company Only
                                                                                              Year Ended December 31, 
(Dollars in thousands)                                                                1995            1994            1993 
<S>                                                                             <C>             <C>            <C>             
Cash flows from operating activities:
        Net income (loss)                                                       $       14,958  $       4,746  $       (20,100)
        Adjustments to reconcile net income (loss) to net cash
                provided by operating activities:
                Depreciation and amortization                                              125            447              447
                Undistributed (income) loss of affiliates                              (10,518)        (2,492)          24,065
                Loss (gain) on sale of securities                                            2             (5)
                (Increase) decrease in other assets                                       (568)           536             (338)
                (Decrease) increase in other liabilities                                (1,262)           316            1,543
                                                                                        ------            ---            -----
                        Net cash provided by operating activities                        2,737          3,548            5,617
Cash flows provided (used) by investing activities:
        Proceeds from securities                                                        15,957         19,961           26,700
        Purchase of securities                                                                        (35,912)         (47,750)
        Net (increase) decrease in short-term investments                               (5,000)        21,000
        Equity contributed to affiliates                                                (7,500)        (5,400)          (5,250)
                                                                                        ------         ------           ------ 
                        Net cash provided (used) by investing activities                 3,457           (351)         (26,300)
Cash flows provided (used) by financing activities:
        Repayment of other borrowings                                                   (8,000)        (4,000)          (4,000)
        Proceeds from issuance of common stock, net                                      1,388            792           23,677
        Cash dividends paid                                                               (888)
                                                                                          ----         ------          -------
                        Net cash provided (used) by financing activities                (7,500)        (3,208)          19,677
                                                                                        ------         ------           ------
        Decrease in cash and cash equivalents                                           (1,306)           (11)          (1,006)
        Cash and cash equivalents beginning of year                                      2,258          2,269            3,275
                                                                                         -----          -----            -----
        Cash and cash equivalents end of year                                   $          952  $       2,258  $         2,269
                                                                                ==============  =============  ===============
Supplemental disclosure of cash flow information:
 Cash paid during the year for:
                        Interest                                                $          607  $         938  $         1,415
                                                                                ==============  =============  ===============
                        Income taxes                                            $          550
                                                                                ==============
</TABLE>

     Cash  dividends  paid  to  the  Company  in  1995  by   consolidated   bank
subsidiaries  totaled  $4,000,000 and $3,000,000 in 1994 and none in 1993.  Cash
dividends paid to the Company by nonbank subsidiaries in 1995 totaled $1,000,000
and none in 1994 and 1993.

(19) Financial Instruments

SFAS No. 107, "Disclosures about Fair Value of Financial  Instruments," requires
disclosure of the fair market value of financial  instruments,  whether  assets,
liabilities or off-balance  sheet  commitments,  if  practicable.  The following
methods and  assumptions  were used to estimate  the fair value of each class of
financial  instruments.  Fair value estimates which were derived from discounted
cash flows or broker quotes cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in immediate settlement of the
instrument.

     Cash and due from banks, excess funds sold and other short-term investments
-- For these short-term instruments the carrying amount is a reasonable estimate
of fair value.  

50
<PAGE>

     Securities  available-for-sale -- For marketable securities fair values are
based on quoted market prices or dealer quotes. 

     Loans -- For certain  homogeneous  categories of loans, such as residential
mortgages and home equity loans,  fair value is estimated based on broker quotes
on sales of similar  loans.  The fair value of fixed rate loans was estimated by
discounting  anticipated  future cash flows using current rates at which similar
loans would be made to borrowers  with similar  credit  ratings and for the same
remaining  maturities.  The fair value of performing  variable rate loans is the
same as the book value at the reporting  date because the loans reprice when the
market changes. 

     Deposit liabilities -- The fair value of noncertificate deposit accounts is
the  amount  payable  on  demand  at the  reporting  date.  The  fair  value  of
fixed-maturity   certificates   of  deposit  is  estimated  by  discounting  the
anticipated  future cash payments using the rates currently offered for deposits
of similar remaining  maturities.  

     Short-term  borrowings  -- For these  short-term  instruments  the carrying
amount is a  reasonable  estimate of fair value.  

     Other  borrowings -- The fair value of other  borrowings were determined by
discounting  the  anticipated  future cash payments by using the rates currently
available to the Company for debt with similar terms and  remaining  maturities.

