##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2005



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 1-14671



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WORONOCO BANCORP, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 04-3444269                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|31 Court Street, Westfield, Massachusetts                      |  | 01085                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(413) 568-9141

(Registrants telephone number, including area code)



Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



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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 whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No ̈



As of May 2, 2005, there were 3,905,057 shares of the Registrants Common Stock outstanding.



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##### Table of Contents

WORONOCO BANCORP, INC.

FORM 10-Q



INDEX



|                              |  |                                                                                                               |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                               |  | Page
|PART I. FINANCIAL INFORMATION |  |                                                                                                              
|                              |  |                                                                                                              
|Item 1.                       |  | Financial Statements (unaudited)                                                                              |  |     
|                              |  |                                                                                                              
|                              |  | Consolidated Balance Sheets at March 31, 2005 and December 31, 2004.                                          |  | 1   
|                              |  |                                                                                                              
|                              |  | Consolidated Income Statements for the Three Months Ended March 31, 2005 and 2004                             |  | 2   
|                              |  |                                                                                                              
|                              |  | Consolidated Statements of Changes in Stockholders Equity for the Three Months Ended March 31, 2005 and 2004 |  | 3   
|                              |  |                                                                                                              
|                              |  | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004                      |  | 4   
|                              |  |                                                                                                              
|                              |  | Notes to Unaudited Consolidated Financial Statements                                                          |  | 5   
|                              |  |                                                                                                              
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                         |  | 9   
|                              |  |                                                                                                              
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                    |  | 26  
|                              |  |                                                                                                              
|Item 4.                       |  | Controls and Procedures                                                                                       |  | 27  
|                              | 
|PART II: OTHER INFORMATION    |  |                                                                                                              
|                              |  |                                                                                                              
|Item 1.                       |  | Legal Proceedings                                                                                             |  | 27  
|                              |  |                                                                                                              
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                   |  | 28  
|                              |  |                                                                                                              
|Item 3.                       |  | Defaults Upon Senior Securities                                                                               |  | 28  
|                              |  |                                                                                                              
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                           |  | 28  
|                              |  |                                                                                                              
|Item 5.                       |  | Other Information                                                                                             |  | 28  
|                              |  |                                                                                                              
|Item 6.                       |  | Exhibits                                                                                                      |  | 28  
|                              | 
|SIGNATURES                    |  | 29                                                                                                           







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##### Table of Contents

PART I. FINANCIAL INFORMATION



Item 1. Financial Statements (unaudited)



WORONOCO BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars In Thousands)

(Unaudited)



|                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                         |  | March 31,2005 |         |   | December 31,2004 |  
|Assets                                                                                                                                                                   |  |               |         |   |                  |   |         |  
|                                                                                                                                                                         |  |              
|Cash and due from banks                                                                                                                                                  |  | $             | 19,262  |   |                  | $ | 16,861  |  
|Interest-bearing deposits                                                                                                                                                |  |               | 1,053   |   |                  |   | 1,044   |  
|Federal funds sold                                                                                                                                                       |  |               |        |   |                  |   | 4,900   |  
|                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                |  |               | 20,315  |   |                  |   | 22,805  |  
|                                                                                                                                                                         |  |              
|Securities available for sale, at fair value                                                                                                                             |  |               | 225,990 |   |                  |   | 242,050 |  
|Federal Home Loan Bank stock, at cost                                                                                                                                    |  |               | 19,009  |   |                  |   | 17,339  |  
|Loans, net of allowance for loan losses ($3,643 at March 31, 2005 and $3,651 at December 31, 2004)                                                                       |  |               | 620,035 |   |                  |   | 610,963 |  
|Premises and equipment, net                                                                                                                                              |  |               | 10,206  |   |                  |   | 10,363  |  
|Accrued interest receivable                                                                                                                                              |  |               | 3,710   |   |                  |   | 3,413   |  
|Goodwill and other intangible assets, net                                                                                                                                |  |               | 3,215   |   |                  |   | 3,221   |  
|Net deferred tax asset                                                                                                                                                   |  |               | 1,377   |   |                  |   | 72      |  
|Cash surrender value of life insurance                                                                                                                                   |  |               | 5,146   |   |                  |   | 5,107   |  
|Other assets                                                                                                                                                             |  |               | 3,563   |   |                  |   | 2,962   |  
|                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total assets                                                                                                                                                             |  | $             | 912,566 |   |                  | $ | 918,295 |  
|                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Liabilities and Stockholders Equity                                                                                                                                     |  |               |         |   |                  |   |         |  
|                                                                                                                                                                         |  |              
|Deposits                                                                                                                                                                 |  | $             | 444,223 |   |                  | $ | 477,855 |  
|Mortgagors escrow accounts                                                                                                                                              |  |               | 2,422   |   |                  |   | 2,078   |  
|Short-term borrowings                                                                                                                                                    |  |               | 170,176 |   |                  |   | 140,554 |  
|Long-term debt                                                                                                                                                           |  |               | 210,577 |   |                  |   | 212,528 |  
|Accrued expenses and other liabilities                                                                                                                                   |  |               | 5,382   |   |                  |   | 3,869   |  
|                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                        |  |               | 832,780 |   |                  |   | 836,884 |  
|                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Commitments and contingencies                                                                                                                                            |  |               |         |   |                  |   |         |  
|                                                                                                                                                                         |  |              
|Stockholders Equity:                                                                                                                                                    |  |               |         |   |                  |   |         |  
|Preferred stock ($.01 par value; 2,000,000 shares authorized; no shares issued and outstanding)                                                                          |  |               |        |   |                  |   |        |  
|Common stock ($.01 par value; 16,000,000 shares authorized; 5,998,860 shares issued; shares outstanding: 3,895,557 at March 31, 2005 and
3,833,709 at December 31, 2004) |  |               | 60      |   |                  |   | 60      |  
|Additional paid-in capital                                                                                                                                               |  |               | 65,028  |   |                  |   | 64,247  |  
|Unearned compensation                                                                                                                                                    |  |               | (3,482  | ) |                  |   | (3,657  | )
|Retained earnings                                                                                                                                                        |  |               | 46,018  |   |                  |   | 47,123  |  
|Accumulated other comprehensive income                                                                                                                                   |  |               | 484     |   |                  |   | 2,793   |  
|Treasury stock, at cost (2,103,303 shares at March 31, 2005 and 2,165,151 shares at December 31, 2004)                                                                   |  |               | (28,322 | ) |                  |   | (29,155 | )
|                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                               |  |               | 79,786  |   |                  |   | 81,411  |  
|                                                                                                                                                                         |  |               |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                               |  | $             | 912,566 |   |                  | $ | 918,295 |  
|                                                                                                                                                                         |  |               |         |   |                  |   |         |  



See accompanying notes to unaudited
consolidated financial statements



1



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##### Table of Contents

WORONOCO BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(In Thousands Except Per Share Amounts)

(Unaudited)



|                                                                  |  |                              |           |      |   |          
|----------------------------------------------------------------- |  | ---------------------------- | --------- | ---- | - | ---------
|                                                                  |  | Three Months Ended March 31,
|                                                                  |  | 2005                         |           | 2004
|Interest and dividend income:                                     |  |                              |           |      |   |          
|Loans, including fees                                             |  | $                            | 8,109     |      | $ | 6,993    
|Interest and dividends on securities:                             |  |                              |           |      |   |          
|Taxable interest                                                  |  |                              | 1,924     |      |   | 1,987    
|Tax exempt interest                                               |  |                              | 353       |      |   | 247      
|Dividends                                                         |  |                              | 606       |      |   | 514      
|Federal funds sold                                                |  |                              | 29        |      |   | 4        
|Other                                                             |  |                              | 6         |      |   | 1        
|                                                                  |  |                              |           |      |   |          
|Total interest and dividend income                                |  |                              | 11,027    |      |   | 9,746    
|                                                                  |  |                              |           |      |   |          
|Interest expense:                                                 |  |                              |           |      |   |          
|Deposits                                                          |  |                              | 1,972     |      |   | 1,532    
|Borrowings                                                        |  |                              | 3,665     |      |   | 3,052    
|                                                                  |  |                              |           |      |   |          
|Total interest expense                                            |  |                              | 5,637     |      |   | 4,584    
|                                                                  |  |                              |           |      |   |          
|Net interest and dividend income                                  |  |                              | 5,390     |      |   | 5,162    
|Provision for loan losses                                         |  |                              | 14        |      |   | 150      
|                                                                  |  |                              |           |      |   |          
|Net interest and dividend income, after provision for loan losses |  |                              | 5,376     |      |   | 5,012    
|                                                                  |  |                              |           |      |   |          
|Non-interest income:                                              |  |                              |           |      |   |          
|Fee income                                                        |  |                              | 1,036     |      |   | 1,040    
|Insurance commissions                                             |  |                              | 545       |      |   | 423      
|Gain on sales of loans, net                                       |  |                              |          |      |   | 80       
|Other income                                                      |  |                              | 43        |      |   | 70       
|                                                                  |  |                              |           |      |   |          
|Total non-interest income                                         |  |                              | 1,624     |      |   | 1,613    
|                                                                  |  |                              |           |      |   |          
|Non-interest expenses:                                            |  |                              |           |      |   |          
|Salaries and employee benefits                                    |  |                              | 2,837     |      |   | 2,784    
|Occupancy and equipment                                           |  |                              | 676       |      |   | 545      
|Marketing                                                         |  |                              | 34        |      |   | 80       
|Professional services                                             |  |                              | 336       |      |   | 271      
|Data processing                                                   |  |                              | 289       |      |   | 270      
|Merger-related                                                    |  |                              | 766       |      |   |         
|Other general and administrative                                  |  |                              | 671       |      |   | 634      
|                                                                  |  |                              |           |      |   |          
|Total non-interest expenses                                       |  |                              | 5,609     |      |   | 4,584    
|                                                                  |  |                              |           |      |   |          
|Income before income taxes                                        |  |                              | 1,391     |      |   | 2,041    
|Provision for income taxes                                        |  |                              | 615       |      |   | 608      
|                                                                  |  |                              |           |      |   |          
|Net income                                                        |  | $                            | 776       |      | $ | 1,433    
|                                                                  |  |                              |           |      |   |          
|Earnings per share:                                               |  |                              |           |      |   |          
|Basic                                                             |  | $                            | 0.21      |      | $ | 0.42     
|Diluted                                                           |  | $                            | 0.21      |      | $ | 0.40     
|                                                                  |  |                             
|Weighted average shares outstanding:                              |  |                              |           |      |   |          
|Basic                                                             |  |                              | 3,641,898 |      |   | 3,390,398
|Diluted                                                           |  |                              | 3,733,659 |      |   | 3,611,181



See accompanying notes to unaudited
consolidated financial statements



2



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##### Table of Contents

WORONOCO BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

Three Months Ended March 31, 2005 and 2004

(Dollars In Thousands)

