SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-Q
(Mark One)

          [X]   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d) OF THE
                SECURITIES EXCHANGE ACT OF 1934.

          For the quarterly period ended JUNE 30, 1997
                                         -------------
                                       OR

          [ ]   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF  THE
                SECURITIES EXCHANGE ACT OF 1934.

          For the transition period from__________to_____________

                         Commission File Number 0-14018

                              BNH BANCSHARES, INC.
             (Exact Name of Registrant as Specified in Its Charter)


        CONNECTICUT                               06-1126899
(State or Other Jurisdiction                  (I.R.S. Employer
 of Incorporation or Organization)           Identification No.)


          209 CHURCH STREET, NEW HAVEN, CONNECTICUT 06510
              (Address of Principal Executive Offices)

Registrant's Telephone Number, Including Area Code (203) 498-3500


Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report: NONE

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

       CLASS                                    August 12, 1997
  Common Stock (no par value)                         3,691,081




<PAGE>

BNH BANCSHARES, INC.

PART I.  FINANCIAL INFORMATION

Item 1.   Financial Statements:                                        Page

Consolidated Statement of Financial Position as of June 30, 1997   
and December 31, 1996                                                   3
               
Consolidated Statement of Operations for the three and six
months ended June 30, 1997 and June 30, 1996                            4

Consolidated Statement of Changes in Shareholders' Equity for the
six months ended June 30, 1997 and June 30, 1996                        5

Consolidated Statement of Cash Flows for the six months   ended
June 30, 1997 and June 30 1996                                          6

Notes to Consolidated Financial Statements                              7



Item 2.   Management's Discussion and Analysis of Financial
Condition and Results of Operations                                     9


Part II.  Other Information
Items 1-3 Not Applicable                                               26

Item 4    Submission of Matters to a Vote of Security Holders          26

Item 5    Not Applicable                                               27
Item 6    Exhibits and Reports on Form 8-K                             27
          SIGNATURES                                                   28


                                   2                         

<PAGE>



                              BNH BANCSHARES, INC.

                 CONSOLIDATED STATEMENT OF FINANCIAL POSITION



ASSETS                                   June 30, 1997         Dec. 31, 1996
----------------------------------------------------------------------------
                                         (unaudited)
Cash and due from banks                 $ 20,600,325          $ 21,043,918
Federal funds sold                         7,900,000            10,700,000
Investment securities:
 Held to Maturity, at amortized cost      20,570,483            21,546,034
 Available for Sale, at market value      43,910,947            42,439,947
 Loans net of unearned discount          246,672,076           234,679,749 
 Less allowance for loan losses           (4,693,414)           (4,695,681)
                                      --------------------------------------

Loans - net                              241,978,662           229,984,068

Property and equipment-net                 4,884,058             4,335,019
Accrued interest receivable                2,324,583             2,159,525
Other real estate owned                      513,396               558,706
Other assets                               9,612,449             9,462,190
                                      ======================================
TOTAL                                   $352,294,903          $342,229,407
                                      ======================================

LIABILITIES AND
 SHAREHOLDERS' EQUITY
--------------------------------

Deposits:
 Demand deposits                        $ 59,987,572          $ 58,108,856
 NOW accounts                             47,381,668            43,948,468
 Money market accounts                    34,722,189            30,709,756
 Savings deposits                         34,224,946            32,344,788
 Time deposits under $100,000            117,156,276           117,008,717
 Time deposits $100,000 or more           17,648,314            16,803,504
                                      --------------------------------------
Total deposits                           311,120,965           298,924,089

Federal Funds purchased and
securities sold under
repurchase agreement                         560,919             4,740,797
FHLB Advances                             12,488,976            11,922,273
Accrued interest payable                     433,272               434,339
Other liabilities                          1,153,742               596,624
                                      --------------------------------------
Total liabilities                        325,757,874           316,618,122
                                      --------------------------------------

Shareholders' equity:
Common stock, $.01 stated
value, authorized 
30,000,000 issued 3,695,352 shares            36,953                36,953
Capital surplus                           47,718,180            47,717,466
Undivided profit/(loss)                  (20,636,260)          (21,597,946)
Net unrealized losses on
securities                                  (334,673)             (298,017)
Treasury stock (4,776 shares)               (247,171)             (247,171)

                                    ----------------------------------------
Total shareholders' equity                26,537,029            25,611,285
                                    ========================================
TOTAL                                   $352,294,903          $342,229,407
                                    ========================================


See accompanying Notes to Consolidated Financial Statements.

                                   3

<PAGE>


                              BNH BANCSHARES, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (unaudited)


                         Three Months Ended June 30,  Six Months Ended June 30,
                                   1997        1996        1997        1996
                           ----------------------------------------------------

INTEREST INCOME:
Loans                         $5,288,719 $4,483,177    $10,317,766  $8,910,408
Investment securities:                    
 Held to maturity                282,081    323,555        563,860     652,908
 Available for sale              680,784    617,587      1,363,567   1,199,710
Federal funds sold                37,715     38,853        103,018      88,587

                           ----------------------------------------------------
Total interest income          6,289,299  5,463,171     12,348,211  10,851,613
                                          

INTEREST EXPENSE:
Time deposits $100,000 or more   234,352    197,734        460,630     396,191
Time deposits under $100,000   1,566,062  1,494,126      3,148,185   2,968,131
Other deposits                   692,417    588,905      1,329,125   1,172,376
Other borrowings                 203,029    107,978        443,619     213,929
                           ----------------------------------------------------
Total interest expense         2,695,860  2,388,745      5,381,560   4,750,627
                           ----------------------------------------------------
NET INTEREST INCOME            3,593,439  3,074,425      6,966,651   6,100,986
PROVISION FOR LOAN LOSSES       (325,000)  (526,000)      (651,000) (1,102,000)
                           ----------------------------------------------------
NET INTEREST INCOME AFTER
 PROVISION FOR LOAN LOSSES     3,268,439  2,548,425      6,315,651   4,998,986
                                          
OTHER INCOME:
Service charges                  568,582    549,556      1,124,454   1,058,369
Other income                     277,381    303,961        520,104     575,682
Net gain on investment
securities                             0          0              0       7,242
                           ----------------------------------------------------
Total other income               845,963    853,517      1,644,558   1,641,293
                           ----------------------------------------------------

OPERATING EXPENSES:
Salaries and employee
benefits                       1,675,635  1,440,006      3,280,048   2,811,346
Occupancy                        398,878    318,218        788,752     672,646
Advertising and promotion        151,907    140,808        307,331     226,432
Office stationery and
supplies                         104,726     83,633        196,879     159,291
Examination and
professional fees                177,079    182,046        382,153     383,467
Insurance                         64,172    108,303        120,032     215,276
Other real estate owned           16,891     20,182         54,340      66,426
Other                            729,819    572,626      1,227,965   1,060,965
                           ----------------------------------------------------
Total operating expenses       3,319,107  2,865,822      6,357,499   5,595,849
                           ----------------------------------------------------
NET INCOME BEFORE INCOME        
TAXES                           $795,295  $536,120      $1,602,709  $1,044,430
                           ----------------------------------------------------
PROVISION(BENEFIT) FOR
INCOME TAXES                     318,058  (235,000)        641,024    (460,500)
                           ----------------------------------------------------
NET INCOME                      $477,238  $771,120        $961,686  $1,504,930
                           ====================================================

NET INCOME PER COMMON              $0.13     $0.21           $0.26       $0.41
SHARE                                     

Weighted average number
of common shares outstanding
during the period              3,690,576 3,688,307       3,690,576   3,687,378



See accompanying Notes to Consolidated Financial Statements.