     Off-balance  sheet  financial  instruments  -- For  commitments  to  extend
credit, standby and commercial letters of credit and foreign exchange contracts,
the carrying amount which represents  accruals of deferred income (fees) arising
from  these  instruments,  and the fair  value of such  deferred  income  is not
material.  Refer to Note 17 for  notional  or  contract  amounts  and a  further
discussion of off-balance sheet financial instruments.  

     Values not  determined  -- SFAS No. 107  excludes  certain  assets from its
disclosure  requirements  including real estate included in banking premises and
equipment,   and  the  intangible  value  inherent  in  the  Company's   deposit
relationships  (i.e.,  core  deposits).  Accordingly,  the aggregate  fair value
amounts  presented  below do not represent the underlying  value of the Company.

     The carrying  amount and estimated  fair values of the Company's  financial
instruments at December 31, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
                                                                         1995                           1994
(Dollars in thousands)                                     Carrying Amount    Fair Value   Carrying Amount    Fair Value
<S>                                                        <C>             <C>             <C>             <C>           
Financial instrument assets:
        Cash and due from banks                            $       89,799  $       89,799  $       93,079  $       93,079
        Securities                                                575,673         575,673         401,740         401,737
        Excess funds sold                                                                          10,000          10,000
        Loans, net                                              1,187,949       1,230,762       1,186,650       1,202,541
        Loans held-for-sale                                        13,098          13,098
Financial instrument liabilities:
        Deposits
                Demand                                     $      372,917  $      372,917 $       371,716  $      371,716
                Interest-bearing demand (NOW accounts)            166,011         166,011         168,434         168,434
                Money market                                      210,924         210,924         271,898         271,898
                Regular savings                                   244,680         244,680         285,350         285,350
                Time                                              518,205         522,189         393,408         396,030
        Short-term borrowings                                     242,962         242,962         158,989         158,989
        Other borrowings                                              143             143           9,964          10,267
</TABLE>

51
<PAGE>

(20) Consolidated Selected Quarterly Financial Data (unaudited)

<TABLE>
<CAPTION>
                                                         For Year Ended December 31, 1995        For Year Ended December 31, 1994
                                                       Fourth     Third    Second     First    Fourth     Third    Second     First
(Dollars in thousands, except per share amounts)       Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter
<S>                                                    <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>    
Interest income                                        $37,954   $37,626   $36,467   $35,920   $34,238   $33,471   $32,715   $31,887
Interest expense                                        14,311    13,921    12,867    11,436    10,287     9,806    10,036    10,082
Net interest income                                     23,643    23,705    23,600    24,484    23,951    23,665    22,679    21,805
Provision for possible loan losses                       1,800     2,790     3,670     4,830     4,801     7,223     6,545     5,713
Net interest income after provision
  for possible loan losses                              21,843    20,915    19,930    19,654    19,150    16,442    16,134    16,092
Noninterest income                                       7,170     7,083     7,007     8,710     7,241     7,578     7,616     7,900
Noninterest expense                                     21,619    21,287    21,211    24,070    24,451    22,517    22,051    22,336
Income tax expense                                       2,895     2,566     2,182     1,524       576       447       376       653
Net income                                               4,499     4,145     3,544     2,770     1,364     1,056     1,323     1,003
Earnings per share                                     $  0.25   $  0.23   $  0.20   $  0.16   $  0.08   $  0.06   $  0.07   $  0.06
</TABLE>

As shown above, the net income of the Company has experienced substantial growth
from the modest level of earnings  achieved in the early quarters of 1994 to the
fourth quarter of 1995 high of $4.5 million. The largest contributor to earnings
growth was the  quarterly  reductions  in  provision  for  possible  loan losses
consistent  with the  declining  level of  troubled  assets.  The lower level of
troubled assets also led to a reduction in foreclosed  asset and workout expense
which is  reflected  in the  quarterly  declines  in  noninterest  expense.  Net
interest income increased throughout the four quarters of 1994 and peaked in the
first quarter of 1995 reflecting the positive effect of a rise in interest rates
on interest  earning  assets while the Company  controlled the level of costs of
interest-bearing   liabilities.   Noninterest  income  has  remained  relatively
constant  except for quarterly  fluctuations  due to the recognition of gains on
sale of securities.

