FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended 03/31/98

                                       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: 000-20809

                                SIS BANCORP, INC.
               (Exact Name of Issuer as Specified in its Charter)

Massachusetts                                              04-3303264

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


SIS BANCORP, INC.
1441 Main Street
Springfield, Massachusetts                             01102
(Address of Principal Executive Offices)            (Zip Code)

                                 (413) 748-8000
                 (Issuers Telephone Number, Including Area Code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No__

         Indicate the number of shares  outstanding of the  registrant's  common
stock, as of the latest practicable date: 6,973,584 shares as of May 7,1998.


<PAGE>

                    CAUTIONARY STATEMENT FOR PURPOSES OF THE
                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995


This Report contains certain  "forward-looking  statements" including statements
concerning plans,  objectives,  future events or performance and assumptions and
other  statements  which are other  than  statements  of  historical  fact.  SIS
Bancorp,  Inc. and its  subsidiaries  (the "Company")  wishes to caution readers
that the following important factors,  among others, may have affected and could
in the future affect the Company's  actual results and could cause the Company's
actual results for subsequent  periods to differ materially from those expressed
in any forward-looking statement made by or on behalf of the Company herein: (i)
the effect of  changes  in laws and  regulations,  including  federal  and state
banking  laws and  regulations,  with which the  Company  must  comply,  and the
associated  costs of compliance with such laws and regulations  either currently
or in the  future as  applicable;  (ii) the  effect  of  changes  in  accounting
policies and practices,  as may be adopted by the regulatory agencies as well as
by the Financial  Accounting  Standards Board; (iii) the effect on the Company's
competitive  position  within its market  area of the  increasing  consolidation
within the banking and financial  services  industries,  including the increased
competition from larger regional and out-of-state banking  organizations as well
as nonbank providers of various financial  services;  (iv) the effect of changes
in interest rates; (v) the effect of changes in the business cycle and downturns
in the local, regional or national economies; (vi) the effect of the "year 2000"
issue (i.e.  that  current  computer  programs use only two digits to identify a
year in the date  field  and  cannot  reflect a change  in the  century)  on the
Company's financial condition or results of operations;  and (vii) the impact of
pending  litigation  on  the  Company's   financial   condition  or  results  of
operations.

<PAGE>

                       SIS BANCORP, INC. AND SUBSIDIARIES

                                    FORM 10-Q

                                      INDEX


                                                                        PAGE NO.

   PART I. FINANCIAL INFORMATION

   Item 1. Financial Statements (Unaudited)

   Condensed Consolidated Balance Sheet
   at March 31, 1998 and December 31, 1997                                 1

   Condensed Consolidated Statement of Operations for the
   three months ended March 31, 1998 and 1997                              2

   Condensed Consolidated Statement of Cash Flows for the
   three months ended March 31, 1998 and 1997                              3

   Condensed Consolidated Statement of Changes in Stockholders' Equity
   for the three months ended March 31, 1998 and 1997                      5

   Notes to the Unaudited Financial Statements                             6


   Item 2. Management's Discussion and Analysis of
               Financial Condition and Results of Operations               8


   PART II OTHER INFORMATION

   Item 1. Legal Proceedings                                              24

   Item 2. Changes in Securities                                          24

   Item 3. Default upon Senior Securities                                 24

   Item 4. Submission of Matters to a Vote of Security Holders            24

   Item 5. Other Information                                              24

   Item 6. Exhibits and Reports on Form 8-K                               24


   SIGNATURES                                                             26


<PAGE>
<TABLE>
<CAPTION>
                                   SIS BANCORP, INC. AND SUBSIDIARIES
                                  CONDENSED CONSOLIDATED BALANCE SHEET
                                         (Dollars In Thousands)


                                                                              (Unaudited)
                                                                               March 31,    December 31,
                                                                                 1998          1997
                                                                             ------------   ------------
<S>                                                                         <C>            <C>
ASSETS