                                   4

<PAGE>


                              BNH BANCSHARES, INC.
         CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                   (unaudited)

                                               June 30, 1997  June 30, 1996
                                               ------------------------------
SHAREHOLDERS' EQUITY at beginning of period    $25,611,285   $15,592,723
COMMON STOCK
 Net proceeds of stock options exercised                 1            20
CAPITAL SURPLUS
 Net proceeds of stock options exercised               713        11,100
UNDIVIDED LOSSES
 Net Income                                        961,686     1,504,930
 Unrealized depreciation on investment
 securities available for sale                     (36,656)     (567,326)
                                               ------------------------------
SHAREHOLDERS' EQUITY at end of period          $26,537,029   $16,541,447
                                               ==============================


See accompanying Notes to Consolidated Financial Statements.

                                   5

<PAGE>


                              BNH BANCSHARES, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (unaudited)


                                             Six months ended June 30,
                                           
                                             1997                 1996
                                        -------------------------------------

OPERATING ACTIVITIES
Net profit                               $  961,686         $1,504,930
Adjustments for items not affecting
cash:
Provision for loan losses                   651,000          1,102,000
Depreciation and amortization of
property and equipment                      306,613            226,286
Net accretion of bond premiums and
discounts                                   (35,350)          (132,552)
(Gain)loss from the sale of available
for sale securities                               0             (7,242)
Loss/writedown on other real estate owned     3,982             22,077
Decrease in interest receivable            (165,058)           (27,399)
Increase(decrease) in interest payable       (1,067)            15,613
Other,net                                   407,574           (579,754)
                                        -------------------------------------
Net cash provided by operating            
activities                                2,129,380          2,123,959
                                        -------------------------------------

FINANCING ACTIVITIES
Net increase in demand, NOW, money
market and savings accounts              11,204,506          3,914,002
Net increase in time deposits               992,369          4,919,321
Net decrease in federal funds
purchased and securities sold
under repurchase agreements              (4,179,878)                 0
Proceeds from FHLB advances                 566,703          2,295,952
                                        ---------------------------------
Net cash provided by financing            
activities                                8,583,700         11,129,275
                                        ---------------------------------

INVESTING ACTIVITIES
Net decrease in federal funds sold        2,800,000            550,000
Maturities of securities held to          
maturity                                  1,010,000                  0
Maturities of securities available for
sale                                      2,500,000         17,049,185
Purchase of securities available for 
sale                                     (4,006,754)       (16,351,781)
Proceeds from the sale of available
for sale securities                               0             10,392
Net loans originated and matured        (12,645,594)       (10,847,063)
Proceeds from sale of other real
estate owned                                 86,448            609,981
Purchase/capitalization of OREO
property                                    (45,121)        (1,690,352)
Purchase of property and equipment         (855,652)          (209,088)
                                        -------------------------------------
Net cash used by investing activities   (11,156,673)       (10,878,726)
                                        -------------------------------------
(Decrease)increase in cash                 (443,593)         2,374,508
Cash and due from banks at beginning
of year                                  21,043,918         19,818,406
                                        =====================================
Cash and due from banks at end of       
period                                  $20,600,325        $22,192,914
                                        =====================================

Cash paid for:
 Interest expense                       $ 5,382,626        $ 4,735,012
 Income taxes                           $    80,000        $    15,500
-----------------------------------------------------------------------------
Non-cash transfers from loans receivable to other real estate owned were $42,000
and $575,126, for the six months ending June 30, 1997 and 1996, respectively.

There were no cash  transfers  from other real estate owned to loans  receivable
for the six months ended June 30, 1997 and 1996.


See accompanying Notes to Consolidated Financial Statements.

                                   6

<PAGE>


                              BNH BANCSHARES, INC.
                    Notes to Consolidated Financial Statements


      1.   Basis of Presentation

      The  accompanying  consolidated  financial  statements  are  unaudited and
      include the  accounts of BNH  Bancshares,  Inc.  (the  "Company")  and its
      subsidiaries,  The Bank of New Haven (the "Bank") and Northeastern Capital
      Corporation.  The financial  statements reflect, in management's  opinion,
      all appropriate  adjustments  consisting of normal  recurring  adjustments
      necessary for a fair presentation of the Company's financial position, the
      results of its operations and the change in its cash flows for the periods
      presented.  These financial  statements should be read in conjunction with
      the financial  statements and notes thereto included in the Company's 1996
      Annual Report to Shareholders.

      Net income per common  share is  computed  based on the  weighted  average
      number of common shares  outstanding  during each year. Per share earnings
      and  weighted  average  shares of common  stock for all periods  presented
      reflect all stock  dividends  and splits.  The  exercise of stock  options
      would not result in material dilution of earnings per share.


      2.   Loan Portfolio

                               June 30,       Dec. 31,
                                 1997           1996
                               (dollars in thousands)

      Commercial               $ 52,869       $ 54,240
      Real estate:
       Construction               1,180            820
       Commercial mortgage       59,749         59,283
       Residential mortgage      55,844         54,651
      Consumer                   77,030         65,686
                              ---------       --------

      Total loans               246,672        234,680

      Allowance for loan losses  (4,693)       ( 4,696)
                                --------      ---------

      Loans - net              $241,979       $229,984
                               =========      ========

                                   7

<PAGE>

      3.   Pending Merger

      On April 8, 1997, the Company announced that it is a party to a definitive
      merger  agreement  (the  "Agreement")  pursuant to which  Citizens Bank of
      Connecticut,  a subsidiary of Citizens Financial Group, Inc., will acquire
      all of the outstanding  shares of stock of the Company (other than certain
      shares to be canceled  pursuant to the Agreement and any objecting shares)
      for $57.2 million, or $15.50 per share.

      The acquisition,  which is subject to shareholder and regulatory approval,
      will be the fourth Connecticut  acquisition by Citizens since 1993 and the
      11th  overall in  Citizens'  four-state  franchise.  When  completed,  the
      acquisition  will make Citizens  Bank of  Connecticut a $1.75 billion bank
      with 42 branch offices. The Company's shareholders will vote on the merger
      at a special meeting of shareholders to be held August 14, 1997.  Assuming
      the required  approvals are obtained,  the  transaction  is expected to be
      completed during the last week of August, 1997.

      Citizens Financial Group, Inc. is a $16 billion financial services company
      headquartered in Providence,  Rhode Island,  with 250 offices operating as
      Citizens  Bank in  Connecticut,  Massachusetts,  New  Hampshire  and Rhode
      Island.  Citizens is 76.5 percent owned by The Royal Bank of Scotland plc,
      with the remaining interest held by The Governor and Company of the Bank 
      of Ireland.