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

None

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

                           Executive Policy Committee

In 1987,  the Board of  Directors  of the Company  created an  Executive  Policy
Committee which is the primary management forum of the Company for all strategic
and policy  decisions.  All  decisions of the  Executive  Policy  Committee  are
subject to the review and approval of the Board of Directors of the Company. The
Executive  Policy  Committee has been directed by the Board of Directors to make
recommendations  to the Board  concerning  adoption of policies,  strategies and
programs  concerning the following,  among other matters:  (a)  acquisitions and
dispositions of corporate entities, assets and/or investments;  (b) the issuance
of equity and/or debt; (c) engaging in new business activities;  (d) the hiring,
termination,  training and motivation of senior management;  (e) the development
of  marketing  programs  concerning  financial  services;  (f)  improvements  to
operations,  service delivery and implementation of procedures for cost control;
(g) improvements to the financial  reporting and financial control systems;  (h)
improvements  to  the  business   information   systems;  and  (i)  improvements
concerning risk management and legal and regulatory  compliance programs.  As of
February 20, 1996, there were 11 members of the Executive Policy Committee.  The
members of the Committee are  identified  and the  background of each  Committee
member is set forth below under "Executive Officers".

52
<PAGE>

                               Executive Officers

The names and ages of the executive  officers of the Company and each  executive
officer's  position with the Company and its principal  subsidiaries  are listed
below.  Each such executive  officer is elected annually by the Directors of the
Company (or the  Directors  of the  applicable  subsidiary  of the  Company) and
serves until his or her  successor is duly chosen and  qualified or until his or
her earlier death, removal or disqualification.

<TABLE>
<CAPTION>
        Name               age                              Positions and Offices with the Company
                                           (and/or where appropriate, position with one of the Company's subsidiaries)
<S>                        <C>    <C>                                                                            
* Neal F. Finnegan         58     President, Chief Executive Officer and Director of the Company and Chairman,
                                  President and Chief Executive Officer of USTrust

* Domenic Colasacco        47     Executive Vice President/Trust and Investment Management and Director of the Company
                                  and Chairman and President of USTC

* James K. Hunt            52     Executive Vice President, Chief Financial Officer and Treasurer of the Company
                                  and Chief Financial Officer and Executive Vice President of USTrust;  Treasurer of
                                  UST Leasing Corporation

* Eric R. Fischer          50     Executive Vice President, General Counsel and Clerk of the Company and Executive  Vice
                                  President, General Counsel and Secretary of USTrust and USTC;  Clerk of UST Capital
                                  Corp. and UST Leasing Corporation

* Kathie S. Stevens        45     Executive Vice President and Senior Lending Officer of the Company and USTrust
                                  and Vice Chairman of USTrust; President of UST Capital Corp.

* Katharine C. Armstrong   51     Executive Vice President/Commercial Lending of the Company and USTrust

* Robert T. McAlear        53     Executive Vice President/Controlled Loans and Credit of the Company and
                                  Vice Chairman of USTrust

* Suzanne Moot             46     Executive Vice President/Marketing and Retail Banking of the Company and USTrust

* Walter E. Huskins, Jr.   56     Executive Vice President/Administration of the Company and USTrust;
                                  Acting President of UST Bank/Connecticut and President of UST Leasing Corporation

* Linda J. Lerner          51     Senior Vice President/Human Resources of the Company,  USTrust and USTC

* Kenneth L. Sullivan      59     Senior Vice President/Operations of the Company and Senior Vice President of USTrust
 
 George T. Clarke         49     Senior Vice President and Controller of the Company and USTrust;
                                  Treasurer of UST Capital Corp.
</TABLE>
*    Member, Executive Policy Committee


     The  following  sets forth the  principal  occupation  during the past five
years of each of the executive officers of the Company.  

     Mr.  Finnegan has served as President  and Chief  Executive  Officer of the
Company since 1993. During the prior five years, Mr. Finnegan was Executive Vice
President in charge of Private  Banking at Bankers Trust Company,  New York, New
York. From 1986 to 1988, Mr. Finnegan was President and Chief Operating  Officer
of Bowery Savings Bank in New York City.  From 1982 to 1986 he was Vice Chairman
of Shawmut  Corporation in Boston.  Mr. Finnegan also serves as Vice Chairman of
the Board of Trustees of Northeastern University. Mr. Finnegan is also Chairman,
President and Chief Executive  Officer of USTrust and a Director and Chairman of
the  Executive  Committee of USTC.  