(Unaudited)



|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|---------------------------------------------------------------------------------------- |  | ----------- | -- | ------------------------ | - | -------------------- |  | - | ---------------- | - |  | ----------------------------------- | ------ | - | ------------- | - | ------ | ----- |  | - | ------- | - |  | - | ------ | -
|                                                                                         |  | CommonStock |    | AdditionalPaid-inCapital |   | UnearnedCompensation |  |   | RetainedEarnings |   |  | AccumulatedOtherComprehensiveIncome |        |   | TreasuryStock |   |        | Total | 
|Balance at December 31, 2004                                                             |  | $           | 60 |                          | $ | 64,247               |  | $ | (3,657           | ) |  | $                                   | 47,123 |   |               | $ | 2,793  |       |  | $ | (29,155 | ) |  | $ | 81,411 |  
|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Comprehensive income:                                                                    |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Net income                                                                               |  |             |   |                          |   |                     |  |   |                 |   |  |                                     | 776    |   |               |   |       |       |  |   |        |   |  |   | 776    |  
|Change in net unrealized gain on securities available for sale                           |  |             |   |                          |   |                     |  |   |                 |   |  |                                     |       |   |               |   | (2,257 | )     |  |   |        |   |  |   | (2,257 | )
|Net loss on derivative instruments                                                       |  |             |   |                          |   |                     |  |   |                 |   |  |                                     |       |   |               |   | (52    | )     |  |   |        |   |  |   | (52    | )
|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Total comprehensive income                                                               |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   | (1,533 | )
|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Decrease in unearned compensation                                                        |  |             |   |                          |   | 265                  |  |   | 175              |   |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   | 440    |  
|Adjustment for tax benefit related to vesting of stock awards and stock option exercises |  |             |   |                          |   | 444                  |  |   |                 |   |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   | 444    |  
|Reissuance of treasury shares in connection with stock option exercises (61,848 shares)  |  |             |   |                          |   | 72                   |  |   |                 |   |  |                                     | (170   | ) |               |   |       |       |  |   | 833     |   |  |   | 735    |  
|Cash dividends declared ($0.4525 per share)                                              |  |             |   |                          |   |                     |  |   |                 |   |  |                                     | (1,711 | ) |               |   |       |       |  |   |        |   |  |   | (1,711 | )
|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Balance at March 31, 2005                                                                |  | $           | 60 |                          | $ | 65,028               |  | $ | (3,482           | ) |  | $                                   | 46,018 |   |               | $ | 484    |       |  | $ | (28,322 | ) |  | $ | 79,786 |  
|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Balance at December 31, 2003                                                             |  | $           | 60 |                          | $ | 60,337               |  | $ | (3,087           | ) |  | $                                   | 48,365 |   |               | $ | 3,731  |       |  | $ | (30,663 | ) |  | $ | 78,743 |  
|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Comprehensive income:                                                                    |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Net income                                                                               |  |             |   |                          |   |                     |  |   |                 |   |  |                                     | 1,433  |   |               |   |       |       |  |   |        |   |  |   | 1,433  |  
|Change in net unrealized gain on securities available for sale                           |  |             |   |                          |   |                     |  |   |                 |   |  |                                     |       |   |               |   | 1,058  |       |  |   |        |   |  |   | 1,058  |  
|Net gain on derivative instruments                                                       |  |             |   |                          |   |                     |  |   |                 |   |  |                                     |       |   |               |   | 23     |       |  |   |        |   |  |   | 23     |  
|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Total comprehensive income                                                               |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   | 2,514  |  
|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Decrease in unearned compensation                                                        |  |             |   |                          |   | 277                  |  |   | 229              |   |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   | 506    |  
|Adjustment for tax benefit related to vesting of stock awards and stock option exercises |  |             |   |                          |   | 331                  |  |   |                 |   |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   | 331    |  
|Reissuance of treasury shares in connection with stock option exercises (62,981 shares)  |  |             |   |                          |   | 66                   |  |   |                 |   |  |                                     | (183   | ) |               |   |       |       |  |   | 819     |   |  |   | 702    |  
|Cash dividends declared ($0.19 per share)                                                |  |             |   |                          |   |                     |  |   |                 |   |  |                                     | (645   | ) |               |   |       |       |  |   |        |   |  |   | (645   | )
|Treasury stock purchased (21,562 shares)                                                 |  |             |   |                          |   |                     |  |   |                 |   |  |                                     |       |   |               |   |       |       |  |   | (765    | ) |  |   | (765   | )
|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  
|Balance at March 31, 2004                                                                |  | $           | 60 |                          | $ | 61,011               |  | $ | (2,858           | ) |  | $                                   | 48,970 |   |               | $ | 4,812  |       |  | $ | (30,609 | ) |  | $ | 81,386 |  
|                                                                                         |  |             |    |                          |   |                      |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |        |  



See accompanying notes to unaudited
consolidated financial statements



3



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##### Table of Contents

WORONOCO BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                  |  |                             |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Three Months EndedMarch 31, |        
|                                                                                  |  | 2005                        |         |   | 2004 |  
|                                                                                  |  | (In thousands)              |        
|Cash flows from operating activities:                                             |  |                             |         |   |      |   |         |  
|Net income                                                                        |  | $                           | 776     |   |      | $ | 1,433   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                             |         |   |      |   |         |  
|Provision for loan losses                                                         |  |                             | 14      |   |      |   | 150     |  
|Net amortization of investments                                                   |  |                             | 200     |   |      |   | 272     |  
|Amortization of purchased loans premium                                           |  |                             | 120     |   |      |   | 65      |  
|Depreciation and amortization                                                     |  |                             | 234     |   |      |   | 243     |  
|Amortization of other intangible assets                                           |  |                             | 6       |   |      |   | 12      |  
|Amortization of mortgage servicing rights                                         |  |                             | 63      |   |      |   | 23      |  
|Employee stock ownership plan expense                                             |  |                             | 362     |   |      |   | 375     |  
|Stock-based incentive plan expense                                                |  |                             | 78      |   |      |   | 131     |  
|Gain on sales of loans, net                                                       |  |                             |        |   |      |   | (80     | )
|Loans originated and held for sale                                                |  |                             |        |   |      |   | (2,881  | )
|Proceeds from sale of loans held for sale                                         |  |                             |        |   |      |   | 2,928   |  
|Changes in operating assets and liabilities:                                      |  |                             |         |   |      |   |         |  
|Accrued interest receivable                                                       |  |                             | (297    | ) |      |   | (152    | )
|Accrued expenses and other liabilities                                            |  |                             | 983     |   |      |   | (164    | )
|Other, net                                                                        |  |                             | (702    | ) |      |   | (1,369  | )
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                             | 1,837   |   |      |   | 986     |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Cash flows from investing activities:                                             |  |                             |         |   |      |   |         |  
|Purchases of securities available for sale                                        |  |                             | (38     | ) |      |   | (31     | )
|Principal payments on mortgage-backed securities                                  |  |                             | 12,370  |   |      |   | 9,159   |  
|Purchases of Federal Home Loan Bank stock                                         |  |                             | (1,670  | ) |      |   | (401    | )
|Loan originations/purchases and principal collections, net                        |  |                             | (9,293  | ) |      |   | (42,847 | )
|Additions to premises and equipment                                               |  |                             | (77     | ) |      |   | (25     | )
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash provide by (used in) investing activities                                |  |                             | 1,292   |   |      |   | (34,145 | )
|                                                                                  |  |                             |         |   |      |   |         |  
|Cash flows from financing activities:                                             |  |                             |         |   |      |   |         |  
|Net decrease in deposits                                                          |  |                             | (33,632 | ) |      |   | (6,920  | )
|Net increase (decrease) in short-term borrowings                                  |  |                             | 29,622  |   |      |   | (1,465  | )
|Proceeds from issuance of long-term debt                                          |  |                             |        |   |      |   | 36,500  |  
|Repayments of long-term debt                                                      |  |                             | (1,951  | ) |      |   | (1,678  | )
|Net increase in mortgagors escrow accounts                                       |  |                             | 344     |   |      |   | 227     |  
|Cash dividends paid                                                               |  |                             | (737    | ) |      |   | (645    | )
|Treasury stock purchased                                                          |  |                             |        |   |      |   | (765    | )
|Reissuance of treasury stock in connection with stock option exercises            |  |                             | 735     |   |      |   | 702     |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net cash (used in) provided by financing activities                               |  |                             | (5,619  | ) |      |   | 25,956  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Net change in cash and cash equivalents                                           |  |                             | (2,490  | ) |      |   | (7,203  | )
|                                                                                  |  |                            
|Cash and cash equivalents at beginning of period                                  |  |                             | 22,805  |   |      |   | 26,294  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                           | 20,315  |   |      | $ | 19,091  |  
|                                                                                  |  |                             |         |   |      |   |         |  
|Supplemental cash flow information:                                               |  |                             |         |   |      |   |         |  
|Interest paid on deposits                                                         |  | $                           | 2,184   |   |      | $ | 1,883   |  
|Interest paid on borrowings                                                       |  |                             | 3,722   |   |      |   | 3,059   |  
|Income taxes paid                                                                 |  |                             | 48      |   |      |   | 32      |  
|Dividends declared and not yet paid                                               |  |                             | 974     |   |      |   |        |  



See accompanying notes to unaudited
consolidated financial statements



4



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##### Table of Contents

WORONOCO BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

At and for the Three Months Ended March 31, 2005



1. Unaudited Consolidated Financial Statements



Woronoco Bancorp, Inc. (the Corporation) has no significant assets other than all of the outstanding shares of its wholly-owned subsidiaries, Woronoco Savings
Bank (the Bank) and WRO Funding Corporation (collectively, the Company). The accounts of the Bank include all of its wholly-owned subsidiaries. The Consolidated Financial Statements of the Company included herein are
unaudited. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial condition, results of operations, changes in stockholders equity and cash flows, as of
and for the periods covered herein, have been made. Certain information and note disclosures normally included in the Consolidated Financial Statements have been omitted as they are included in the Securities and Exchange Commission Form 10-K and
accompanying Notes to the Consolidated Financial Statements (the Form 10-K) filed by the Company for the year ended December 31, 2004.



These consolidated financial statements should be read in conjunction with the Form 10-K.



The results for the three month interim period covered hereby are not necessarily indicative of the operating results for a full year.



2. Agreement and Plan of Merger



In December 2004, the Corporation entered into an Agreement and Plan of Merger (the
Merger Agreement) with Berkshire Hills Bancorp, Inc., a Delaware corporation and the holding company for Berkshire Bank. Berkshire Bank is headquartered in Pittsfield, Massachusetts, with 11 branch offices serving communities throughout
Berkshire County, and a representative office and one branch in New York. At March 31, 2005, Berkshire Hills Bancorp had total assets of $1.3 billion.



The acquisition will be accounted for using the purchase method of accounting. Woronoco Bancorp, Inc. and Berkshire Hills Bancorp, Inc. have both received shareholder
approvals to proceed with their merger. Based on a preliminary vote count, of the total votes cast, approximately 95% of Berkshire shares and approximately 86% of Woronoco shares were voted in favor of the transaction, and a majority of each
companys total outstanding shares were voted in favor of the transaction. The merger is expected to close during the second quarter of 2005, subject to the approval of applicable regulatory authorities.



3. Earnings Per Share



Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued by the Company are primarily
associated with outstanding stock options and are determined using the treasury stock method.