      4.   New Accounting Pronouncements

      In February,  1997,  the FASB issued  Statement  of  Financial  Accounting
      Standards No. 128  "Earnings  Per Share"  ("SFAS 128").  SFAS 128 provides
      accounting  and reporting  standards for the  calculation  of earnings per
      share intended to simplify the  computation by replacing the  presentation
      of primary  earnings per share with the presentation of basic earnings per
      share.  The  Company  will be  required  to adopt  SFAS 128 in the  fourth
      quarter of 1997.  Had  earnings  per share for the quarter  ended June 30,
      1997 been computed in accordance with SFAS 128, basic and diluted earnings
      per share would have both been $.13,  and basic and diluted  earnings  per
      share would have both been $.21 for the quarter ended June 30, 1996.

                                   8
<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


      The Company  earned  income  before tax for the six months ending June 30,
      1997 of $1,603,000 compared with $1,044,000 for the same period last year.
      Net income for the six months ending June 30, 1997 was  $962,000,  or $.26
      per share,  compared  with  $1,505,000,  or $.41 per  share,  for the same
      period  last year.  The  Company  earned  income  before tax for the three
      months ending June 30, 1997 of $795,000,  or $.22 per share, compared with
      $536,000, or $.15 per share, for the same period last year. Net income for
      the three  months  ending June 30, 1997 was  $477,000,  or $.13 per share,
      compared with $771,000, $.21 per share, for the same period last year.

      During the first six months of 1997, the Company, as a result of returning
      to a fully taxable reporting basis due to improved operating  performance,
      recorded a provision  for income  taxes of $641,000  compared to a benefit
      recorded during the same 1996 period of $461,000. The income tax provision
      was $318,000  for the three month period  ending June 30, 1997 as compared
      to a recorded benefit of $235,000 for the same period in 1996.

      The primary reason for the  improvement in both quarterly and year to date
      pretax  earnings when  comparing the periods ending June 30, 1997 with the
      same periods  last year was an increase in net  interest  income and lower
      loan loss provisions partially offset by increased operating expenses. The
      Company's net interest income increased $866,000,  or 14%, from $6,101,000
      for the six months ending June 30, 1996 to $6,967,000  for the same period
      in 1997.  The Company's net interest  income also increased  $519,000,  or
      17%,  from  $3,074,000  for the  three  months  ending  June  30,  1996 to
      $3,593,000  for the same  period in 1997.  The  increase  in net  interest
      income can primarily be attributed to an overall  increase in loan volume.
      Total loans were  $213,071,000  as of June 30,  1996,  $234,680,000  as of
      December 31, 1996 and  $246,672,000 as of June 30, 1997. As a result of an
      improvement in asset quality,  the Company's quarterly provisions for loan
      losses have been lower in 1997 as compared  with the prior year.  The loan
      loss  provision  for the six  months  ending  June 30,  1997 was  $651,000
      compared with $1,102,000 for the same 1996 period. The loan loss provision
      for the three  months  ending June 30,  1997 was  $325,000  compared  with
      $526,000  for the same  1996  period.  The  Company's  operating  expenses
      increased $761,000, or 14%, from $5,596,000 for the six months ending June
      30,  1996  compared  with  $6,357,000  for the same  period  in 1997.  The
      Company's operating expenses increased  $453,000,  or 16%, from $2,866,000
      for the three months ending June 30, 1996 compared with $3,319,000 for the
      same  period  in  1997.  This was  primarily  due to  increased  staffing,
      occupancy  and  other  expenses  related  to  operating  three  additional
      branches  as well as  costs  associated  with an  increased  level of loan
      production.

      The return on average  assets was .50% for the six months  ending June 30,
      1997 compared to 1.00% for the same 1996 period.  Net income was 

                                   9
<PAGE>

     $0.13 for the three  months  ended June 30,  1997  compared  with $0.21 per
     share for the three months  ended June 30,  1996.  Net income was $0.26 per
     share for the six months ended June 30, 1997  compared with $0.41 per share
     for the same  1996  period.  All per  share  data has been  adjusted  for a
     reverse stock split which occurred during the second quarter of 1996.


      NET INTEREST INCOME

      Net interest income is the difference between the interest earned on loans
      and investments and the interest paid on deposits and other borrowings.

      Net interest income was $6,967,000 for the six month period ended June 30,
      1997  compared to  $6,101,000  for the same 1996 period,  representing  an
      increase of $866,000,  or 14%. Net interest  income was $3,593,000 for the
      three month period ended June 30, 1997 compared to $3,074,000 for the same
      1996 period, representing an increase of $519,000, or 17%. The increase in
      net interest income for both the three and six month  comparative  periods
      is primarily attributed to higher levels of average loans partially offset
      by a  proportionately  smaller  increase  in the levels of average  paying
      liabilities.  Yields on average  paying  assets  increased 20 basis points
      when  comparing  the three month  periods ended June 30, 1997 and June 30,
      1996,  and increased by 12 basis points when  comparing the respective six
      month periods.

      Interest income increased to $12,348,000 for the six months ended June 30,
      1997 from $10,852,000 for the same 1996 period, an increase of $1,496,000,
      or 14%. Interest income increased to $6,289,000 for the three months ended
      June 30, 1997 from  $5,463,000  for the same 1996  period,  an increase of
      $826,000,  or 15%.  The  Company's  average  earning  assets  increased to
      $308,019,000 for the six months ended June 30, 1997 from  $274,257,000 for
      the same 1996  period,  or 12%.  The  increase in  interest  income can be
      primarily  attributed  to  an  increase  in  both  the  average  loan  and
      investment portfolios.

      Interest expense increased to $5,382,000 for the six months ended June 30,
      1997 from $4,751,000 for the same 1996 period, an increase of $631,000, or
      13%.  Interest expense  increased to $2,696,000 for the three months ended
      June 30, 1997 from  $2,389,000  for the same 1996  period,  an increase of
      $307,000,  or 13%.  This  increase  reflects the growth in average  paying
      liabilities and their associated interest rates from June 30, 1996 to June
      30, 1997. Average paying liabilities increased to $255,000,000 for the six
      months ended June 30, 1997 from  $228,000,000 for the same period in 1996,
      an increase of $27,000,000, or 12%. The Company's average interest rate on
      paying liabilities  increased 7 basis points from 4.18% for the six months
      ended June 30, 1996 to 4.25% for the six months ended June 30, 1997.