     Mr.  Colasacco was elected  Executive  Vice President and a Director of the
Company  in 1990.  In 1993,  he was  also  elected  Chairman  of the  Board  and
President of USTC.  Prior to that time, he served as an Executive Vice President
of USTC. He also directs the trust and investment  management  activities of the
Company and its  subsidiaries.  Mr. Colasacco has been an officer of the Company
or of one of its  subsidiaries  since 1974. 

     Mr.  Hunt  was  elected  Executive  Vice  President,  Treasurer  and  Chief
Financial Officer of the Company in 1994. Prior to joining the Company, Mr. Hunt
served as  Executive  Vice  President  at Peoples  Bancorp of  Worcester,  Inc.,
Worcester,  Massachusetts,  from  1987  through  mid-1994.  He  also  serves  as
Executive Vice President and Chief Financial Officer of USTrust and as Treasurer
of UST  Leasing  Corporation  and various  other  nonbanking  subsidiaries.  

     Mr. Fischer was elected Executive Vice President, General Counsel and Clerk
of the  Company  in 1992.  Prior to 1992,  he served as Senior  Vice  President,
General Counsel and Assistant  Clerk of the Company.  Before joining the Company
in 1986, he served as Assistant  General  Counsel of Bank of 

53
<PAGE>

Boston  Corporation  and its principal  subsidiary,  The First  National Bank of
Boston.  Mr. Fischer is, and has been since 1984, a member of the faculty of the
Morin Center for Banking and Financial Law Studies of Boston  University  School
of Law.  He also  serves  as  Executive  Vice  President,  General  Counsel  and
Secretary of USTC and USTrust, Assistant Secretary of UST/Conn, and Clerk of UST
Capital   Corp.,   UST  Leasing   Corporation   and  various  other   nonbanking
subsidiaries. 

     Ms.  Stevens who has served as Executive  Vice President and Senior Lending
Officer of the  Company  since 1993 was also  elected to the  positions  of Vice
Chairman of USTrust and Chairman of the Senior  Credit  Committee of the Company
and USTrust in 1995.  Ms.  Stevens has been a senior  officer in the  Commercial
Lending  function  since she joined the  Company  in 1985.  Ms.  Stevens is also
President  of  UST  Capital  Corp. 

     Ms. Armstrong was named Executive Vice President/Commercial  Lending of the
Company  and USTrust in 1995.  In that  capacity  she  oversees  the  commercial
lending, asset-based lending and commercial real estate lending functions of the
Company.  From 1993 to 1995 Ms. Armstrong served as Senior Vice President/Credit
Administration  of the  Company.  Ms.  Armstrong  joined the Company in 1985 and
served in various  credit  administration  functions from 1985 until she assumed
her position as Executive Vice President/Commercial Lending in 1995. 

     Mr.  McAlear  was elected  Executive  Vice  President/Controlled  Loans and
Credit of the Company in 1994.  He has served as Vice  Chairman of USTrust since
he  joined  the  Company  in 1990.  His  primary  responsibilities  involve  the
supervision of the controlled loan, owned real estate and credit  administration
functions of USTrust and the Company.  Prior to 1990,  Mr.  McAlear served as an
Executive  Vice  President in the lending  area of the Bank of New England.  

     Ms.  Moot  joined  the  Company  in  1995  and  serves  as  Executive  Vice
President/Marketing  and Retail  Banking of the  Company and  USTrust.  Prior to
joining the  Company,  Ms. Moot  served as a  consultant  to more than two dozen
commercial  and savings  bank  clients  between 1988 and 1995 and served as Vice
President of Commercial Marketing at Shawmut Bank, Boston, MA from 1985 to 1988.


     Mr.  Huskins was elected  Executive  Vice  President/Administration  of the
Company  in  August  1993.  Mr.  Huskins  is also  responsible  for the  leasing
activities of the Company.  Prior to joining the Company,  Mr. Huskins served as
President,  Sterling Protection Company,  Watertown,  MA (security systems) from
1990  to  1993  and as Vice  Chairman  of  Chancellor  Corporation,  Boston,  MA
(leasing)  from 1977 to 1989.  Mr.  Huskins also serves as a Director and Acting
President of UST/Conn and as Chairman of the Board and  President of UST Leasing
Corporation.