5



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##### Table of Contents

Earnings per common share for the three months ended March 31, 2005 and 2004 have been computed based upon the following
(dollars in thousands except per share amounts):



|                                                                                         |  |                                        |           |      |   |          
|---------------------------------------------------------------------------------------- |  | -------------------------------------- | --------- | ---- | - | ---------
|                                                                                         |  | Unaudited Three Months Ended March 31,
|                                                                                         |  | 2005                                   |           | 2004
|Net income                                                                               |  | $                                      | 776       |      | $ | 1,433    
|                                                                                         |  |                                        |           |      |   |          
|Average number of common shares outstanding                                              |  |                                        | 3,641,898 |      |   | 3,390,398
|Effect of dilutive potential common shares                                               |  |                                        | 91,761    |      |   | 220,783  
|                                                                                         |  |                                        |           |      |   |          
|Average number of common shares outstanding used to calculate diluted earnings per share |  |                                        | 3,733,659 |      |   | 3,611,181
|                                                                                         |  |                                        |           |      |   |          
|Net income per share:                                                                    |  |                                        |           |      |   |          
|Basic                                                                                    |  | $                                      | 0.21      |      | $ | 0.42     
|Diluted                                                                                  |  | $                                      | 0.21      |      | $ | 0.40     



For the three months ended March 31,
2005 and 2004, the Company had 46,000 options outstanding that were anti-dilutive and therefore not included in the earnings per share calculation.



4. Stock compensation plans



SFAS No. 123, Accounting for Stock-Based Compensation, encourages all entities to adopt a fair value based method of accounting for employee stock
compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, whereby compensation cost is the excess, if any,
of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Companys stock-based plans have no intrinsic value at the grant
date, and under Opinion No. 25 no compensation cost is recognized for them.



The Company has elected to continue with the accounting methodology in Opinion No. 25 and, as a result, has provided pro forma disclosures of net income and earnings per share, as if the fair value based method of accounting had been
applied.



The following table illustrates the effect on net income and earnings
per share as if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation.



|                                                                                                                                             |  |                              |      |   |      |   |       |  
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---- | - | ---- | - | ----- | -
|                                                                                                                                             |  | Three Months Ended March 31, |     
|                                                                                                                                             |  | 2005                         |      |   | 2004 |  
|Net income, as reported                                                                                                                      |  | $                            | 776  |   |      | $ | 1,433 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all options, net of related tax
effects |  |                              | (22  | ) |      |   | (449  | )
|                                                                                                                                             |  |                              |      |   |      |   |       |  
|Pro forma net income                                                                                                                         |  | $                            | 754  |   |      | $ | 984   |  
|                                                                                                                                             |  |                              |      |   |      |   |       |  
|Earnings per share:                                                                                                                          |  |                              |      |   |      |   |       |  
|Basic-as reported                                                                                                                            |  | $                            | 0.21 |   |      | $ | 0.42  |  
|                                                                                                                                             |  |                              |      |   |      |   |       |  
|Basic-pro forma                                                                                                                              |  | $                            | 0.21 |   |      | $ | 0.29  |  
|                                                                                                                                             |  |                              |      |   |      |   |       |  
|Diluted-as reported                                                                                                                          |  | $                            | 0.21 |   |      | $ | 0.40  |  
|                                                                                                                                             |  |                              |      |   |      |   |       |  
|Diluted-pro forma                                                                                                                            |  | $                            | 0.20 |   |      | $ | 0.27  |  
|                                                                                                                                             |  |                              |      |   |      |   |       |  



6



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##### Table of Contents

In December 2004, the FASB published FASB Statement No. 123 (revised 2004), Share-Based Payment (SFAS
123(R) or the Statement). SFAS 123(R) requires that the compensation cost relating to share-based payment transactions, including grants of employee stock options, be recognized in financial statements. That cost will be measured
based on the fair value of the equity or liability instruments issued. SFAS 123(R) covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. SFAS 123(R) is a replacement of FASB Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related interpretive
guidance. The effect of the Statement will be to require entities to measure the cost of employee services received in exchange for stock options based on the grant-date fair value of the award, and to recognize the cost over the period the employee
is required to provide services for the award. SFAS 123(R) permits entities to use any option-pricing model that meets the fair value objective in the Statement.



The Company will be required to apply SFAS 123(R) as of the beginning of its first fiscal year that begins after June 15, 2005, which will
be January 1, 2006. SFAS 123(R) allows two methods for determining the effects of the transition: the modified prospective transition method and the modified retrospective method of transition. Under the modified prospective transition method, an
entity would use the fair value based accounting method for all employee awards granted, modified, or settled after the effective date. As of the effective date, compensation cost related to the nonvested portion of awards outstanding as of that
date would be based on the grant-date fair value of those awards as calculated under the original provisions of Statement No. 123; that is, an entity would not remeasure the grant-date fair value estimate of the unvested portion of awards granted
prior to the effective date of SFAS 123(R). Under the modified retrospective method of transition, an entity would revise its previously issued financial statements to recognize employee compensation cost for prior periods presented in accordance
with the original provisions of Statement No. 123. The Company has not yet completed its study of the transition methods or made any decisions about how it will adopt SFAS 123(R).



5. Dividends



On April 20, 2005, the Company declared a cash dividend of $0.2025 per share payable on May 16, 2005 to shareholders of record as of the close of business on May 2, 2005.



6. Loan commitments



Outstanding loan commitments totaled $18.1 million at March 31, 2005 compared to $15.0
million at December 31, 2004. At December 31, 2004, the Company had commitments to purchase loans of $20.0 million. The Company had no commitments to purchase loans at March 31, 2005.



7



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##### Table of Contents

7. Segment reporting



Information about reportable segments, and reconciliation of such information to the consolidated financial statements as of and for the three months ended March 31, 2005
and 2004, follows:



|                                    |  |                |         |           |   |                         |  |   |                    |   |  |   |        
|----------------------------------- |  | -------------- | ------- | --------- | - | ----------------------- |  | - | ------------------ | - |  | - | -------
|                                    |  | Banking        |         | Insurance |   | IntersegmentElimination |  |   | ConsolidatedTotals
|                                    |  | (In Thousands)
|2005                                |  |                |         |           |   |                         |  |   |                    |   |  |   |        
|                                    |  |                |         |          
|Net interest and dividend income    |  | $              | 5,390   |           | $ |                        |  | $ |                   |   |  | $ | 5,390  
|Other revenue - external customers  |  |                | 1,036   |           |   | 545                     |  |   |                   |   |  |   | 1,581  
|Other revenue - from other segments |  |                |        |           |   | 2                       |  |   | (2                 | ) |  |   |       
|Depreciation and amortization       |  |                | 218     |           |   | 16                      |  |   |                   |   |  |   | 234    
|Provision for loan losses           |  |                | 14      |           |   |                        |  |   |                   |   |  |   | 14     
|Profit                              |  |                | 728     |           |   | 49                      |  |   | (1                 | ) |  |   | 776    
|Assets                              |  |                | 909,096 |           |   | 3,891                   |  |   | (421               | ) |  |   | 912,566
|                                    |  |                |         |          
|2004                                |  |                |         |           |   |                         |  |   |                    |   |  |   |        
|                                    |  |                |         |          
|Net interest and dividend income    |  | $              | 5,162   |           | $ |                        |  | $ |                   |   |  | $ | 5,162  
|Other revenue - external customers  |  |                | 1,040   |           |   | 423                     |  |   |                   |   |  |   | 1,463  
|Other revenue - from other segments |  |                |        |           |   | 1                       |  |   | (1                 | ) |  |   |       
|Depreciation and amortization       |  |                | 235     |           |   | 8                       |  |   |                   |   |  |   | 243    
|Provision for loan losses           |  |                | 150     |           |   |                        |  |   |                   |   |  |   | 150    
|Profit                              |  |                | 1,348   |           |   | 86                      |  |   | (1                 | ) |  |   | 1,433  
|Assets                              |  |                | 823,545 |           |   | 2,728                   |  |   | (815               | ) |  |   | 825,458





8



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##### Table of Contents

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



The following analysis discusses changes in the financial condition and results of operations of the Company at and for the three months ended March 31, 2005 and 2004,
and should be read in conjunction with the Companys Unaudited Consolidated Financial Statements and the notes thereto, appearing in Part I, Item 1 of this document.



Forward-Looking Statements



This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this
statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identified by use of the words
believe, expect, intend, anticipate, estimate, project or similar expressions. The Companys ability to predict results or the actual effect of future plans or strategies
is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company include, but are not limited to: changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal
policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial
services in the Companys market area and accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.



The Company does not undertake  and specifically disclaims any obligation  to
publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.



9



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##### Table of Contents

Comparison of Financial Condition at March 31, 2005 and December 31, 2004



The Companys assets fell $5.7 million, or 0.6%, to $912.6 million at March 31, 2005
from $918.3 million at December 31, 2004 primarily reflecting a decrease in securities available-for-sale, partially offset by growth in net loans. Securities available-for-sale declined $16.1 million, or 6.6%, mainly due to principal payments
totaling $12.4 million and a $3.5 million decrease in the unrealized gain. Total net loans rose $9.1 million, or 1.5%, largely due to purchases of adjustable-rate residential mortgages and solid loan origination activity, partially offset by
refinancing and prepayment activity and amortization in the existing portfolio.



Total deposits declined $33.6 million, or 7.0%, to $444.2 million at March 31, 2005 from $477.9 million at December 31, 2004 largely as a result of brokered certificates of deposit maturities totaling $25.5 million and a decrease of $7.5
million in core deposit balances. Core deposits, excluding brokered deposits and certificates of deposit, fell 2.9% to $250.7 million at March 31, 2005 from $258.2 million at December 31, 2004 largely as a result of less active promotion of
relationship banking accounts, the competitive pricing environment in the Companys primary markets and seasonal balance variability. Short-term borrowings increased $29.6 million, or 21.1%, to $170.2 million at March 31, 2005 primarily to
replace maturing brokered deposits.



Total stockholders equity decreased
$1.6 million, or 2.0%, to $79.8 million at March 31, 2005 reflecting a decrease of $2.3 million in net unrealized gains on securities available for sale and cash dividends declared of $1.7 million. These items were somewhat mitigated by net income
of $776,000, treasury share reissuances totaling $735,000 in connection with the exercise of stock options, tax benefit adjustments in the amount of $444,000 related to the vesting of stock awards and stock option exercises and a reduction of
$440,000 in unearned compensation resulting from continued vesting in stock benefit plans.