                                   10

<PAGE>



                              Three Months Ended June 30,
                                (dollars in thousands)
                                      (unaudited)

                          1997              |            1996
 
ASSETS           Average           Average  |  Average              Average
                 Balance  Interest Yield       Balance   Interest   Yield

Investments:
 Held to Maturity, at
amortized cost   $ 20,566 $  282  5.50%     |  $ 23,834  $    323   5.46%
           
 Available
for Sale(2)        44,242    680  6.16%     |    42,055       618   5.91%

Federal funds sold  2,884     38  5.35%     |     2,920        39   5.35%

Loans - net(1)    242,904  5,289  8.73%     |   208,789     4,483   8.64%
                 -------- ------  -----        --------  --------   -----
Total average                               | 
earning assets
(1)              $310,597 $6,289  8.12%     |  $277,598  $  5,463   7.92%
                 ======== ======  =====        ========  ========   =====

INTEREST                                  
BEARING
LIABILITIES

Deposits:                                 
 NOW accounts    $ 42,694  $ 160    1.50%   |   $40,590  $    151   1.50%

 Money markets     34,243    310    3.63%   |    29,039       244   3.37%

 Savings           33,783    223    2.65%   |    30,384       194   2.57%
deposits

 Time deposits                               
under $100,000    113,659  1,566    5.53%   |   109,225     1,494   5.50%

 Time deposits                               
of $100,000
or more            17,171    234    5.47%   |    14,629       198   5.44%
                 --------    ---    -----      --------  --------   -----
Total interest                              
bearing deposits $241,550 $2,493    4.14%   |  $223,867  $  2,281   4.10%

Other borrowings   14,086    203    5.78%   |     7,705       108   5.64%
                 -------- ------    -----      --------  --------   -----

Total interest                               
bearing deposits                             
& other
borrowings       $255,636 $2,696    4.23%    | $231,572  $  2,389   4.15%
                 ======== =======   =====      ========  ========   =====

Net interest                                 
income                    $3,593             |             $3,074
                          ------                           ------

Interest rate                                
spread (1)                         3.89%     |                      3.77%
                                   -----                            -----

Net interest                                 
margin (1)                         4.64%     |                      4.45%
                                   -----                            -----

                                             
==============================================================================

(1) Interest rate spread represents the difference  between the weighted average
yield  on   interest-earning   assets   and  the   weighted   average   cost  of
interest-bearing  liabilities (which do not include  non-interest bearing demand
accounts),  and  net  interest  margin  represents  net  interest  income  as  a
percentage  of average  interest-earning  assets,  including  the average  daily
amount of nonperforming loans.

(2) The average  balance and related  weighted  average yield  calculations  are
based on average historical amortized cost for period presented.
==============================================================================

                                   11
<PAGE>

                                 Six Months Ended June 30,
                                  (dollars in thousands)
                                        (unaudited)

                          1997               |            1996

                 Average           Average   |  Average              Average
ASSETS           Balance  Interest Yield     |  Balance   Interest   Yield

Investments:

 Held to                                     
Maturity,        
at amortized     
cost             $ 20,720  $  564  5.49%     |  $ 23,833  $    653   5.51%  

 Available
for Sale(2)        44,310   1,363  6.21%     |    41,048     1,200   5.88%

 Federal funds 
sold                3,968     103  5.24%     |     3,377        89   5.28%

Loans - net(1)    239,021  10,318  8.70%     |   206,000     8,910   8.70%
                 --------  ------  -----        --------  --------   -----
Total average                                |
earning assets
(1)              $308,019 $12,348  8.08%     |  $274,258  $ 10,852   7.96%
                 ======== =======  =====        ========  ========   =====
                                             
INTEREST BEARING
LIABILITIES

Deposits:                                    
 NOW accounts    $ 41,465 $   307  1.49%     |  $ 40,021  $    299   1.50%

 Money markets     32,831     589  3.62%     |    29,004       483   3.35%

 Savings           
deposits           32,975     432  2.64%     |    30,840       391   2.55%

 Time deposits                               |
under  $100,000   114,663   3,148  5.54%         106,703     2,968   5.59%

 Time deposits                               |
of $100,000
or more            16,928     461  5.49%     |    14,628       396   5.45%
                 --------  ------  -----        --------  --------   -----

Total interest                               
bearing deposits $238,862 $ 4,937  4.17%     |  $221,196  $  4,537   4.12%

Other borrowings   16,194     444  5.52%     |     7,460       214   5.77%
                 --------  ------  -----        --------  --------   -----

Total interest                               
bearing deposits                             
& other
borrowings       $255,056 $ 5,381  4.25%     |  $228,656  $  4,751   4.18%
                 ======== ======== =====        ========  ========   =====

Net interest                                 
income                    $ 6,967            |            $  6,101
                          -------                         --------

Interest rate                                
spread (1)                         3.83%     |                       3.78%
                                   -----                             -----

Net interest                                 
margin (1)                         4.56%     |                       4.47%
                                   -----                             -----

        
==============================================================================

(1) Interest rate spread represents the difference  between the weighted average
yield  on   interest-earning   assets   and  the   weighted   average   cost  of
interest-bearing  liabilities (which do not include  non-interest bearing demand
accounts),  and  net  interest  margin  represents  net  interest  income  as  a
percentage  of average  interest-earning  assets,  including  the average  daily
amount of nonperforming loans.

(2) The average  balance and related  weighted  average yield  calculations  are
based on average historical amortized cost for period presented.
==============================================================================

                                   12
<PAGE>

      OTHER INCOME

      Other income  increased  marginally to $1,644,000 for the first six months
      of 1997 as compared  to  $1,641,000  for the same period in 1996.  Service
      charges  assessed against  customer  accounts,  a major component of other
      income,  increased  $66,000 to $1,124,000 for the first six months of 1997
      as compared to  $1,058,000  for the same 1996 period.  Mortgage  placement
      fees, which are fees the company earns for originating  residential  first
      mortgage loans,  increased $14,000 to $159,000 for the first six months of
      1997 as compared to $145,000 for the same period in 1996. ATM fees,  which
      are fees  assessed  by the  Company to process  automated  teller  machine
      transactions,  increased  $20,000 to $74,000 for the period ended June 30,
      1997 as compared to $54,000 for the period ended June 30, 1996.  Increases
      in service charges,  mortgage placement and ATM fees were partially offset
      by  decreases  in  fees  earned  on   installment   loan   placements  and
      miscellaneous  loan fees.  Installment loan placement fees, which are fees
      the Company earns for originating  installment loans, decreased $14,000 to
      $89,000 for the first six months of 1997 as  compared to $103,000  for the
      same 1996 period.  Miscellaneous  loan fees,  various charges  assessed to
      approve,  process and service loan products,  decreased $83,000 to $23,000
      for the first six months of 1997 as compared to $106,000 for the same 1996
      period.


      PROVISION FOR LOAN LOSSES

      The provision for loan losses charged to operations reflects  management's
      analysis of the loan portfolio and determination of an adequate  allowance
      for loan losses to provide for probable losses in the loan portfolio.  The
      potential for loss in the portfolio  reflects the risks and  uncertainties
      inherent in the extension of credit.