     Ms.  Lerner has served as Senior Vice  President  of the Company  since she
joined the Company in 1988.  She directs the Human  Resources  activities of the
Company.  Prior to her  joining  the  Company,  Ms.  Lerner  served in a similar
capacity for the Provident  Institution for Savings in Boston.  

     Mr. Sullivan has served as Senior Vice  President/Operations of the Company
since  1994.  He also  serves as Senior  Vice  President  of  USTrust.  In those
capacities,  he has  responsibility  for the  data  processing  and  information
systems of the Company as well as for its operations activities.  Prior to 1988,
Mr.  Sullivan  served as Executive  Vice  President of Operations  with BayBanks
Systems,  Inc.  in  Waltham,  Massachusetts.  Prior to 1995,  he also  served as
President of UST Data Services Corp. which as of December 31, 1995 was dissolved
and became a division of USTrust.  

     Mr. Clarke was elected  Senior Vice President and Controller of the Company
in 1994 and of USTrust in 1996.  Prior to 1994 he served as Vice  President  and
Controller of the Company  since 1988.  Before  joining the Company,  Mr. Clarke
served as Deputy Comptroller of The First National Bank of Boston. Mr. Clarke is
also Treasurer of UST Capital Corp.

     There are no arrangements or  understandings  between any executive officer
and any other  person  pursuant to which he or she was  selected as an executive
officer.

     Other than the  information  provided in the  preceding  paragraphs of this
Item 10,  this  item has been  omitted  since  the  Company  will  have  filed a
definitive proxy statement within 120 days after December 31, 1995, the close of
its  fiscal  year.  The  additional   information   required  by  this  item  is
incorporated by reference to such proxy statement.

ITEM 11. Executive Compensation

This item has been omitted since the Company will have filed a definitive  proxy
statement within 120 days after December 31, 1995, the close of its fiscal year.
The information required by this item is incorporated by reference to such proxy
statement.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

This item has been omitted since the Company will have filed a definitive  proxy
statement within 120 days after December 31, 1995, the close of its fiscal year.
The information required by this item is incorporated by reference to such proxy
statement.  

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive  officers and  directors  to file reports of ownership  and changes in
ownership with the Securities and Exchange  

54
<PAGE>

Commission.  Executive Officers and Directors are required by the SEC regulation
to furnish the Company with copies of all Section  16(a) forms they file.  Based
solely on its  review of the copies of such forms  received  by it, the  Company
believes  that,  during 1995,  all such filing  requirements  applicable  to its
executive officers and directors were complied with by such individuals.

ITEM 13. Certain Relationships and Related Transactions

This item has been omitted since the Company will have filed a definitive  proxy
statement within 120 days after December 31, 1995, the close of its fiscal year.
The information required by this item is incorporated by reference to such proxy
statement.

                                    PART IV

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

(a)     List the following documents filed as part of this report:

1.   All financial statements

     UST Corp. and Subsidiaries

     See Index to Financial Statements.

2.   Financial  statement  schedules required to be filed by Item 8 of Form 10-K
     and by Item 14(d)

     None (Information included in Financial Statements).

3.   Exhibits  required  to be filed by Item 501 of  Regulation  S-K and by Item
     13(c)

     (3) Articles: By-Laws

          3(a) Articles of Organization of the Company as amended to date.**

          3(b) By-laws of the Company as amended to date.**

     (4)  Instruments  defining  the  rights  of  security  holders,   including
          indentures:

          4(a) Specimen of the Company's Common Stock Certificate.  (Exhibit 4.1
               to  Registrant's  Registration  Statement  No.  2-67787  on  Form
               S-l.)**

          4(b) Description  of rights of the  holders  of the  Company's  Common
               Stock   (Appearing  on  Page  76  of  Registrant's   Registration
               Statement No. 33-11118 on Form S-4).**

          4(c) Note  Agreement,  dated  August 8, 1986,  between the Company and
               holders of the  Company's  8.5% Senior  Notes Due August 1, 1996.
               (Exhibit 4(d) to Registrant's  Annual Report on Form 10-K for the
               year ended December 31, 1986.)**

          4(d) Rights Agreement, dated September 19, 1995, between UST Corp. and
               United  States  Trust  Company,  as  Rights  Agent.  (Exhibit  to
               Registrant's Form 8-A filed September 26, 1995)**