10



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##### Table of Contents

Investment Activities



At March 31, 2005, the Companys investment securities portfolio, all of which was classified as available-for-sale, amounted to $226.0 million, or 24.8% of assets.
The following table sets forth at the dates indicated information regarding the amortized cost and market values of the Companys investment securities.



|                                        |  |                |         |                   |   |               |  |            |         |  |   |        
|--------------------------------------- |  | -------------- | ------- | ----------------- | - | ------------- |  | ---------- | ------- |  | - | -------
|                                        |  | March 31, 2005 |         | December 31, 2004
|                                        |  | AmortizedCost  |         | Fair Value        |   | AmortizedCost |  | Fair Value
|                                        |  | (In Thousands)
|Available-for-sale securities:          |  |                |         |                   |   |               |  |            |         |  |   |        
|Equity securities:                      |  |                |         |                   |   |               |  |            |         |  |   |        
|Mutual funds                            |  | $              | 5,228   |                   | $ | 5,285         |  | $          | 5,189   |  | $ | 5,308  
|Common stocks                           |  |                | 115     |                   |   | 115           |  |            | 115     |  |   | 115    
|                                        |  |                |         |                   |   |               |  |            |         |  |   |        
|Total equity securities                 |  |                | 5,343   |                   |   | 5,400         |  |            | 5,304   |  |   | 5,423  
|                                        |  |                |         |                   |   |               |  |            |         |  |   |        
|Debt securities:                        |  |                |         |                   |   |               |  |            |         |  |   |        
|Mortgage-backed:                        |  |                |         |                   |   |               |  |            |         |  |   |        
|Freddie Mac                             |  |                | 61,384  |                   |   | 60,214        |  |            | 64,572  |  |   | 64,282 
|Fannie Mae                              |  |                | 98,194  |                   |   | 97,564        |  |            | 106,971 |  |   | 108,169
|Ginnie Mae                              |  |                | 3,891   |                   |   | 4,024         |  |            | 4,458   |  |   | 4,643  
|REMIC                                   |  |                | 42      |                   |   | 42            |  |            | 47      |  |   | 48     
|                                        |  |                |         |                   |   |               |  |            |         |  |   |        
|Total mortgage-backed securities        |  |                | 163,511 |                   |   | 161,844       |  |            | 176,048 |  |   | 177,142
|                                        |  |                |         |                   |   |               |  |            |         |  |   |        
|Other:                                  |  |                |         |                   |   |               |  |            |         |  |   |        
|U.S. agency                             |  |                | 5,039   |                   |   | 5,094         |  |            | 5,047   |  |   | 5,159  
|Municipal bonds                         |  |                | 31,329  |                   |   | 31,918        |  |            | 31,332  |  |   | 32,346 
|Trust preferred                         |  |                | 19,999  |                   |   | 21,734        |  |            | 20,022  |  |   | 21,980 
|                                        |  |                |         |                   |   |               |  |            |         |  |   |        
|Total other debt securities             |  |                | 56,367  |                   |   | 58,746        |  |            | 56,401  |  |   | 59,485 
|                                        |  |                |         |                   |   |               |  |            |         |  |   |        
|Total debt securities                   |  |                | 219,878 |                   |   | 220,590       |  |            | 232,449 |  |   | 236,627
|                                        |  |                |         |                   |   |               |  |            |         |  |   |        
|Total available-for-sale securities (1) |  | $              | 225,221 |                   | $ | 225,990       |  | $          | 237,753 |  | $ | 242,050
|                                        |  |                |         |                   |   |               |  |            |         |  |   |        

---

|(1) | Does not include investments in FHLB-Boston stock totaling $19.0 million at March 31, 2005 and $17.3 million at December 31, 2004.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



Securities available-for-sale decreased $16.1 million, or 6.6%, to $226.0 million at March
31, 2005 primarily due to mortgage-backed security principal payments amounting to $12.4 million and a net reduction of $3.5 million in net unrealized gains on available-for-sale securities. The Company used the proceeds from principal payments to
retire short-term debt.



11



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##### Table of Contents

Lending Activities



At March 31, 2005, the Companys net loan portfolio was $620.0 million, or 67.9% of total assets. The following table sets forth the composition of the
Companys loan portfolio in dollar amounts and as a percentage of the respective portfolio at the dates indicated.



|                                    |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|----------------------------------- |  | ---------------------- | ------- | - | ----------------- | ------ | - | ------ | - | ------- | --------------- |  | ------ | -
|                                    |  | March 31, 2005         |         |   | December 31, 2004 |       
|                                    |  | Amount                 |         |   | Percentof Total   |        |   | Amount |   |         | Percentof Total | 
|                                    |  | (Dollars In Thousands) |        
|Real estate loans:                  |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|One- to four-family                 |  | $                      | 400,925 |   |                   | 62.98  | % |        | $ | 388,352 |                 |  | 61.84  | %
|Multi-family                        |  |                        | 35,575  |   |                   | 5.59   | % |        |   | 36,436  |                 |  | 5.80   | %
|Commercial                          |  |                        | 63,283  |   |                   | 9.94   | % |        |   | 63,132  |                 |  | 10.05  | %
|Construction and development        |  |                        | 30,475  |   |                   | 4.79   | % |        |   | 31,542  |                 |  | 5.02   | %
|                                    |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|Total real estate loans             |  |                        | 530,258 |   |                   | 83.30  | % |        |   | 519,462 |                 |  | 82.71  | %
|                                    |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|Consumer loans:                     |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|Home equity                         |  |                        | 85,269  |   |                   | 13.39  | % |        |   | 84,941  |                 |  | 13.53  | %
|Automobile                          |  |                        | 5,475   |   |                   | 0.86   | % |        |   | 5,483   |                 |  | 0.87   | %
|Other                               |  |                        | 2,163   |   |                   | 0.34   | % |        |   | 2,173   |                 |  | 0.35   | %
|                                    |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|Total consumer loans                |  |                        | 92,907  |   |                   | 14.59  | % |        |   | 92,597  |                 |  | 14.75  | %
|                                    |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|Commercial loans                    |  |                        | 13,426  |   |                   | 2.11   | % |        |   | 15,954  |                 |  | 2.54   | %
|                                    |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|Total loans                         |  |                        | 636,591 |   |                   | 100.00 | % |        |   | 628,013 |                 |  | 100.00 | %
|                                    |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|Less:                               |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|Unadvanced loan funds (1)           |  |                        | (13,760 | ) |                   |        |   |        |   | (14,201 | )               |  |        |  
|Net deferred loan origination costs |  |                        | 847     |   |                   |        |   |        |   | 802     |                 |  |        |  
|Allowance for loan losses           |  |                        | (3,643  | ) |                   |        |   |        |   | (3,651  | )               |  |        |  
|                                    |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  
|Loans, net                          |  | $                      | 620,035 |   |                   |        |   |        | $ | 610,963 |                 |  |        |  
|                                    |  |                        |         |   |                   |        |   |        |   |         |                 |  |        |  

---

|(1) | Includes committed but unadvanced loan amounts.
|--- | -----------------------------------------------



The Companys net loan portfolio grew $9.1 million, or 1.5%, during the first three months of 2005 largely reflecting origination volume totaling $32.6 million and
purchases of $16.8 million in adjustable-rate, one-to four-family residential mortgages. The Companys level of loan closings was strong as a result of several factors including sales activities, a strong housing market, a stable local economy
and a historically low interest rate environment. The loan purchases should enhance net interest income as a result of positive interest rate spreads and position the balance sheet for expected future interest rate increases. These factors were
somewhat mitigated by refinancing and prepayment activity totaling $22.1 million due primarily to the favorable interest rate environment and amortization of the existing portfolio amounting to $17.8 million.



12



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##### Table of Contents

Non-performing Assets



The following table sets forth information regarding nonaccrual loans, real estate owned and restructured loans at the dates indicated.



|                                                                                                  |  |                        |      |   |                   |   |      |  
|------------------------------------------------------------------------------------------------- |  | ---------------------- | ---- | - | ----------------- | - | ---- | -
|                                                                                                  |  | March 31,2005          |      |   | December 31, 2004 |  
|                                                                                                  |  | (Dollars in Thousands) |     
|Nonaccrual loans:                                                                                 |  |                        |      |   |                   |   |      |  
|One- to four- family real estate                                                                  |  | $                      | 297  |   |                   | $ | 462  |  
|Multi-family and commercial real estate                                                           |  |                        | 74   |   |                   |   |     |  
|Other consumer                                                                                    |  |                        | 11   |   |                   |   |     |  
|Commercial                                                                                        |  |                        |     |   |                   |   | 4    |  
|                                                                                                  |  |                        |      |   |                   |   |      |  
|Total                                                                                             |  |                        | 382  |   |                   |   | 466  |  
|Real estate owned, net (1)                                                                        |  |                        |     |   |                   |   |     |  
|Other repossessed assets                                                                          |  |                        |     |   |                   |   | 66   |  
|                                                                                                  |  |                        |      |   |                   |   |      |  
|Total nonperforming assets                                                                        |  |                        | 382  |   |                   |   | 532  |  
|Troubled debt restructurings                                                                      |  |                        |     |   |                   |   |     |  
|                                                                                                  |  |                        |      |   |                   |   |      |  
|Troubled debt restructurings and total nonperforming assets                                       |  | $                      | 382  |   |                   | $ | 532  |  
|                                                                                                  |  |                        |      |   |                   |   |      |  
|Total nonperforming loans and troubled debt restructurings as a percentage of total loans (2) (3) |  |                        | 0.06 | % |                   |   | 0.08 | %
|Total nonperforming assets and troubled debt restructurings as a percentage of total assets (3)   |  |                        | 0.04 | % |                   |   | 0.06 | %

---

|(1) | REO balances are shown net of related loss allowances.
|--- | ------------------------------------------------------

|(2) | Total loans includes loans, less unadvanced loan funds, plus net deferred loan costs.
|--- | -------------------------------------------------------------------------------------

|(3) | Nonperforming assets consist of nonperforming loans and REO. Nonperforming loans consist of all loans 90 days or more past due and other loans that have been identified by the
Company as presenting uncertainty with respect to the collectibility of interest or principal.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



13



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##### Table of Contents

Allowance for Loan Losses



Management prepares a loan loss sufficiency analysis on a quarterly basis. The allowance for loan losses is maintained through the provision
for loan losses, which is charged to operations. The allowance for loan losses is maintained at an amount that management considers adequate to cover estimated losses in the loan portfolio based on managements on-going evaluation of the risks
inherent in the loan portfolio, consideration of local and regional trends in delinquency and impaired loans, the amount of charge-offs and recoveries, the volume of loans, changes in risk selection, credit concentrations, existing loan-to-value
ratios, national and regional economies and the real estate market in the Companys primary lending area. Management believes that the current allowance for loan losses is sufficient to cover losses inherent in the current loan portfolio. The
Companys loan loss allowance determinations also incorporate factors and analyses which consider the principal loss associated with the loan. This evaluation is inherently subjective as it requires estimates that are susceptible to significant
revision as more information becomes available.



The loan loss allowance
consists of a specific allowance for impaired loans and a general allowance for all other loans. All loans are considered in the evaluation, whether on an individual or group basis. Changes in the balances of problem and impaired loans affect the
specific reserve, while changes in volume and concentrations of current performing loans affect the general reserve and the allocation of the allowance of the loan losses among loan types.