      The  determination  of the  adequacy of the  allowance  for loan losses is
      based upon  management's  assessment  of risk  elements in the  portfolio,
      factors   affecting  loan  quality  and  assumptions  about  the  economic
      environment  in which the Company  operates.  The Company  utilizes a loan
      grading system,  based upon FDIC parameters,  and utilizes that assessment
      of the overall quality of the loan portfolio in the process of determining
      an adequate allowance for loan loss level. This system involves an ongoing
      review of the  commercial  and real  estate  loan  portfolios,  with added
      emphasis on the  Company's  larger  commercial  credits and  nonperforming
      loans.  Various  factors  are  involved  in  determining  the loan  grade,
      including  the  cash  flow  and  financial  status  of the  borrower,  the
      existence and nature of collateral,  and general  economic  conditions and
      their impact on the borrower's industry.  These reviews are dependent upon
      estimates,  appraisals  and  judgments,  which can change  quickly  due to
      economic conditions

                                   13
<PAGE>

      and the  Company's  perceptions  as to how  these  conditions  affect  the
      collateral  securing  its  current  and  past  due  loans  as  well as the
      borrower's economic prospects. In each reporting period, the allowance for
      loan losses is reviewed  based on the most recent loan grading data and is
      adjusted to the amount deemed  necessary,  in the Company's  judgment,  to
      maintain adequate allowance for loan loss levels.

      The provision for loan losses  charged  against  earnings in the first six
      months of 1997 was  $651,000  compared  with  $1,102,000  in the same 1996
      period.  Net loan  charge-offs  for the six months ended June 30, 1997 and
      1996 were $653,000 and  $2,272,000,  respectively.  The provision for loan
      losses charged against earnings in the second quarter of 1997 was $325,000
      compared with $526,000 in the same 1996 period.  Net loan  charge-offs for
      the three months  ended June 30, 1997 and June 30, 1996 were  $330,000 and
      $967,000, respectively.

      In establishing  the allowance for loan losses,  management has considered
      the possible  deterioration of the collateral securing its past due loans.
      As of  June  30,  1997,  the  Company's  allowance  for  loan  losses  was
      $4,693,000, or 1.97% of total loans, as compared to $4,723,000, or 2.2% of
      total  loans,  as of June 30,  1996.  The  allowance  for loan  losses was
      $4,696,000,  or 2.0% of total loans, as of December 31, 1996. The ratio of
      the  allowance for loan losses to nonaccrual  and  restructured  loans and
      accruing  loans past due 90 days or more was 70.8% as of June 30,  1997 as
      compared  to 79.9% and 75.8% as of December  31,  1996 and June 30,  1996,
      respectively.

      As of June 30, 1997,  nonaccrual  loans were  $3,649,000  as compared with
      $5,761,000 as of December 31, 1996, and $4,452,000 as of June 30, 1996. As
      of June 30, 1997,  approximately $3,206,000 of the loans in the nonaccrual
      portfolio were collateralized  partially by commercial or residential real
      estate or business assets and  approximately  $443,000 of nonaccrual loans
      were unsecured. The Company believes that its allowance for loan losses is
      adequate to absorb any  potential  reduction of the net carrying  value in
      the  nonaccrual  portfolio.  The ratio of nonaccrual  loans to total loans
      declined from 2.1% at June 30, 1996 to 1.5% at June 30, 1997.

      Management,  after careful  consideration of the above factors,  is of the
      opinion  that  the  allowance  for  loan  losses  as of June  30,  1997 is
      adequate.  Although  the  economy  in  Connecticut  has  improved,  it  is
      difficult to predict how the future  economy may impact the Company's loan
      customers.  If  economic  conditions  continue  to  improve  during  1997,
      management  believes that the level of its nonaccrual  loans will continue
      to decline during the next several quarterly periods.  However,  the level
      of the

                                   14
<PAGE>

      Company's  nonperforming  assets will  continue to  negatively  impact the
      Company's  profitability  in future quarterly  periods.  The nature of the
      Connecticut  economy  will  continue  to  influence  the  levels  of  loan
      charge-offs,  nonaccrual  loans and the  allowance  for loan  losses,  and
      management will appropriately adjust the allowance as considered necessary
      to reflect future changes in risk.

      The following  tables set forth  quarterly  information  on  nonperforming
      assets,  restructured  loans,  accruing loans past due 90 days or more and
      loans charged-off for the quarterly periods from June 30, 1996 to June 30,
      1997.

                                   15
<PAGE>





                      ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
                             (dollars in thousands)

                     June 30,    Mar. 31,   Dec. 31,   Sept. 30,  June 30,
QUARTER ENDED          1997        1997       1996       1996       1996

Balance beginning
of period            $ 4,698     $ 4,696    $ 4,696    $ 4,723    $ 5,164

Provision charged to
income                   325         326        362        500        526
Loans charged off:
 Commercial               94         196        276        413        696
 Real Estate:
   Commercial Mtg.       125          70          0         33        182
   Residential Mtg.       36           2         13         48        108
 Consumer                181         103        128        108        109
                     -------     -------    -------    -------    -------
Total Loans
Charged-off              436         371        417        602      1,095
Recoveries               106          47         55         75        128
                     -------     -------    -------    -------    -------
Net loans
charged-off              330         324        362        527        967
                     -------     -------    -------    -------    -------
Balance, end of
period               $ 4,693     $ 4,698    $ 4,696    $ 4,696    $ 4,723
                     =======     =======    =======    =======    =======
Ratios:
Net loans
charged-off to avg.    
loans                  0.14%       0.14%      0.16%      0.24%      0.46%
Allowance for loan
losses to total
loans                  1.90%       1.96%      2.00%      2.07%      2.22%

                                   16
<PAGE>


                      NONACCRUAL LOANS, RESTRUCTURED LOANS
                           AND OTHER REAL ESTATE OWNED
                             (dollars in thousands)


QUARTER ENDED            June 30,  Mar. 31, Dec. 31,  Sept. 30,  June 30,
                           1997      1997     1996       1996      1996
Nonaccrual loans:
  Commercial          $   1,064  $    924 $  1,005   $  1,213  $  1,665
  Real Estate:
    Commercial            1,757     1,769    2,255      2,316     2,336
    Residential             538       110       99         99       185
  Consumer                  290       259      263        266       266
                      ---------  -------- --------   --------  --------
Total nonaccrual
loans                     3,649     3,062    3,622      3,894     4,452

Other Real Estate
Owned-net                   513       588      559        956     1,673
                      ---------  -------- --------   --------  --------

Total nonperforming       
assets                    4,163     3,650    4,181      4,850     6,124
Restructured loans        2,666     2,937    1,580      1,592     1,622
                      ---------  -------- --------   --------  --------
Total nonperforming
assets &
restructured loand    $   6,828  $  6,587 $  5,761   $  6,442  $  7,746
                      =========  ======== ========   ========  ========

Accruing loans past
due 90 days or more:
  Commercial                  0       142       97        514         5
  Real Estate:
    Construction              0         0        0          0         0
    Commercial                0       260      103          0         0
    Residential             112       473      346          0         0
  Consumer                  199       318      125        142       151
                      ---------  -------- --------   --------  --------
Total accruing loans
past due 90 days or
more                  $     311  $  1,193 $    671   $    656  $    156
                      =========  ======== ========   ========  ========

Allowance for loan
losses                $   4,693  $  4,698 $  4,696   $  4,696  $  4,723
     