               4(d)(i) Certificate  of Vote  Establishing a Series of a Class of
                    Stock.  (Exhibit A to Rights  Agreement  between the Company
                    and United States Trust  Company,  dated  September 19, 1995
                    and  filed as an  Exhibit  to  Registrant's  Form 8-A  filed
                    September 26, 1995.)**

               4(d)(ii)  Form  of  Rights  Certificate.  (Exhibit  B  to  Rights
                    Agreement  between  the  Company  and  United  States  Trust
                    Company, dated September 19, 1995 and filed as an Exhibit to
                    Registrant's Form 8-A filed September 26, 1995.)**

               4(d)(iii)  Summary  of  Rights  to  Purchase   Preferred  Shares.
                    (Exhibit  C to Rights  Agreement  between  the  Company  and
                    United States Trust  Company,  dated  September 19, 1995 and
                    filed as an Exhibit to Registrant's Form 8-A filed September
                    26, 1995.)**

     (10) Material Contracts

          10(a)Deferred  Compensation  Program,  as  amended  to June 16,  1992.
               (Exhibit to Form 10-K for year ended December 31, 1992)**

55
<PAGE>

          10(b)Incentive  Stock  Option  Plan,  as  amended  to  May  15,  1990.
               (Exhibit to Form 10-K for year ended December 31, 1992)**

          10(c)Pension  Plan,  as amended to January 1, 1990.  (Exhibit  to Form
               10-K for year ended December 31, 1991)**

               10(c)(i) December 20, 1994 Amendment to Pension Plan**

          10(d)Employee  Stock  Ownership  Plan,  as amended to January 1, 1991.
               (Exhibit to Form 10-K for year ended December 31, 1991)**

               10(d)(i) December 20, 1994 Amendment to Employee Stock  Ownership
                    Plan**

          10(e)Employee Savings Plan (formerly known as Profit-Sharing Plan), as
               amended to January 1, 1991.  (Exhibit to Form 10-K for year ended
               December 31, 1991)**

               10(e)(i)  Amendment,  as of January 1, 1994, to Employee  Savings
                    Plan**

          10(f)1992  Stock  Compensation  Plan.   (Registration  Statement  Nos.
               33-54390 and 2-77803)**

               10(f)(i) 1992 Stock  Compensation Plan as amended and restated on
                    November 15, 1994**

          10(g)Dividend Reinvestment Plan, as amended.  (Exhibit to Registration
               Statement No. 33-38836 on Form S-3.)**

          10(h)1989  Directors  Stock Option Plan (Exhibit to Form 10-K for year
               ended December 31, 1989)**

          10(i) 1995 Stock Option Plan for Non-Employee Directors**

          10(j)Purchase  Agreement,  dated  as of  June  1,  1993,  between  the
               Company and Kidder,  Peabody Group,  Inc.  related to the private
               placement of 500,000 shares of UST Corp.  Common Stock.  (Exhibit
               to Form 8-K for quarter ended June 30, 1993)**

          10(k)Registration Rights Agreement,  dated as of June 1, 1993, between
               the  Company  and  Kidder,  Peabody  Group,  Inc.  related to the
               private  placement of 500,000  shares of UST Corp.  Common Stock.
               (Exhibit to Form 8-K for quarter ended June 30, 1993)**

          10(l)Restated and amended Employment  Agreement,  dated as of November
               21, 1995, between the Company and Neal F. Finnegan, President and
               Chief Executive Officer of the Company.*

          10(m)Placing  Agreement,  dated July 28, 1993, between the Company and
               Fox-Pitt  Kelton  N.V.,  relating  to the  placement  overseas of
               2,870,000 shares of the Company's Common Stock.  (Exhibit to Form
               10-Q for quarter ended September 30, 1993)**

          10(n)Transition  Agreement,  dated as of June 30,  1993,  between  the
               Company and James V. Sidell, former President and Chief Executive
               Officer of the Company.  (Exhibit to Form 10-Q for quarter  ended
               September 30, 1993)**

          10(o)Separation  Agreement dated August 16, 1993,  between the Company
               and  Robert  G.  Truslow,   former  President  of  the  Company's
               wholly-owned  subsidiary,  USTrust.  (Exhibit  to Form  10-Q  for
               quarter ended September 30, 1993)**