Cash and due from banks                                                      $    48,885    $    50,297
Federal funds sold and short term investments                                     54,458         17,317
Investment securities available for sale                                         568,853        576,108
Investment securities held to maturity (fair value: $213,861 at March 31,
  1998 and $193,396 at December 31, 1997)                                        213,508        193,007
Loans receivable, net of allowance for possible losses
  ($23,239 at March 31, 1998 and $22,724 at December 31, 1997)                   837,336        828,761
Accrued interest and dividends receivable                                         11,168         10,749
Investments in real estate and real estate partnerships                            2,879          2,903
Foreclosed real estate, net                                                          817          1,209
Bank premises, furniture and fixtures, net                                        37,036         35,843
Other assets                                                                      19,028         17,424
                                                                             -----------    -----------
    Total assets                                                             $ 1,793,968    $ 1,733,618
                                                                             ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                     $ 1,309,402    $ 1,267,298
Federal Home Loan Bank advances                                                  173,446        184,121
Securities sold under agreements to repurchase                                   134,023        113,299
Loans payable                                                                      2,474          2,492
Mortgage escrow deposits                                                           7,662          5,642
Accrued expenses and other liabilities                                            38,776         35,294
                                                                             -----------    -----------
    Total liabilities                                                          1,665,783      1,608,146
                                                                             -----------    -----------

Commitments and contingent liabilities                                              --             --

Stockholders' equity:
Preferred stock ($.01 par value; 5,000,000 shares
  authorized: no shares issued and outstanding)                                     --             --
Common stock ($.01 par value; 25,000,000 shares authorized; shares
  issued: 7,081,184 at March 31, 1998 and 7,081,187 at December 31, 1997;
  shares outstanding: 6,969,984 at March 31, 1998 and 6,947,787 at
  December 31, 1997)                                                                  71             71
Unearned compensation                                                             (3,388)        (3,123)
Additional paid-in capital                                                        55,068         54,755
Retained earnings                                                                 78,163         75,153
Accumulated other comprehensive income -
  net unrealized gain on investment securities available for sale                  1,203          2,133
Treasury stock, at cost (111,200 and 133,400 shares at March 31, 1998 and
  December 31, 1997, respectively)                                                (2,932)        (3,517)
                                                                             -----------    -----------
    Total stockholders' equity                                                   128,185        125,472
                                                                             -----------    -----------
Total liabilities and stockholders' equity                                   $ 1,793,968    $ 1,733,618
                                                                             ===========    ===========

          See accompanying Notes to the Unaudited Financial Statements
</TABLE>
                                       1
<PAGE>
<TABLE>
<CAPTION>
                          SIS BANCORP, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                   (Dollars In Thousands Except Per Share Amounts)

                                                                   (Unaudited)
                                                                Three Months Ended
                                                           ---------------------------
                                                             March 31,       March 31,
                                                               1998            1997
                                                           ------------    -----------
<S>                                                        <C>            <C>
Interest and dividend income:
        Loans                                               $    17,901    $    16,248
        Investment securities available for sale                  8,517          8,502
        Investment securities held to maturity                    3,472          3,778
        Investment securities held for trading                     --                2
        Federal funds sold and short term investments               561            295
                                                            -----------    -----------
                       Total interest and dividend income        30,451         28,825
                                                            -----------    -----------
Interest expense:
        Deposits                                                 10,577         10,056
        Borrowings                                                4,475          3,856
                                                            -----------    -----------
                       Total interest expense                    15,052         13,912
                                                            -----------    -----------
Net interest and dividend income                                 15,399         14,913
Less: Provision for possible loan losses                            251            500
                                                            -----------    -----------
Net interest and dividend income after provision
        for possible loan losses                                 15,148         14,413

Noninterest income:
        Net gain on sale of loans                                   255            106
        Net loss on sale of securities held for trading            --              (11)
        Fees and other income                                     3,721          3,298
                                                            -----------    -----------
                       Total noninterest income                   3,976          3,393
                                                            -----------    -----------

Noninterest expense:
        Operating expenses:
                 Salaries and employee benefits                   6,221          5,914
                 Occupancy expense of bank premises, net          1,220          1,200
                 Furniture and equipment expense                    963            773
                 Other operating expenses                         4,081          4,201
                                                            -----------    -----------
                        Total operating expenses                 12,485         12,088
                                                            -----------    -----------
        Foreclosed real estate expense (income)                      68            (74)
        Net (income) expense of real estate operations              (13)           421
                                                            -----------    -----------
                        Total noninterest expense                12,540         12,435

Income before income tax expense                                  6,584          5,371
Income tax expense                                                2,508          2,091
                                                            -----------    -----------
                        Net income                          $     4,076    $     3,280
                                                            ===========    ===========

Earnings per share:
         Basic                                              $      0.61    $      0.50
         Diluted                                            $      0.58    $      0.48