SFAS 114 impaired
loans                 $   3,975  $  3,901 $  2,507   $  2,723  $  2,997

Ratio of
nonperforming assets
to total assets           1.2%      1.1%     1.2%       1.5%      2.0%

Ratio of
nonperforming
assets, restructured
loans & accruing
loans past due 90   
days or more to
total assets              2.0%      2.3%     1.9%       2.2%      2.5%

Ratio of
nonperforming assets
to total loans and
OREO                      1.7%      1.5%     1.8%       2.1%      2.9%

Ratio of
nonperforming
assets, restructured
loans, and accruing
loans past due 90
days or more to
total loans and OREO      2.9%      3.3%     2.7%       3.1%      3.7%

Ratio of allowance
for loan losses to
nonaccrual loans,
restructured loans
and accruing loans      
past due 90 days or
more                     70.8%     65.3%    79.9%      76.5%     75.8%

Ratio of nonaccrual
loans, restructured
loans and accruing
loans past due 90
days or more to
shareholders' equity  
and allowance for
loan losses              21.2%     23.6%    19.4%     20.8%      29.3%

                                   17
<PAGE>

OTHER REAL ESTATE OWNED

Other Real Estate  Owned  (OREO)  expense  was $54,000 for the six month  period
ended June 30, 1997 as  compared  to $66,000  for the six months  ended June 30,
1996. OREO expense was $17,000 for the three month period ended June 30, 1997 as
compared to $20,000 for the three  months ended June 30,  1996.  These  expenses
reflect losses on sales and writedowns on OREO properties and associated  direct
holding costs,  such as property  taxes,  insurance and utilities.  OREO holding
costs were $50,000 and $44,000 for the six month periods ended June 30, 1997 and
1996,  respectively.  For the three month period  ended June 30,  1997,  holding
costs were $25,000 as compared to $19,000 for the same 1996 period.

The  OREO  balance  as of June 30,  1997 was  $513,000  and was  comprised  of 9
properties.  The  OREO  portfolio  consists  of 2  commercial  properties  which
constitute 15% of the total OREO portfolio, 5 residential properties,  including
multifamily homes,  representing 80% of the total OREO portfolio,  and 2 parcels
of land comprising the remaining 5% of the portfolio.

The following table reflects OREO activity for the last five quarterly periods.



                       OTHER REAL ESTATE OWNED
                         QUARTERLY ANALYSIS
                       (dollars in thousands)



QUARTER ENDED

DESCRIPTION        06/30/97  03/31/97  12/31/96  09/30/96  06/30/96
--------------------------------------------------------------------

Beginning book     $  588    $  558    $  956    $1,673    $1,617
value

Properties added        0        42       104         1       620

Proceeds from         
OREO sold             (85)        0      (480)     (722)     (563)

Gains(losses) on
properties sold         8         0       (22)        4        84


Other activity          2

Property    
writedowns              0       (12)        0         0       (85)
                   =================================================
Ending book value  $  513    $  588    $  558    $  956    $1,673
                   =================================================

                                   18
<PAGE>

OPERATING EXPENSES

Operating  expenses  increased  $761,000,  or 14%, from  $5,596,000  for the six
months ending June 30, 1996 to $6,357,000  for the same 1997 period.  Salary and
employee  benefits,  occupancy,  advertising and promotion and office stationery
and supplies were primarily responsible for this increase in operating expenses.

Salary and employee benefits increased $469,000, or 17%, from $2,811,000 for the
first six months of 1996 to $3,280,000  for the same 1997 period.  This increase
can be primarily  attributed to  additional  staffing  requirements  to maintain
three new branch  locations  which were opened  during 1996 and early 1997,  one
each in Milford,  Branford,  and Guilford.  The Company's  full time  equivalent
positions as of June 30, 1996 were 143 as compared to 149 as of June 30, 1997.

Occupancy expense also increased, from $673,000 for the first six months of 1996
to $789,000 for the same 1997 period.  Advertising expense and office stationery
supplies  expense  increased  $120,000 from $385,000 for the first six months of
1996 to $505,000  for the first six months of 1997.  As with salary and employee
benefits, these increases can be attributed to the new branch locations.

As a  result  of  lower  FDIC  deposit  insurance  premiums,  insurance  expense
decreased $95,000 from $215,000 for the first six months of 1996 to $120,000 for
the same 1997 period.

Operating  expenses  increased  $453,000,  or 16%, from $2,866,000 for the three
month period  ending June 30, 1996 to $3,319,000  for the same 1997 period.  The
reasons for this  increase are  substantially  similar to those  outlined in the
comparison of the first six month periods of 1996 and 1997.


PROVISION(BENEFIT) FOR INCOME TAXES

During  the first six  months of 1997,  the  Company  recognized  an income  tax
expense of $641,000 as compared with the recognition of an income tax benefit of
$461,000 for the same period in 1996. Because of improved operating  performance
and  anticipation of continued  future  profitability,  the Company had recorded
income tax benefits  during 1996 to reduce its  valuation  allowance on deferred
tax assets. The Company has since returned to a fully taxable reporting basis.

                                   19
<PAGE>

Gross deferred tax assets were approximately  $11.2 million as of June 30, 1997.
A  valuation  allowance  of $2.2  million was  established  for a portion of the
deferred tax assets,  principally state net operating loss  carryforwards  which
may expire  before  utilization.  The net deferred tax assets,  after  valuation
allowance,  were $9 million as of June 30, 1997 and are included in other assets
in  the  financial   statements.   The  level  of  the  valuation  allowance  is
management's  best judgment  regarding  the amount and timing of future  taxable
income and established reversal patterns of temporary differences.

As a result of the Company's net operating losses in prior years, it has Federal
net operating loss  carryforwards of approximately  $20 million (expiring 2010),
and State net operating loss  carryforwarsds  of $21 million (expiring 2000), as
of December  31,  1996.  Such net  operating  loss  carryforwards,  except for a
portion of the State net operating  loss  carryforwards  which may expire before
utilization,  can be used to offset future taxable income based on  management's
estimate of the amount of taxable income to be generated in future periods.


CAPITAL ADEQUACY

The Company and the Bank are  subject to the capital  adequacy  rules of several
regulators.  Effective  December 19, 1992,  each federal  banking  agency issued
final  rules to carry  out the  "prompt  corrective  action"  provisions  of the
Federal Deposit Insurance Corporation  Improvement Act of 1991 (the "Improvement
Act"). The regulations adopted, among other things, defined capital measures and
capital  thresholds for each of the five capital  categories  established in the
Improvement  Act and  established  a uniform  schedule for the filing of capital
restoration  plans  by  undercapitalized   institutions.   The  following  table
identifies  generally the capital measures and thresholds defined under the FDIC
and Federal Reserve Board rules.