          10(p)Separation  Agreement,  dated  September  20,  1993,  between the
               Company and Frank A. Morse,  former  President  of the  Company's
               wholly-owned subsidiary,  UST Bank/Connecticut.  (Exhibit to Form
               10-Q for quarter ended September 30, 1993)**

          10(q)Separation  Agreement,  dated April 6, 1994,  between the Company
               and  Theodore  M.  Shediac,  former  Chairman  of  the  Company's
               wholly-owned subsidiary, USTrust.**

          10(r)Retirement  Agreement,  dated  September  27,  1994,  between the
               Company and Paul M. Siskind,  former Chairman of the Board of the
               Company**

          10(s)Separation  Agreement,  dated March 31, 1994, between the Company
               and  William  C.  Brooks,  former  Chief  Financial  Officer  and
               Treasurer of the Company**

          10(t)Resignation  Agreement,   dated  as  of  February  1,  1995,  and
               effective  February  28,  1995,  between the Company and James M.
               Breiner, former Director of the Company and Chairman of the Board
               of   Directors   of  the   Company's   wholly-owned   subsidiary,
               USTBank/Connecticut.**

          10(u)Executive  Employment  Agreements  with  certain  members  of the
               Company's  Executive  Policy  Committee,  dated as of February 1,
               1996:

56
<PAGE>

               10(u)(i)  Restated  Employment  Agreement  between UST Corp.  and
                    Walter E. Huskins,  Executive  Vice-President/Administration
                    of the Company*

               10(u)(ii) Restated  Employment  Agreement  between UST Corp.  and
                    James K. Hunt,  Executive Vice  President,  Chief  Financial
                    Officer and Treasurer of the Company*

               10(u)(iii) Restated  Employment  Agreement  between UST Corp. and
                    Eric R. Fischer,  Executive Vice President,  General Counsel
                    and Clerk of the Company*

               10(u)(iv) Restated  Employment  Agreement  between UST Corp.  and
                    Linda J. Lerner,  Senior Vice  President/Human  Resources of
                    the Company*

               10(u)(v)  Restated  Employment  Agreement  between UST Corp.  and
                    Kenneth L. Sullivan, Senior Vice President/Operations of the
                    Company*

               10(u)(vi) Restated  Employment  Agreement  between UST Corp.  and
                    Katharine C. Armstrong,  Executive Vice President/Commercial
                    Lending of the Company*

               10(u)(vii) Restated  Employment  Agreement  between UST Corp. and
                    Suzanne Moot, Executive Vice  President/Marketing and Retail
                    Banking of the Company*

               10(u)(viii)Employment  Agreement  between UST Corp. and Robert T.
                    McAlear,   Executive  Vice  President/Controlled  Loans  and
                    Credit of the Company*

               10(u)(ix)  Employment  Agreement  between UST Corp. and Kathie S.
                    Stevens, Executive Vice President, Senior Lending Officer of
                    the Company*

          10(v) Severance Pay Plan, effective January 1, 1995**

          10(w)Senior Officer Severance Pay Plan, effective January 1, 1995**

          10(x)Asset    Management    Employment    Agreement   by   and   among
               Employee/Principals  of  the  Asset  Management  Division  of the
               United  States Trust  Company and United States Trust Company and
               UST Corp., effective as of January 1, 1995:

               10(x)(i) Employment  Agreement  among UST Corp,  USTC and Domenic
                    Colasacco,  President of USTC, a wholly owned  subsidiary of
                    the Company**

               10(x)(ii) Employment  Agreement among UST Corp.,  USTC and Robert
                    A. Lincoln, Senior Vice President,  Senior Portfolio Manager
                    of USTC**

               10(x)(iii) Employment Agreement among UST Corp., USTC and Stephen
                    K. Moody, Senior Vice President, Senior Portfolio Manager of
                    USTC**

               10(x)(iv) Employment Agreement among UST Corp., USTC and Lucia B.
                    Santini, Senior Vice President/Administrator of USTC**

               10(x)(v) Employment Agreement among UST Corp., USTC and Robert B.
                    Zevin, Senior Vice President, Economist and Senior Portfolio
                    Manager of USTC**

          10(y)Asset    Management    Unifying    Agreement    by   and    among
               Employee/Principals  of  the  Asset  Management  Division  of the
               United  States Trust  Company and United States Trust Company and
               UST Corp., effective as of January 1, 1995**

     (11) Statement  re:  computation  of per share  earnings (See Note 2 to the
          Notes to Consolidated Financial Statements.)*

     (21) Subsidiaries of the Registrant*

     (23) Consent of Arthur Andersen LLP*

     (27) Article 9 Summary  Financial  Information for 12 months ended December
          31, 1995*

*    Filed herewith

**   Filed as part of a previous  Commission  filing and incorporated  herein by
     reference.

(b)  Reports on Form 8-K

     None.