The specific allowance incorporates the results of measuring impairment for specifically
identified non-homogeneous problem loans. In accordance with SFAS No. 114, the specific allowance reduces the carrying amount of the impaired loans to their estimated fair value. A loan is recognized as impaired when, based on current information
and events, it is probable that the Company will be unable to collect all interest and principal payments due according to the contractual terms of the loan agreement. A loan is not deemed to be impaired if there is a short delay in receipt of
payment or if, during a longer period of delay, the Company expects to collect all amounts due including interest accrued at the contractual rate during the period of delay. Impairment can be measured based on present value of the expected future
principal and interest cash flows discounted at the loans effective interest rate or the Company may measure impairment based on a loans observable market price or the fair market value of the collateral, if the loan is collateral
dependent. Larger groups of smaller-balance homogeneous loans that are collectively evaluated for impairment, such as residential real estate mortgages, home equity loans and consumer and installment loans are not included within the scope of SFAS
No. 114.



The general allowance is calculated by applying reserve percentages
to outstanding loans by type and inherent risk, excluding loans for which a specific allowance has been determined. As part of this analysis, each quarter management prepares an allowance for loan losses summary worksheet in which the loan portfolio
is categorized by risk characteristics such as loan type and loan grade. Changes in the mix of loans and the internal loan grades affect the amount of the general allowance. In determining the reserve percentages to apply to each loan category,
management considers historical losses, peer group comparisons, industry data and loss percentages used by banking regulators for similarly graded loans. Reserve percentages may be adjusted for qualitative factors that, in managements
judgment, affect the collectibility of the portfolio as of the evaluation date.



Performing loan loss reserve percentages are also based on actual losses for the previous three years adjusted for qualitative factors, such as new loan products, credit quality trends (including trends in non-performing loans expected to
result from existing conditions), collateral values, loan volumes and concentrations and specific industry conditions within portfolio segments that exist at the balance sheet date. These factors are intended to reduce the difference between
estimated and actual losses and are designed to be self-correcting. Similarly, by basing the current performing loan reserve percentages on loss experience over the prior three years, the methodology is designed to take the Companys recent
loss experience into account.



The Companys allowance methodology has
been applied on a consistent basis. Based on this methodology, the Company believes that it has established and maintained the allowance for loan losses at adequate levels. However, future adjustments to the allowance for loan losses may be
necessary if economic, real estate, loan growth and portfolio diversification and other conditions differ substantially from the current operating environment, resulting in estimated and actual losses differing substantially.



14



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##### Table of Contents

The Company determines the classification of its assets and the amount of its valuation allowances. These determinations
can be reviewed by the Federal Deposit Insurance Corporation (the FDIC) and the Commissioner of Banks for the Massachusetts Department of Banking, which can order the establishment of additional specific or general loss allowances. The
FDIC, in conjunction with the other federal banking agencies, maintains an interagency policy statement on the allowance for loan and lease losses. The policy statement provides guidance for financial institutions on both the responsibilities of
management for the assessment and establishment of adequate allowances and guidance for banking agency examiners to use in determining the adequacy of general valuation guidelines. Generally, the policy statement recommends that institutions have
effective systems and controls to identify, monitor and address asset quality problems; that management has analyzed all significant factors that affect the collectibility of the portfolio in a reasonable manner; and that management has established
acceptable allowance evaluation processes that meet the objectives set forth in the policy statement. While the Company believes that it has established an adequate allowance for loan losses, there can be no assurance that regulators, in reviewing
the Companys loan portfolio, will not request the Company to materially increase its allowance for loan losses, thereby negatively affecting the Companys financial condition and earnings.



15



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##### Table of Contents

The following table sets forth activity in the Companys allowance for loan losses for the periods set forth.



|                                                                                      |  |                                            |        |   |      |   |        |   
|------------------------------------------------------------------------------------- |  | ------------------------------------------ | ------ | - | ---- | - | ------ | --
|                                                                                      |  | At or for the Three Months Ended March 31, |       
|                                                                                      |  | 2005                                       |        |   | 2004 |  
|                                                                                      |  | (Dollars in Thousands)                     |       
|Allowance for loan losses, beginning of period                                        |  | $                                          | 3,651  |   |      | $ | 3,280  |   
|                                                                                      |  |                                           
|Charged-off loans:                                                                    |  |                                            |        |   |      |   |        |   
|Consumer                                                                              |  |                                            | 38     |   |      |   | 30     |   
|                                                                                      |  |                                            |        |   |      |   |        |   
|Total charged-off loans                                                               |  |                                            | 38     |   |      |   | 30     |   
|                                                                                      |  |                                            |        |   |      |   |        |   
|Recoveries on loans previously charged-off:                                           |  |                                            |        |   |      |   |        |   
|Real estate                                                                           |  |                                            |       |   |      |   | 60     |   
|Consumer                                                                              |  |                                            | 16     |   |      |   | 26     |   
|                                                                                      |  |                                            |        |   |      |   |        |   
|Total recoveries                                                                      |  |                                            | 16     |   |      |   | 86     |   
|                                                                                      |  |                                            |        |   |      |   |        |   
|Net loan charge-offs (recoveries)                                                     |  |                                            | 22     |   |      |   | (56    | ) 
|Provision for loan losses                                                             |  |                                            | 14     |   |      |   | 150    |   
|                                                                                      |  |                                            |        |   |      |   |        |   
|Allowance for loan losses, end of period                                              |  | $                                          | 3,643  |   |      | $ | 3,486  |   
|                                                                                      |  |                                            |        |   |      |   |        |   
|Net loan charge-offs (recoveries) to average loans, net                               |  |                                            | 0.01   | % |      |   | (0.04  | )%
|Allowance for loan losses to total loans (1)                                          |  |                                            | 0.58   | % |      |   | 0.64   | % 
|Allowance for loan losses to nonperforming loans and troubled debt restructurings (2) |  |                                            | 953.66 | % |      |   | 810.70 | % 
|Net loan charge-offs (recoveries) to allowance for loan losses                        |  |                                            | 2.42   | % |      |   | (6.43  | )%
|Recoveries to charge-offs                                                             |  |                                            | 42.11  | % |      |   | 286.67 | % 

---

|(1) | Total loans includes loans, less unadvanced loan funds, plus net deferred loan costs.
|--- | -------------------------------------------------------------------------------------

|(2) | Nonperforming loans consist of all loans 90 days or more past due and other loans which have been identified by the Company as presenting uncertainty with respect to the
collectibility of interest or principal.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





16



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##### Table of Contents

Deposits



The following table sets forth the Companys deposit accounts for the periods indicated.



|                        |  |                        |         |                           |                   |   |         |   |                           |  |        |  
|----------------------- |  | ---------------------- | ------- | ------------------------- | ----------------- | - | ------- | - | ------------------------- |  | ------ | -
|                        |  | March 31, 2005         |         |                           | December 31, 2004 |  
|                        |  | Balance                |         | Percent of Total Deposits |                   |   | Balance |   | Percent of Total Deposits | 
|                        |  | (Dollars In Thousands) |        
|Demand                  |  | $                      | 32,476  |                           | 7.31              | % |         | $ | 33,251                    |  | 6.95   | %
|Savings                 |  |                        | 90,122  |                           | 20.29             | % |         |   | 86,535                    |  | 18.11  | %
|Money market            |  |                        | 68,887  |                           | 15.51             | % |         |   | 78,108                    |  | 16.35  | %
|NOW                     |  |                        | 59,238  |                           | 13.34             | % |         |   | 60,333                    |  | 12.63  | %
|Brokered deposits       |  |                        | 69,619  |                           | 15.66             | % |         |   | 95,084                    |  | 19.90  | %
|Certificates of deposit |  |                        | 123,881 |                           | 27.89             | % |         |   | 124,544                   |  | 26.06  | %
|                        |  |                        |         |                           |                   |   |         |   |                           |  |        |  
|Total deposits          |  | $                      | 444,223 |                           | 100.00            | % |         | $ | 477,855                   |  | 100.00 | %
|                        |  |                        |         |                           |                   |   |         |   |                           |  |        |  



Core deposits, which exclude brokered
deposits and certificates of deposit, fell $7.5 million, or 2.9%, to $250.7 million at March 31, 2005 from $258.2 million at December 31, 2004 largely as a result of less active promotion of relationship banking accounts, the competitive pricing
environment in the Companys primary markets and seasonal balance variability. Brokered deposit balances declined $25.5 million, or 26.8%, to $69.6 million at March 31, 2005 primarily due to certificate maturities.



17



---

##### Table of Contents

Comparison of Operating Results for the Three Months Ended March 31, 2005 and 2004



General



The Company reported net income of $776,000, or $0.21 per diluted share, in the first quarter of 2005 compared to $1.4 million, or $0.40 per
diluted share, for the same quarter last year. The lower earnings were attributable in large part to the recognition of expenses totaling $766,000 related to the pending merger with Berkshire Hills Bancorp. Excluding the impact of merger-related
charges, the results for the first quarter of 2005 reflect growth in average loans and core deposits, expansion in insurance commissions and lower provision for loan losses, somewhat offset by net interest margin compression, lower gains from loan
sales and higher non-interest expenses.



Analysis of Net Interest Income



Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. Net interest income depends on the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them.



The following table sets forth average balances, interest income and expense and yields
earned or rates paid on the major categories of assets and liabilities for the periods indicated. The average yields and costs are derived by dividing interest income or expense by the average balance of interest-earning assets or interest-bearing
liabilities, respectively. The yields and costs are annualized. Average balances are derived from average daily balances. The yields and costs include fees which are considered adjustments to yields. Loan interest and yield data does not include any
accrued interest from nonaccruing loans.