                             Total        Tier 1      Tier 1
                             Risk-Based   Risk-Based  Leverage
                             Ratio        Ratio       Ratio

Well Capitalized             10% or       6% or       5% or above
                             above &      above &     

Adequately Capitalized       8% or        4% or       4% or above 
                             above &      above &

Undercapitalized             Under 8%     Under 4%    Under 4%

Significantly                
Undercapitalized             Under 6% or  Under 3% or Under 3%


Critically Undercapitalized                            A ratio of tangible
                                                       equity to total assets
                                                       equal to or under 2%

                                   20
<PAGE>

To fall within the well  capitalized  or adequately  capitalized  category,  the
financial   institution   must  meet  the  requirements  of  all  three  capital
measurements.  Undercapitalized and significantly  undercapitalized institutions
will be categorized as such if the  institution  falls within any of those three
capital measurements.  The risk-based capital guidelines establish a measurement
of  capital  adequacy  by  relating  a  banking  organization's  capital  to its
financial risks, both on- and off-balance  sheet. As of June 30, 1997,  December
31, 1996 and June 30, 1996,  the Company's  total  risk-based  capital ratio was
9.80%, 9.56% and 9.72%,  respectively.  The second capital measure is the Tier 1
risk-based  ratio,   which  includes  only  core  capital  as  it  measures  the
relationship to risk-weighted assets. As of June 30, 1997, December 31, 1996 and
June 30, 1996, the Company's Tier 1 risk-based ratio was 8.54%, 8.3%, and 8.46%,
respectively.  The  third  capital  adequacy  measure  is the  Tier 1 (or  core)
leverage capital (using the same definition of capital as used in the risk-based
guidelines)  to average total assets.  The Company's  Tier 1 leverage  ratio was
6.07%,  5.75%,  and 5.76% as of June 30,  1997,  December  31, 1996 and June 30,
1996,  respectively.  As of June 30,  1997,  based on the  above  criteria,  the
Company falls within the adequately  capitalized  category.  The Bank also falls
within the adequately capitalized category.

At the conclusion of its regulatory examination, the FDIC, based on the Bank's
improved  overall  financial  condition,  has  removed  the  Memorandum  of 
Understanding. See "Regulatory Matters" for further discussion.

The  Improvement  Act also  requires each federal  banking  agency to revise its
risk-based  capital  standards  for  insured  institutions  to ensure that those
standards take adequate  account of interest rate risk,  concentration of credit
risk, and risks of nontraditional  activities and reflect the actual performance
and expected risk of loss on multi-family  residential loans. While the FDIC has
published  proposed  regulations  for the  purpose of  amending  its  risk-based
capital  standards,  the Company  cannot  predict what may be required under any
final regulations that may be adopted. Such regulations could, however,  further
increase the regulatory capital requirements which are applicable to the Company
and the Bank.


LIQUIDITY AND INTEREST RATE SENSITIVITY

The liquidity  process is monitored by the Company's Asset  Liability  Committee
("ALCO"),  which meets  regularly to  implement  its  asset/liability  and funds
management  policy.  ALCO's role is to evaluate liquidity and interest rate risk
and their impact on earnings.  The Committee  developed a reporting  system that
integrates  the current  interest  rate  environment  of the  national

                                   21
<PAGE>

and local  economy  with  the  maturities  and the repricing  schedules of both
the assets and  liabilities  of the Company.  The objective of ALCO is to manage
the  Company's  assets and  liabilities  to  provide  an optimum  and stable net
interest margin and to facilitate a constant level of net interest income.

The primary focus of the Company's liquidity management is to match cash inflows
and outflows with funds provided by the Company's market for deposits and loans.
The  Company's  objective  is to  maintain  adequate  cash which is  invested in
federal  funds.  During the first six  months of 1997,  the  average  balance of
federal funds sold was $2,093,000. In the event the Company needs to borrow cash
to manage its overnight position or short-term position,  the Company can borrow
approximately  $10 million,  as of June 30, 1997, on an overnight basis from the
Federal  Home Loan  Bank of  Boston  ("FHLBB")  and has  access to a  $1,000,000
federal  funds line of credit with a commercial  correspondent  bank. As of June
30, 1997, the Company had no outstanding  overnight  borrowings at the FHLBB. In
addition,  the Company has access to $30,000,000 in short-term funds via reverse
repurchase agreements with a brokerage firm. The Company also has the ability to
borrow term advances  (from one week to twenty years) from the FHLBB.  Its total
advance line,  including  overnight  borrowings from the FHLBB, is approximately
$22,300,000,  of which $12,489,000 was outstanding as of June 30, 1997. In order
to utilize additional  borrowing  capacity from the FHLBB,  additional shares of
FHLBB  capital  stock  would  need to be  purchased.  The  Company's  investment
portfolio also provides a secondary source of liquidity.

At June 30, 1997, the Company's  liquidity  ratio,  as defined by FDIC criteria,
was 25.4% compared to 27.0% and 29.1% as of December 31, 1996 and June 30, 1996,
respectively.  The  liquidity  ratio  is  defined  as the  total  of  net  cash,
short-term  investments  and  other  marketable  assets,  divided  by total  net
deposits and  short-term  liabilities.  Management  believes  that its liquidity
position is adequate as of June 30, 1997.

The Company  generated a negative  aggregate  cash flow of $444,000  for the six
months ended June 30,  1997,  as compared to a positive  aggregate  cash flow of
$2,375,000  for the same 1996  period.  The  aggregate  cash flows  provided  by
operating   activities  were  relatively   unchanged  and  were  $2,129,000  and
$2,124,000  for the  six  months  ending  June  30,  1997  and  June  30,  1996,
respectively.

During the first six months of 1997,  net cash of  $8,584,000  was  provided  by
financing  activities as compared to $11,129,000  for the same 1996 period.  The
decrease in cash used by financing  activities in 1997 is primarily due to a net
increase in demand,  NOW, money market and savings accounts offset by a decrease
in federal funds purchased and securities sold under repurchase agreements.

                                   22
<PAGE>

Net cash  provided by investing  activities  was  $11,157,000  for the first six
months of 1997  compared to  $10,879,000  for the same 1996 period.  This slight
increase in cash as a result of  investing  activities  was due  primarily to an
overall  reduction  in both  maturities  and  purchases  of  available  for sale
securities.

The table below  compares rate sensitive  assets and rate sensitive  liabilities
according  to when they will mature  and/or  reprice  after June 30,  1997.  The
comparison is expressed as a rate sensitivity gap (i.e., interest rate sensitive
assets  less  interest  rate  sensitive   liabilities)   and  an  interest  rate
sensitivity  gap ratio (i.e.,  the rate  sensitivity gap as a percentage of rate
sensitive  assets).  These  measures are shown both for  individual  periods and
cumulatively.  In an increasing rate  environment,  asset  sensitivity  (i.e., a
positive gap) enhances earnings potential,  whereas liability sensitivity (i.e.,
a negative gap) negatively  impacts  earnings.  The opposite  results occur in a
declining  rate  environment.  It  should  be  noted  that  the  table  does not
necessarily  indicate  the  impact of general  interest  rate  movements  on net
interest  margin  since  the  Company's   repricing  of  different   assets  and
liabilities  is also  influenced by  competitive  pressures and the needs of the
Company's customers.