(d)  Exhibits being filed

     See Exhibit Index

(e)  Financial Statement Schedules included in Financial Statements.

57
<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.

UST Corp.

<TABLE>
         <S>                                           <C>    
        By /s/  NEAL F. FINNEGAN                        By /s/  JAMES K. HUNT
           ---------------------                           ------------------
                Neal F. Finnegan                                James K. Hunt
                President and Chief Executive Officer           Executive Vice President and Treasurer
                (Principal Executive Officer)                   (Principal Financial Officer and
                Date:  February 20, 1996                        Principal Accounting Officer)
                                                                Date:  February 20, 1996
</TABLE>

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>
        <S>                                            <C>
        By /s/  ROBERT M. COARD                         By /s/   WALLACE M. HASELTON
           --------------------                            -------------------------
                Robert M. Coard, Director                        Wallace M. Haselton, Director
                Date:  February 20, 1996                         Date:  February 20, 1996

        By /s/  DOMENIC COLASACCO                        By /s/  BRIAN W. HOTAREK
           ----------------------                           ---------------------
                Domenic Colasacco, Director and                  Brian W. Hotarek, Director
                Executive Vice President                         Date:  February 20, 1996
                Date:  February 20, 1996
                                                         
        By /s/  ROBERT L. CULVER                         By /s/  FRANCIS X. MESSINA          
           ----------------------                           ------------------------               
                Robert L. Culver, Director                       Francis X. Messina, Director
                Date:  February 20, 1996                         Date:  February 20, 1996
                
                                                         
        By /s/  ALAN K. DERKAZARIAN                      By /s/  SYDNEY L. MILLER              
           ------------------------                         ---------------------           
                Alan K. Derkazarian, Director                    Sydney L. Miller, Director   
                Date:  February 20, 1996                         Date:  February 20, 1996    
                                                        
        By /s/  DONALD C. DOLBEN                         By /s/  VIKKI L. PRYOR          
           ---------------------                            ---------------------                                                   
                Donald C. Dolben, Director                       Vikki L. Pryor, Director
                Date:  February 20, 1996                         Date:  February 20, 1996
                                                         
        By /s/  NEAL F. FINNEGAN                         By /s/  GERALD M. RIDGE          
           ---------------------                            ---------------------     
                Neal F. Finnegan, Director,                      Gerald M. Ridge, Director
                President and Chief Executive Officer            Date:  February 20, 1996                       
                Date:  February 20, 1996                         
                                                                
                                                                
        By /s/  WALTER A. GULESERIAN                     By /s/  WILLIAM SCHWARTZ 
           -------------------------                        -----------------------
                Walter A. Guleserian, Director                   William Schwartz, Director
                Date:  February 20, 1996                         Date:  February 20, 1996  
                          
                                                        
        By /s/  EDWARD GUZOVSKY                          By /s/  SAMUEL B. SHELDON          
           ------------------------                         ------------------------
                Edward Guzovsky, Director                        Samuel B. Sheldon, Director
                Date:  February 20, 1996                         Date:  February 20, 1996   

                                                          
                                                          
        By /s/  JAMES V. SIDELL                          By /s/  BARBARA C. SIDELL          
           ----------------------                           -------------------------
                James V. Sidell, Director                        Barbara C. Sidell, Director 
                Date:  February 20, 1996                         Date:  February 20, 1996    
                                
                                                         
        By /s/  PAUL D. SLATER                           By /s/  MICHAEL J. VERROCHI          
           ---------------------                            ------------------------
                Paul D. Slater, Director                         Michael J. Verrochi, Director
                Date:  February 20, 1996                         Date:  February 20, 1996     
                                                            
                                                            
        By /s/  EDWARD J. SULLIVAN                       By /s/  GORDON M. WEINER         
           ------------------------                         ----------------------
                Edward J. Sullivan, Director                     Gordon M. Weiner, Director   
                Date:  February 20, 1996                         Date:  February 20, 1996     
</TABLE>