18



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##### Table of Contents

|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|--------------------------------------------------------------------------------- |  | ------------------------------------ | ------- | -------- | ---- | ------ | ------------------- |  | ------ | --------------- |  | -------- | ------- |  | ------------------- | ----- | - |  | ------ | -
|                                                                                  |  | For the Three Months Ended March 31, |        
|                                                                                  |  | 2005                                 |         |          | 2004 |       
|                                                                                  |  | AverageBalance                       |         | Interest |      |        | Average Yield/ Rate |  |        | Average Balance |  | Interest |         |  | Average Yield/ Rate |      
|                                                                                  |  | (Dollars in Thousands)               |        
|Interest-earning assets: (1)                                                      |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Available-for-sale investments:                                                   |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Mortgage-backed securities                                                        |  | $                                    | 169,907 |          | $    | 1,864  |                     |  | 4.39   | %               |  | $        | 174,227 |  | $                   | 1,927 |   |  | 4.42   | %
|U.S. Government and agency securities                                             |  |                                      | 5,137   |          |      | 60     |                     |  | 4.67   | %               |  |          | 5,370   |  |                     | 60    |   |  | 4.47   | %
|Equity securities                                                                 |  |                                      | 45,993  |          |      | 606    |                     |  | 5.27   | %               |  |          | 43,302  |  |                     | 514   |   |  | 4.75   | %
|State and municipal securities (2)                                                |  |                                      | 32,529  |          |      | 535    |                     |  | 6.58   | %               |  |          | 22,360  |  |                     | 374   |   |  | 6.69   | %
|Loans: (3)                                                                        |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Residential real estate loans                                                     |  |                                      | 441,931 |          |      | 5,507  |                     |  | 4.98   | %               |  |          | 336,244 |  |                     | 4,574 |   |  | 5.44   | %
|Commercial real estate loans                                                      |  |                                      | 72,282  |          |      | 1,201  |                     |  | 6.65   | %               |  |          | 69,841  |  |                     | 1,104 |   |  | 6.32   | %
|Consumer loans                                                                    |  |                                      | 92,491  |          |      | 1,193  |                     |  | 5.23   | %               |  |          | 89,170  |  |                     | 1,118 |   |  | 5.04   | %
|Commercial loans                                                                  |  |                                      | 15,072  |          |      | 208    |                     |  | 5.52   | %               |  |          | 15,096  |  |                     | 197   |   |  | 5.16   | %
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Loans, net                                                                        |  |                                      | 621,776 |          |      | 8,109  |                     |  | 5.22   | %               |  |          | 510,351 |  |                     | 6,993 |   |  | 5.48   | %
|Other                                                                             |  |                                      | 6,394   |          |      | 35     |                     |  | 2.19   | %               |  |          | 3,156   |  |                     | 5     |   |  | 0.63   | %
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Total interest-earning assets                                                     |  |                                      | 881,736 |          |      | 11,209 |                     |  | 5.08   | %               |  |          | 758,766 |  |                     | 9,873 |   |  | 5.20   | %
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Noninterest-earning assets                                                        |  |                                      | 42,077  |          |      |        |                     |  |        |                 |  |          | 40,342  |  |                     |       |   |  |        |  
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Total assets                                                                      |  | $                                    | 923,813 |          |      |        |                     |  |        |                 |  | $        | 799,108 |  |                     |       |   |  |        |  
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Interest-bearing liabilities:                                                     |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Deposits:                                                                         |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Money market accounts                                                             |  | $                                    | 73,439  |          | $    | 239    |                     |  | 1.32   | %               |  | $        | 61,141  |  | $                   | 162   |   |  | 1.07   | %
|Savings accounts (4)                                                              |  |                                      | 90,008  |          |      | 145    |                     |  | 0.65   | %               |  |          | 85,537  |  |                     | 112   |   |  | 0.53   | %
|NOW accounts                                                                      |  |                                      | 56,720  |          |      | 52     |                     |  | 0.37   | %               |  |          | 59,591  |  |                     | 61    |   |  | 0.41   | %
|Certificates of deposit (5)                                                       |  |                                      | 209,258 |          |      | 1,536  |                     |  | 2.98   | %               |  |          | 184,111 |  |                     | 1,197 |   |  | 2.61   | %
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Total interest-bearing deposits                                                   |  |                                      | 429,425 |          |      | 1,972  |                     |  | 1.86   | %               |  |          | 390,380 |  |                     | 1,532 |   |  | 1.58   | %
|Borrowings                                                                        |  |                                      | 377,355 |          |      | 3,665  |                     |  | 3.88   | %               |  |          | 297,649 |  |                     | 3,052 |   |  | 4.06   | %
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Total interest-bearing liabilities                                                |  |                                      | 806,780 |          |      | 5,637  |                     |  | 2.83   | %               |  |          | 688,029 |  |                     | 4,584 |   |  | 2.68   | %
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Demand deposits                                                                   |  |                                      | 31,405  |          |      |        |                     |  |        |                 |  |          | 26,703  |  |                     |       |   |  |        |  
|Other noninterest-bearing liabilities                                             |  |                                      | 3,537   |          |      |        |                     |  |        |                 |  |          | 4,447   |  |                     |       |   |  |        |  
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Total liabilities                                                                 |  |                                      | 841,722 |          |      |        |                     |  |        |                 |  |          | 719,179 |  |                     |       |   |  |        |  
|Total stockholders equity                                                        |  |                                      | 82,091  |          |      |        |                     |  |        |                 |  |          | 79,929  |  |                     |       |   |  |        |  
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Total liabilities and stockholders equity                                        |  | $                                    | 923,813 |          |      |        |                     |  |        |                 |  | $        | 799,108 |  |                     |       |   |  |        |  
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Net interest-earning assets                                                       |  | $                                    | 74,956  |          |      |        |                     |  |        |                 |  | $        | 70,737  |  |                     |       |   |  |        |  
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Tax equivalent net interest income/ interest rate spread (6)                      |  |                                      |         |          |      | 5,572  |                     |  | 2.25   | %               |  |          |         |  |                     | 5,289 |   |  | 2.52   | %
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Tax equivalent net interest margin as a percentage of interest-earning assets (7) |  |                                      |         |          |      |        |                     |  | 2.53   | %               |  |          |         |  |                     |       |   |  | 2.79   | %
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Ratio of interest-earning assets to interest-bearing liabilities                  |  |                                      |         |          |      |        |                     |  | 109.29 | %               |  |          |         |  |                     |       |   |  | 110.28 | %
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Less: tax equivalent adjustment (2)                                               |  |                                      |         |          |      | (182   | )                   |  |        |                 |  |          |         |  |                     | (127  | ) |  |        |  
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  
|Net interest income as reported on income statement                               |  |                                      |         |          | $    | 5,390  |                     |  |        |                 |  |          |         |  | $                   | 5,162 |   |  |        |  
|                                                                                  |  |                                      |         |          |      |        |                     |  |        |                 |  |          |         |  |                     |       |   |  |        |  

---

|(1) | Includes related assets available-for-sale and unamortized discounts and premiums.
|--- | ----------------------------------------------------------------------------------

|(2) | State and municipal securities income and net interest income are presented on a tax equivalent basis using a tax rate of 34%. The tax equivalent adjustment is deducted from tax
equivalent net interest income to agree to the amount reported in the income statement.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Amount is net of deferred loan origination costs, unadvanced loan funds, allowance for loan losses and includes nonaccrual loans. The Company records interest income on nonaccruing
loans on a cash basis.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Savings accounts include mortgagors escrow deposits.
|--- | -----------------------------------------------------

|(5) | Certificates of deposit include brokered deposits.
|--- | --------------------------------------------------

|(6) | Tax equivalent net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing
liabilities.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Tax equivalent net interest margin represents tax equivalent net interest income divided by average interest-earning assets.
|--- | ----------------------------------------------------------------------------------------------------------------------------



19



---

##### Table of Contents

The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning
assets and interest-bearing liabilities have affected the Companys tax equivalent interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes
in volume (changes in volume multiplied by prior rate); (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) the net change. The changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to rate.



|                                               |  |                                                    |       |   |      |   |      |     |  |   |       |  
|---------------------------------------------- |  | -------------------------------------------------- | ----- | - | ---- | - | ---- | --- |  | - | ----- | -
|                                               |  | Three Months Ended March 31, 2005 compared to 2004 |      
|                                               |  | Increase (Decrease)Due to                          |       |   |      |  
|                                               |  | Volume                                             |       |   | Rate |   |      | Net | 
|                                               |  | (In Thousands)                                     |      
|Interest-earning assets:                       |  |                                                    |       |   |      |   |      |     |  |   |       |  
|                                               |  |                                                    |      
|Mortgage-backed securities                     |  | $                                                  | (49   | ) |      | $ | (14  | )   |  | $ | (63   | )
|U.S. Government and agency securities          |  |                                                    | (3    | ) |      |   | 3    |     |  |   |      |  
|Equity securities                              |  |                                                    | 33    |   |      |   | 59   |     |  |   | 92    |  
|State and municipal securities (1)             |  |                                                    | 167   |   |      |   | (6   | )   |  |   | 161   |  
|Loans:                                         |  |                                                    |       |   |      |   |      |     |  |   |       |  
|Residential real estate loans                  |  |                                                    | 1,341 |   |      |   | (408 | )   |  |   | 933   |  
|Commercial real estate loans                   |  |                                                    | 39    |   |      |   | 58   |     |  |   | 97    |  
|Consumer loans                                 |  |                                                    | 37    |   |      |   | 38   |     |  |   | 75    |  
|Commercial loans                               |  |                                                    |      |   |      |   | 11   |     |  |   | 11    |  
|                                               |  |                                                    |       |   |      |   |      |     |  |   |       |  
|Total loans                                    |  |                                                    | 1,417 |   |      |   | (301 | )   |  |   | 1,116 |  
|Other                                          |  |                                                    | 9     |   |      |   | 21   |     |  |   | 30    |  
|                                               |  |                                                    |       |   |      |   |      |     |  |   |       |  
|Total interest-earning assets                  |  |                                                    | 1,574 |   |      |   | (238 | )   |  |   | 1,336 |  
|                                               |  |                                                    |       |   |      |   |      |     |  |   |       |  
|Interest-bearing liabilities:                  |  |                                                    |       |   |      |   |      |     |  |   |       |  
|                                               |  |                                                    |      
|Deposits:                                      |  |                                                    |       |   |      |   |      |     |  |   |       |  
|Money market accounts                          |  |                                                    | 35    |   |      |   | 42   |     |  |   | 77    |  
|Savings accounts (2)                           |  |                                                    | 6     |   |      |   | 27   |     |  |   | 33    |  
|NOW accounts                                   |  |                                                    | (3    | ) |      |   | (6   | )   |  |   | (9    | )
|Certificates of deposit (3)                    |  |                                                    | 167   |   |      |   | 172  |     |  |   | 339   |  
|                                               |  |                                                    |       |   |      |   |      |     |  |   |       |  
|Total deposits                                 |  |                                                    | 205   |   |      |   | 235  |     |  |   | 440   |  
|Borrowings                                     |  |                                                    | 752   |   |      |   | (139 | )   |  |   | 613   |  
|                                               |  |                                                    |       |   |      |   |      |     |  |   |       |  
|Total interest-bearing liabilities             |  |                                                    | 957   |   |      |   | 96   |     |  |   | 1,053 |  
|                                               |  |                                                    |       |   |      |   |      |     |  |   |       |  
|Increase (decrease) in net interest income (4) |  | $                                                  | 617   |   |      | $ | (334 | )   |  | $ | 283   |  
|                                               |  |                                                    |       |   |      |   |      |     |  |   |       |  

---

|(1) | The changes in state and municipal income are reflected on a tax equivalent basis using a tax rate of 34%.
|--- | ----------------------------------------------------------------------------------------------------------

|(2) | Includes interest on mortgagors escrow deposits.
|--- | -------------------------------------------------

|(3) | Includes interest on brokered certificates of deposit.
|--- | ------------------------------------------------------

|(4) | The changes in net interest income are reflected on a tax equivalent basis and thus do not correspond to the income statement.
|--- | ------------------------------------------------------------------------------------------------------------------------------



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Net interest income, on a tax equivalent basis, increased $283,000, or 5.4%, to $5.6 million for the three months ended
March 31, 2005 compared to $5.3 million for the same period in 2004, mainly driven by growth in average interest-earning assets, partially offset by net interest margin contraction. Net interest margin, on a tax equivalent basis, compressed 26 basis
points to 2.53% for the three months ended March 31, 2005 from the comparable period in 2004 primarily resulting from reduced yields on interest-earning assets and a higher cost of funds.