As of June 30, 1997 the Company  has a positive  cumulative  gap through the one
year  horizon.  This  results  from  approximately  44%  of the  Company's  loan
portfolio  maturing or repricing within one year.  However,  the Company becomes
liability  sensitive  beyond one year,  primarily  due to its demand and savings
accounts,  which are considered  relatively  stable and not easily influenced by
changes in interest  rates.  Cumulatively  through  one year,  the Company has a
positive gap position of $13,911,000,  representing a positive 5% cumulative gap
ratio.

ALCO manages the gap position on an ongoing basis according to its assessment of
the  interest  rate outlook and other  factors in order to assure that  interest
rate risk does not  exceed a 10%  change in net  interest  income for a one year
period.  As the Company  increases its total assets,  the overall  business plan
provides for  matching  assets and  liabilities  to minimize  interest  rate and
liquidity  risk.  If interest  rates were to increase  immediately  by 200 basis
points,  the negative  impact on the Company  would be within  ALCO's  tolerance
level.

                                   23
<PAGE>

                  Interest Rate Sensitivity Table
                      (dollars in thousands)

                                          Months  Months  Over
June 30, 1997  Month 1  Month 2  Month 3   4-6     7-12   1 Year   Total
----------------------------------------------------------------------------

Rate
Sensitive
Assets:    
 Loans (1)     $69,163  $6,909   $3,425   $9,421 $16,123 $137,982 $243,023
 Investments    13,762   2,073    4,425    6,436  13,309   32,907   72,912 
               -------------------------------------------------------------

Total Rate
Sensitive 
Assets          82,925   8,982   7,850    15,857  29,432 170,889   315,935
 
Rate Sensitive
 Liabilities:
 Time deposits  10,100   6,951   6,848    26,835  39,595  44,475   134,804
                                                 
 Other                
deposits (2)    12,681      12   2,852     1,928  23,333 148,560   189,366
                                                 
               -------------------------------------------------------------

Total Rate
Sensitive
Liabilities     22,781   6,963   9,700  28,763    62,928  193,035  324,170

Net Gap         60,144   2,019  (1,850)(12,906)  (33,496) (22,146)  (8,235)
                               
               -------------------------------------------------------------

Cumulative Gap  60,144  62,163  60,313  47,407    13,911   (8,235)  (8,235)
               -------------------------------------------------------------
Net Gap as %
of total rate
sensitive assets   19%      1%     -1%     -4%      -11%      -7%      -3%

Cumulative
Gap as % of
total rate
sensitive
assets             19%     20%     19%     15%        4%      -3%      -3%


(1) Excludes nonaccrual loans

(2) Includes borrowings


REGULATORY MATTERS

The Federal Deposit Insurance Corporation ("FDIC"),  after completion of a joint
examination of the Bank with the Connecticut  Banking  Department as of December
31, 1995, has removed its Memorandum of Understanding (the "Memorandum"), issued
on May 16, 1995.  The  Memorandum  required,  among other things,  that the Bank
achieve certain Tier 1 leverage and total  risk-based  capital levels.  The Bank
was required to have a Tier 1 leverage  capital ratio of at least 5% by June 30,
1996 and 6% by June 30,  1997.  Also,  the Bank was required to maintain a total
risk-based  capital  ratio  of at  least  8%  throughout  the  existence  of the
Memorandum.  As of September  30, 1995,  the Bank met the first  capital  target
identified  in  the  Memorandum,  as its  Tier  1  leverage  capital  and  total
risk-based  capital  ratios  were 5.0% and 8.8%,  respectively.  The Company has
achieved the second Tier 1 leverage capital ratio requirement and as of June 30,
1997, the Bank's Tier 1 leverage capital and total risk-based capital ratios are
6.1% and  9.8%,  respectively.  In  

                                   24


<PAGE>

removing the  Memorandum,  the FDIC and the Company have agreed that the Company
will  continue  efforts  toward  meeting  the  capital  goals  outlined  in  the
Memorandum, notify the State regulators prior to paying dividends, and establish
a goal for the end of 1996 that classified  assets will be equal to 40% of total
capital and eligible reserves;  and, at the end of 1997, that this ratio will be
30%.
                                   25

<PAGE>


PART II -    OTHER INFORMATION

ITEMS 1-3 Not applicable.

ITEM 4       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

             On April  29,  1997,  BNH  Bancshares,  Inc.  held its
             Annual Meeting of  Shareholders.  At the meeting,  the
             Company's  shareholders  were  asked to vote  upon the
             following proposals:

             Proposal 1   the election of directors;

             Proposal 2   to approve an  amendment  increasing  the  aggregate
                          number of shares of the common  stock  authorized  for
                          issuance under the BNH Bancshares, Inc. 1992 Stock
                          Incentive Plan;

             Proposal 3   to  ratify  the  appointment  of  Coopers  & Lybrand
                          L.L.P.  as the  independent  accountants  to audit the
                          consolidated  financial  statements of the Company for
                          the calendar year 1997.

             The following is the name of each director  elected at the meeting,
             which  includes all directors  whose term as director will continue
             after such Annual Meeting, and a description of the number of votes
             cast for, against or withheld,  abstentions and broker non-votes as
             to the election of each nominee for director:


Proposal 1                             Votes                  Broker
Election of              Votes For     Against  Abstentions  Non-Votes
Directors                                or
                                       Withheld

Stephen P. Ahern         3,015,533     31,886        0           0
Martin R. Anastasio      3,024,668     22,731        0           0
Edward M. Crowley        2,984,849     62,550        0           0
James J. Cullen          3,016,182     31,217        0           0
George M. Dermer         3,014,664     32,735        0           0
Thomas M. Donegan        3,019,308     28,091        0           0
Theodore F. Hogan, Jr.   3,034,558     12,841        0           0
Jean G. Lamont           3,014,908     32,491        0           0
Lawrence M. Liebman      2,913,610    133,789        0           0
F. Patrick McFadden, Jr. 3,016,783     30,616        0           0
Carl M. Porto            3,016,808     30,591        0           0
Vincent A. Romei         3,016,171     31,228        0           0
Stanley Scholsohn        3,034,471     12,928        0           0
Cheever Tyler            3,018,088     29,311        0           0

Proposal 2               2,603,047    183,966   29,044     231,342

Proposal 3               3,009,818     30,079    7,502           0

                                   26
<PAGE>

ITEM 5     OTHER INFORMATION - None.

ITEM 6    Exhibits and Reports on Form 8-K:

     (a)  Exhibits - Exhibit 27 - Financial Data Schedule.

     (b)  Reports  on Form 8-K - A Current  Report on Form 8-K,  dated  April 8,
          1997,  was filed on April 21, 1997.  The filing  reported on Item 5,
          "Other Events."
                                   27
<PAGE>


                             SIGNATURES

Pursuant  to the  requirements  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.


Date:  August 12, 1997      /s/ F. Patrick McFadden, Jr.
                           ---------------------------------
                           F. Patrick McFadden, Jr.
                           President/Chief Executive Officer



Date:  August 12, 1997      /s/ John F. Trentacosta
                           ---------------------------------
                           John F. Trentacosta
                           Executive Vice President/Chief
                           Financial Officer