Weighted average shares outstanding:
         Basic                                                6,638,457      6,576,684
         Diluted                                              7,004,057      6,851,596


             See accompanying Notes to the Unaudited Financial Statements
</TABLE>
                                       2
<PAGE>
<TABLE>
<CAPTION>

                       SIS BANCORP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                             (Dollars In Thousands)

                                                                    (Unaudited)
                                                                Three Months Ended
                                                                     March 31,
                                                               --------------------
                                                                  1998       1997
                                                               ---------   --------
<S>                                                           <C>         <C>
Cash Flows From Operating Activities
Net income                                                     $  4,076    $  3,280
Adjustments to reconcile net income to net cash provided by
    operating activities
     Provision for possible loan losses                             251         500
     Depreciation                                                 1,081         958
     Amortization of premium on investment securities, net        1,044         644
     ESOP and restricted stock expenses                             507         348
     Increase in assets held for trading                           --           (10)
     Income from equity investment in partnerships                 --            (1)
     Gain on sale of loans                                         (255)       (106)
     Disbursements for mortgage loans held for sale             (30,355)    (15,101)
     Receipts from mortgage loans held for sale                  30,610      15,207
     Gain on sale of fixed assets and real estate                  --           (86)
     Changes in assets and liabilities:
         (Increase) decrease in other assets, net                (1,298)      1,355
         Decrease in accrued expenses and other liabilities       3,482       2,290
                                                               --------    --------
             Net cash provided by operating activities            9,143       9,278
                                                               --------    --------

Cash Flows From Investing Activities

    Proceeds from maturities and principal payments received
       on investment securities available for sale               76,685      33,653
    Purchase of investment securities available for sale        (72,005)    (87,096)
    Proceeds from maturities and principal payments received
       on investment securities held to maturity                 15,996      11,347
    Purchase of investment securities held to maturity          (36,621)     (7,264)
    Net increase in investments in real estate                       (6)       --
    Net increase in loans receivable                             (8,882)     (7,354)
    Net decrease in foreclosed real estate                          448         225
    Proceeds from sale of loans                                    --            89
    Proceeds from sale of fixed assets                             --            21
    Purchase of fixed assets                                     (2,244)     (1,282)
                                                               --------    --------
             Net cash used for investing activities             (26,629)    (57,661)
                                                               --------    --------

          See accompanying Notes to the Unaudited Financial Statements


                                       3
<PAGE>
<CAPTION>

                       SIS BANCORP, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
                             (Dollars In Thousands)

                                                                  (Unaudited)
                                                              Three Months Ended
                                                                   March 31,
                                                             ----------------------
                                                                1998        1997
                                                             ---------   ----------
<S>                                                         <C>         <C>
  
Cash Flows from Financing Activities

  Net increase in deposits                                     42,104       37,034
  Net increase in borrowings                                   10,031       18,106
  Net increase in mortgagors' escrow deposits                   2,020        2,117
  Net proceeds from exercise of stock options                     126          175
  Repurchase/retirement of common stock                          --         (2,095)
  Cash dividends paid                                          (1,066)        (776)
                                                            ---------    ---------
        Net cash provided by financing activities              53,215       54,561
                                                            ---------    ---------

Increase in cash and cash equivalents                          35,729        6,178

Cash and cash equivalents, beginning of year                   67,614       68,090
                                                            ---------    ---------

Cash and cash equivalents, end of year                      $ 103,343    $  74,268
                                                            =========    =========


Supplemental disclosures of cash flow information:
     Cash paid during the year for interest to depositors
             and interest on debt                           $  14,710    $  13,777

     Income taxes paid                                      $   1,144    $     841

Non-cash investing activities:
     Transfers to foreclosed real estate, net               $      56    $    --




         See accompanying Notes to the Consolidated Financial Statements
</TABLE>

                                       4
<PAGE>
<TABLE>
<CAPTION>
                                                SIS BANCORP, INC. AND SUBSIDIARIES
                               CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                        For The Three Months Ended March 31, 1998 and 1997
                                                      (Dollars In Thousands)

                                                                                                Net unrealized
                                                                                                 gain (loss)
                                                                                                on investment
                                                                            Additional            securities  Treasury 
                                                       Common    Unearned     Paid-In  Retained   available    Stock
                                                       Stock   Compensation   Capital  Earnings    for sale   at Cost     Total
                                                      -------  ------------ ---------- --------   ---------  --------   --------