Interest and dividend income, on a tax equivalent basis, rose $1.3 million, or 13.5%, to $11.2 million for the three months ended March 31,
2005 compared to $9.9 million for the same period last year, largely reflecting growth in average interest-earning assets, partially offset by a decrease in the yield on average interest-earning assets. Average interest-earning assets totaled $881.7
million for the three months ended March 31, 2005 compared to $758.8 million for the same period last year, an increase of $122.9 million, or 16.2%. Average loans increased $111.4 million, or 21.8%, primarily due to strong origination and
refinancing volume and purchases of one-to four-family adjustable-rate mortgages, somewhat mitigated by amortization and prepayments of existing loans and sales of longer-term, fixed-rate residential mortgages. Average state and municipal securities
expanded $10.2 million, or 45.5%, principally reflecting bond purchases. Average mortgage-backed securities fell $4.3 million, or 2.5%, mainly attributable to principal payments. The yield on average interest-earning assets declined 12 basis points
to 5.08% for the three months ended March 31, 2005, principally as a result of the impact of a flattening yield curve. Intermediate and long term market rates have remained historically low, leading to significant levels of loan prepayment and
refinancing volume as well as accelerated cash flows and premium amortization associated with the existing purchased loans and mortgage-backed securities portfolios. The proceeds from these activities were used to support loan growth and to purchase
adjustable rate loans and investment securities at lower yields. The affect of low intermediate and long term rates was somewhat mitigated by higher short term rates, which led to a portion of the Companys existing interest-sensitive assets
repricing upward.



Total interest expense increased $1.0 million, or 23.0%, to
$5.6 million for the three months ended March 31, 2005 from $4.6 million for the same period in 2004, resulting primarily from growth in average interest-bearing liabilities and higher rates paid on average interest-bearing liabilities. Average
interest-bearing liabilities rose $118.8 million, or 17.3%, to $806.8 million for the three months ended March 31, 2005 from $688.0 million for the comparable period in 2004 reflecting solid growth in interest-bearing deposits and an increase in
FHLB advances to fund balance sheet expansion. Rates paid on average interest-bearing liabilities rose 15 basis points to 2.83% for the first quarter of 2005 largely reflecting higher short-term interest rates and promotional rates paid for certain
relationship banking products, partially offset by expanded lower-cost core deposits. The higher short-term interest rates led to an increase in rates paid for new certificates of deposit and borrowings as well as the repricing of a portion of the
Companys outstanding certificates of deposit and borrowings.



Provision for Loan Losses



The provision for loan
losses decreased $136,000 to $14,000 in the first quarter of 2005 compared to $150,000 for the same period in 2004 primarily due to slower loan growth in 2005 as compared to 2004 and a decrease in non-performing loans during the three months ended
March 31, 2005. These items were partially offset by a increase in net charge-offs for the first quarter of 2005. The allowance for loan losses is maintained through provisions for loan losses.



Non-interest Income



Total non-interest income rose $11,000, or 0.7%, to $1.6 million for the first quarter of
2004 reflecting growth in insurance commissions, somewhat offset by lower gain on sales of loans and other income. Insurance commissions increased $122,000, or 28.8%, to $545,000 for the three months ended March 31, 2005 compared to $423,000 in the
same period in 2004 mainly resulting from the acquisition of Colton Agency in the fourth quarter of 2004 as well as new customers gained as a result of successful business development efforts. The Company realized gains on loan sales totaling
$80,000 during the three months ended March 31, 2004 attributable to the sale of $2.8 million of one-to four-family loans. The gains from loan sales are indicative of



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the Companys strategy to sell longer-term, lower coupon, fixed-rate mortgages. In the first quarter of 2005, the Company had no loan sales reflecting
unfavorable market conditions and reduced originations of longer-term, fixed-rate mortgages. Other income decreased $27,000 to $43,000 for the three months ended March 31, 2005 due to a reduced investment in bank-owned life insurance at March 31,
2005 compared to March 31, 2004.



Non-interest Expenses



Non-interest expenses rose $1.0 million, or 22.4%, to $5.6 million
for the three months ended March 31, 2005 compared to $4.6 million in the first quarter of 2004 largely attributable to merger-related charges totaling $766,000 as well as growth in occupancy and equipment and professional services costs. Occupancy
and equipment costs increased $131,000, or 24.0%, primarily as a result of several fourth quarter 2004 events including the establishment of a new full-service branch in Longmeadow, the opening of a new facility in Feeding Hills and the purchase of
Colton Insurance Agency. Professional services costs increased $65,000, or 24.0%, to $336,000 for the three months ended March 31, 2005 mainly due to consulting expenses incurred in 2005 in connection with the operation of Colton Insurance Agency
and employee benefit plans.



Income Taxes



The Companys income tax expense increased $7,000, or 1.2%, to $615,000 for the first
quarter of 2005 compared to $608,000 in 2004 primarily attributable to non-deductible merger charges incurred in 2005, partially offset by the impact of an increase in municipal securities income in 2005, which is exempt from income taxes.



22



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##### Table of Contents

Liquidity



Liquidity and funding strategies are the responsibility of the Companys Asset Liability Management Committee (ALCO). The ALCO is responsible for
establishing liquidity targets and implementing strategies to meet desired goals. Liquidity is measured by the Companys ability to raise cash within 30 days at a reasonable cost and with a minimum of loss. The Banks primary sources of
funds are deposits, principal and interest payments on loans and investment securities and borrowings from the FHLB-Boston. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit outflows and
mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.



The primary source of funding for the Corporation is dividends from the Bank. These funds have been used to pay dividends and to repurchase the Corporations common stock. The Banks ability to pay dividends
and other capital distributions to the Corporation is generally limited by Massachusetts banking regulations and regulations of the Federal Deposit Insurance Corporation. Additionally, the Massachusetts Banking Commissioner and the Federal Deposit
Insurance Corporation may prohibit the payment of dividends by the Bank to the Corporation that are otherwise permissible by regulation for safety and soundness reasons.



The primary investing activities of the Company are the origination of one-to four-family mortgage loans and consumer loans, primarily home
equity loans and lines of credit, and, to a lesser extent, the origination of other types of loans, purchases of one-to four-family adjustable-rate mortgages and investments in mortgage-backed, debt and equity securities. During the three months
ended March 31, 2005, the Companys loan originations and purchases totaled $32.6 million and $16.8 million, respectively. At March 31, 2005, the Companys investments in mortgage-backed, other debt and equity securities totaled $226.0
million.



These activities are funded primarily by principal and interest
payments on loans and investment securities, deposit growth and the utilization of FHLB advances. The Company experienced a $33.6 million net decrease in total deposits during the three months ended March 31, 2005, including the affect of brokered
certificates of deposit maturities totaling $25.5 million. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by the Company and its local competitors, as well as other factors. The Company
closely monitors its liquidity position on a daily basis. If the Company requires funds beyond its ability to generate them internally, additional sources of funds are available through FHLB advances. At March 31, 2005, the Company had $371.3
million of outstanding FHLB borrowings.



At March 31, 2005, the Company had
outstanding commitments to originate $18.1 million of loans. Management of the Company anticipates that it will have sufficient funds available to meet its current loan commitments. Retail certificates of deposit scheduled to mature in one year or
less from March 31, 2005 totaled $103.7 million. The Company relies primarily on competitive rates, customer service, and long-standing relationships with customers to retain deposits. From time to time, the Company will also offer competitive
special products to its customers to increase retention and to attract new deposits. Based upon the Companys experience with deposit retention and current retention strategies, management believes that, although it is not possible to predict
future terms and conditions upon renewal, a significant portion of such deposits will remain with the Company.



23



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Off-Balance Sheet Arrangements



Information relating to Off-Balance Sheet Arrangements is presented in the Securities and Exchange Commission Form 10-K filed by the Company
for the year ended December 31, 2004. There have been no material changes in the Companys off-balance sheet arrangements since December 31, 2004.



Payments Due Under Contractual Obligations



Information relating to payments due under contractual obligations is presented in the Securities and Exchange Commission Form 10-K filed by the Company for the year
ended December 31, 2004. There were no material changes in the Companys payments due under contractual obligations during the quarter ended March 31, 2005.



Regulatory Capital



Under FDIC regulations, federally insured state-chartered banks that are not members of the Federal Reserve System (state non-member banks), such as the Bank,
are required to comply with minimum leverage capital requirements. For an institution determined by the FDIC to not be anticipating or experiencing significant growth and to be in general a strong banking organization, rated composite 1 under the
Uniform Financial Institutions Rating System (the Rating System) established by the Federal Financial Institutions Examination Council, the minimum capital leverage requirement is a ratio of Tier 1 capital to total assets of 3%. For all
other institutions, the minimum leverage capital ratio is not less than 4%. Tier 1 capital is the sum of common stockholders equity, noncumulative perpetual preferred stock (including any related surplus) and minority investments in certain
subsidiaries, less intangible assets (except for certain servicing rights and credit card relationships) and a percentage of certain nonfinancial equity investments.



The Bank must also comply with FDIC risk-based capital guidelines. The FDIC guidelines require state non-member banks to maintain certain
levels of regulatory capital in relation to regulatory risk-weighted assets. The ratio of regulatory capital to regulatory risk-weighted assets is referred to as the Banks risk-based capital ratio. Risk-based capital ratios are
determined by allocating assets and specified off-balance sheet items to four risk-weighted categories ranging from 0% to 100%, with higher levels of capital being required for the categories perceived as representing greater risk. For example,
under the FDICs risk-weighting system, cash and securities backed by the full faith and credit of the U.S. Government are given a 0% risk weight, loans secured by one- to four-family residential properties generally have a 50% risk weight and
commercial loans have a risk weighting of 100%.



State non-member banks must
maintain a minimum ratio of total capital to risk-weighted assets of at least 8%, of which at least one-half must be Tier 1 capital. Total capital consists of Tier 1 capital plus Tier 2 or supplementary capital items, which include allowances for
loan losses in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock, a portion of the net unrealized gain on equity securities and other capital instruments. The includable amount of Tier 2 capital cannot exceed the amount of
the institutions Tier 1 capital. Management believes, as of March 31, 2005 and December 31, 2004, that the Bank met all capital adequacy requirements to which it was subject.



The Federal Deposit Insurance Corporation Improvement Act (FDICIA) required 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 the risk of nontraditional activities, as well as to reflect the actual performance and expected
risk of loss on multi-family residential loans. The FDIC, along with the other federal banking agencies, has adopted a regulation providing that the agencies will take into account the exposure of a banks capital and economic value to changes
in interest rate risk in assessing a banks capital adequacy. Banks with specified amounts of trading activity may be subject to adjustments to its risk-based capital requirement to ensure adequate capital to support market risk.



As of March 31, 2005, the most recent notification from the Federal Deposit Insurance Company
categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as



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##### Table of Contents

well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables.
There are no conditions or events since that notification that management believes have changed the Banks category. As a savings and loan holding company regulated by the Office of Thrift Supervision, the Company is not, under current law,
subject to any separate regulatory capital requirements.



The Companys
and Banks actual capital amounts and ratios as of March 31, 2005 and December 31, 2004 are presented in the table.



|                                       |  |                |        |       |                                      |   |        |                                                                       |        |  |     |        |  |       |        |  |      |  
|-------------------------------------- |  | -------------- | ------ | ----- | ------------------------------------ | - | ------ | --------------------------------------------------------------------- | ------ |  | --- | ------ |  | ----- | ------ |  | ---- | -
|                                       |  | Actual         |        |       | Minimum for CapitalAdequacy Purposes |   |        | Minimum to be WellCapitalized UnderPrompt CorrectiveAction Provisions |       
|                                       |  | Amount         |        | Ratio |                                      |   | Amount |                                                                       | Ratio  |  |     | Amount |  | Ratio |       
|                                       |  | (In Thousands) |       
|As of March 31, 2005                   |  |                |        |       |                                      |   |        |                                                                       |        |  |     |        |  |       |        |  |      |  
|                                       |  |                |        |       |                                      |  
|Total Capital to Risk Weighted Assets  |  |                |        |       |                                      |   |        |                                                                       |        |  |     |        |  |       |        |  |      |  
|Company                                |  | $              | 79,626 |       | 14.4                                 | % |        |                                                                       | N/A    |  | N/A |        |  |       | N/A    |  | N/A  |  
|Bank                                   |  | $              | 73,785 |       | 13.4                                 | % |        | $                                                                     | 44,147 |  | 8.0 | %      |  | $     | 55,184 |  | 10.0 | %
|                                       |  |                |        |       |                                      |  
|Tier 1 Capital to Risk Weighted Assets |  |                |        |       |                                      |   |        |                                                                       |        |  |     |        |  |       |        |  |      |  
|Company                                |  | $              | 75,957 |       | 13.8                                 | % |        |                                                                       | N/A    |  | N/A |        |  |       | N/A    |  | N/A  |  
|Bank                                   |  | $              | 70,116 |       | 12.7                                 | % |        | $                                                                     | 22,073 |  | 4.0 | %      |  | $     | 33,110 |  | 6.0  | %
|                                       |  |                |        |       |                                      |  
|Tier 1 Capital to Average Assets       |  |                |        |       |                                      |   |        |                                                                       |        |  |     |        |  |       |        |  |      |  
|Company                                |  | $              | 75,957 |       | 8.3                                  | % |        |                                                                       | N/A    |  | N/A |        |  |       | N/A    |  | N/A  |  
|Bank                                   |  | $              | 70,116 |       | 7.7                                  | % |        | $                                                                     | 36,660 |  | 4.0 | %      |  | $     | 45,826 |  | 5.0  | %
|                                       |  |                |        |       |                                      |  
|As of December 31, 2004:               |  |                |        |       |                                      |   |        |                                                                       |        |  |     |        |  |       |        |  |      |  
|                                       |  |                |        |       |                                      |  
|Total Capital to Risk Weighted Assets  |  |                |        |       |                                      |   |        |                                                                       |        |  |     |        |  |       |        |  |      |  
|Company                                |  | $              | 78,975 |       | 14.4                                 | % |        |                                                                       | N/A    |  | N/A |        |  |       | N/A    |  | N/A  |  
|Bank                                   |  | $              | 71,187 |       | 13.0                                 | % |        | $                                                                     | 43,958 |  | 8.0 | %      |  | $     | 54,948 |  | 10.0 | %
|                                       |  |                |        |       |                                      |  
|Tier 1 Capital to Risk Weighted Assets |  |                |        |       |                                      |   |        |                                                                       |        |  |     |        |  |       |        |  |      |  
|Company                                |  | $              | 75,270 |       | 13.7                                 | % |        |                                                                       | N/A    |  | N/A |        |  |       | N/A    |  | N/A  |  
|Bank                                   |  | $              | 67,482 |       | 12.3                                 | % |        | $                                                                     | 21,979 |  | 4.0 | %      |  | $     | 32,969 |  | 6.0  | %
|                                       |  |                |        |       |                                      |  
|Tier 1 Capital to Average Assets       |  |                |        |       |                                      |   |        |                                                                       |        |  |     |        |  |       |        |  |      |  
|Company                                |  | $              | 75,270 |       | 8.4                                  | % |        |                                                                       | N/A    |  | N/A |        |  |       | N/A    |  | N/A  |  
|Bank                                   |  | $              | 67,482 |       | 7.5                                  | % |        | $                                                                     | 35,778 |  | 4.0 | %      |  | $     | 44,723 |  | 5.0  | %



Impact of New Accounting Standards



In December 2004, the FASB published FASB Statement No. 123 (revised
2004), Share-Based Payment (SFAS 123(R) or the Statement). SFAS 123(R) requires that the compensation cost relating to share-based payment transactions, including grants of employee stock options, be recognized in
financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) covers a wide range of share-based compensation arrangements including stock options, restricted share plans,
performance-based awards, share appreciation rights, and employee share purchase plans. SFAS 123(R) is a replacement of FASB Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees, and its related interpretive guidance. The effect of the Statement will be to require entities to measure the cost of employee services received in exchange for stock options based on the grant-date fair value of the
award, and to recognize the cost over the period the employee is required to provide services for the award. SFAS 123(R) permits entities to use any option-pricing model that meets the fair value objective in the Statement.



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##### Table of Contents

The Company will be required to apply SFAS 123(R) as of the beginning of its first fiscal year that begins after June 15,
2005, which will be January 1, 2006. SFAS 123(R) allows two methods for determining the effects of the transition: the modified prospective transition method and the modified retrospective method of transition. Under the modified prospective
transition method, an entity would use the fair value based accounting method for all employee awards granted, modified, or settled after the effective date. As of the effective date, compensation cost related to the nonvested portion of awards
outstanding as of that date would be based on the grant-date fair value of those awards as calculated under the original provisions of Statement No. 123; that is, an entity would not remeasure the grant-date fair value estimate of the unvested
portion of awards granted prior to the effective date of SFAS 123(R). Under the modified retrospective method of transition, an entity would revise its previously issued financial statements to recognize employee compensation cost for prior periods
presented in accordance with the original provisions of Statement No. 123. The Company has not yet completed its study of the transition methods or made any decisions about how it will adopt SFAS 123(R).



Item 3. Quantitative and Qualitative Disclosures About Market Risk



Information regarding quantitative and qualitative disclosures about market risk is presented in the Securities and Exchange Commission Form 10-K filed by the Company for the year ended December 31, 2004. Following is
a discussion of material changes to the Companys market risk disclosures since December 31, 2004.



Income simulation analysis. The Company uses income simulation modeling in order to analyze its interest rate risk under various scenarios. The income simulation model is designed to measure the
performance of the Companys net interest income based upon potential changes in interest rates over a select period of time. The model consists of current data related to cash flow characteristics, repricing opportunities, maturities and
current rates for all interest-earning assets and interest-bearing liabilities. In addition, management makes certain assumptions associated with prepayment speeds, maturities for non-certificate deposits, pricing decisions on loans and deposits,
and reinvestment/replacement of asset and liability cash flows. The model does not include assumptions about future changes to the structure of the balance sheet or actions the Company may take to mitigate projected risks. The income simulation
model is produced for a flat rate scenario (i.e. no change in current interest rates) over a twelve month period. A second and third model are produced in which a gradual increase of 200 basis points and a decrease of 100 basis points occurs over a
twelve month period. Other models are produced, as appropriate, to simulate the flattening or steepening of the yield curve. Under these scenarios, assets subject to repricing or prepayment are adjusted to account for faster or slower prepayment
assumptions. The resultant changes in net interest income are then measured against the flat rate scenario. At March 31, 2005 and December 31, 2004, the model projects expansion of 2.77% and 0.80%, respectively, in the down 100 basis points scenario
during the next twelve months. In an up 200 basis points environment, the model forecasts net interest income contraction of 9.12% and 5.28%, respectively, at March 31, 2005 and December 31, 2004. The variability calculated in these models is within
the guidelines established by the Companys interest rate risk policy.



The preceding income simulation analysis does not represent a forecast of net interest income and should not be relied upon as being indicative of expected operating results. These hypothetical estimates are based upon numerous assumptions,
which are subject to change, including: the nature and timing of interest rate levels including the yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of
asset and liability cash flows, and others. Also, as market conditions vary from those assumed in the income simulation models, the actual results will differ reflecting prepayment/refinancing levels likely deviating from those assumed, the varying
impact of interest rate changes on caps and floors embedded in adjustable rate loans, early withdrawal of deposits, changes in product preferences, and other internal/external variables.



26



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Item 4. Controls and Procedures



The
Companys management, including the Companys principal executive officer and principal financial officer, have evaluated the effectiveness of the Companys disclosure controls and procedures, as such term is defined in
Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the Exchange Act). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the
period covered by this report, the Companys disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act
with the Securities and Exchange Commission (the SEC) (1) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and (2) is accumulated and communicated to the Companys
management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.



There has been no change in the Companys internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15 that
occurred during the quarter ended March 31, 2005 that has materially affected or is reasonably likely to materially affect, the Companys internal control over financial reporting.



PART II. OTHER INFORMATION



Item 1. Legal Proceedings.



The Company
is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the financial
condition and results of operations of the Company.



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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.



The Company had no purchases of its equity securities during the three months ended March 31, 2005.



Item 3. Defaults Upon Senior Securities.



None.



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



None.



Item 5. Other Information.



None.



Item 6. Exhibits.



|     |  |                                                                                                                  
|---- |  | -----------------------------------------------------------------------------------------------------------------
|3.1  |  | Certificate of Incorporation of Woronoco Bancorp, Inc. (1)                                                       
|     | 
|3.2  |  | Amended Bylaws of Woronoco Bancorp, Inc. (2)                                                                     
|     | 
|4.0  |  | Stock Certificate of Woronoco Bancorp, Inc. (1)                                                                  
|     | 
|11.0 |  | Statement Re: Computation of Per Share Earnings (Incorporated Herein By Reference to Part 1  Earnings Per Share)
|     | 
|31.0 |  | Certifications pursuant to Rule 13a-14(a)/15d-14(a)                                                              
|     | 
|32.0 |  | Certifications pursuant to 18 U.S.C. Section 1350                                                                

---

|(1) | Incorporated by reference into this document from the Exhibits filed with the Registration Statement on Form S-1, and any amendments thereto, Registration No. 333-67255.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference into this document from the Exhibits filed with the Form 10-Q filed on November 14, 2002.
|--- | -------------------------------------------------------------------------------------------------------------------



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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.



|                    |  |                        |  |                                             
|------------------- |  | ---------------------- |  | --------------------------------------------
|                    |  | WORONOCO BANCORP, INC.
|                    |  |                       
|Dated: May 10, 2005 |  | By:                    |  | /s/ Cornelius D. Mahoney                    
|                    |  |                        |  | Cornelius D. Mahoney                        
|                    |  |                        |  | Chairman of the Board, President and        
|                    |  |                        |  | Chief Executive Officer                     
|                    |  |                        |  | (principal executive officer)               
|                    |  |                       
|Dated: May 10, 2005 |  | By:                    |  | /s/ Debra L. Murphy                         
|                    |  |                        |  | Debra L. Murphy                             
|                    |  |                        |  | Executive Vice President and                
|                    |  |                        |  | Chief Financial Officer                     
|                    |  |                        |  | (principal financial and accounting officer)



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