<S>                                                   <C>        <C>        <C>       <C>        <C>        <C>        <C>     
Balance at December 31, 1997                           $   71     $(3,123)   $54,755   $75,153    $ 2,133    $(3,517)   $125,472
Net income                                               --          --         --       4,076       --         --         4,076
Cash dividends declared                                  --          --         --      (1,066)      --         --        (1,066)
Issuance of common stock in connection with employee             
    and non-employee directors benefit programs          --          (459)      --        --         --          585         126
Decrease in unearned compensation                        --           194        313      --         --         --           507
Change in unrealized gain on investment                          
    securities available for sale                        --          --         --        --         (930)      --          (930)
                                                       ------     -------    -------   -------    -------    -------    --------
Balance at March 31, 1998                              $   71     $(3,388)   $55,068   $78,163    $ 1,203    $(2,932)   $128,185
                                                       ======     =======    =======   =======    =======    =======    ========
                                                                 
                                                                   
Balance at December 31, 1996                           $   71     $(3,693)   $53,836   $67,119    $ 1,453    $  --      $118,786
Net income                                               --          --         --       3,280       --         --         3,280
Cash dividends declared                                  --          --         --        (775)      --         --          (775)
Issuance of common stock in connection with employee             
    and non-employee directors benefit programs          --           (98)        44      --         --          228         174
Decrease in unearned compensation                        --           167        181      --         --         --           348
Change in unrealized gain on investment                          
    securities available for sale                        --          --         --        --       (1,441)      --        (1,441)
Treasury stock purchased                                 --          --         --        --         --       (2,095)     (2,095)
                                                       ------     -------    -------   -------    -------    -------    --------
Balance at March 31, 1997                              $   71     $(3,624)   $54,061   $69,624    $    12    $(1,867)   $118,277
                                                       ======     =======    =======   =======    =======    =======    ========
                                                               


          See accompanying Notes to the Unaudited Financial Statements
</TABLE>

                                       5
<PAGE>
                       SIS BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
                 (Dollars in thousands except per share amounts)

1. Acquisition of Glastonbury Bank & Trust Company
On August 18, 1997,  the Company and  Glastonbury  Bank & Trust Company  ("GBT")
signed an Agreement and Plan of Reorganization, under which the Company acquired
all of the outstanding shares of GBT (the "Merger"). The Merger was completed on
December  17,  1997.  As a result  of the  Merger,  GBT  became  a  wholly-owned
subsidiary  of the  Company.  The Merger  resulted in the  exchange of 0.74 of a
share of the Company's common stock for each of GBT's 1,829,920 shares of common
stock and was  treated  as a  pooling  of  interests  for  accounting  purposes.
Accordingly, the Company's historical financial statements have been restated to
reflect the combination with GBT.

2. Condensed Consolidated Financial Statements
The Condensed  Consolidated  Financial Statements of the Company included herein
are unaudited, and 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  and cash flows,  as of and for the
periods covered herein, have been made. Certain information and note disclosures
normally  included in  Condensed  Consolidated  Financial  Statements  have been
omitted  as they  are  included  in the  most  recent  Securities  and  Exchange
Commission ("SEC") Form 10-K and accompanying Notes to the Financial  Statements
(the "Form  10-K")  filed by the Company for the year ended  December  31, 1997.
Management believes that the disclosures contained herein are adequate to make a
fair presentation.

These unaudited condensed  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.

3. New Accounting Pronouncements

In June 1997,  the FASB issued SFAS 130 "Reporting  Comprehensive  Income" which
establishes  standards for  disclosure of  comprehensive  income.  Comprehensive
income  represents  net  income  for a period  plus the  change  in  equity of a
business during a period from non-shareholder sources. Excluding net income, the
Company's  only other  source of  comprehensive  income is its  unrealized  gain
(loss)  on  investment  securities  available  for  sale,  net of tax.  SFAS 130
requires the restatement of prior periods for comparative purposes.  The Company
adopted SFAS 130 on January 1, 1998.  Adoption of this  Statement did not have a
material  impact on the Company's  financial  position or results of operations.
Total  comprehensive  income for the three  months ended March 31, 1998 and 1997
was $4.1 and $2.5 million, respectively.

In June  1997,  the FASB  issued  SFAS 131  "Disclosures  about  Segments  of an
Enterprise and Related Information" which establishes standards for the way that
public business  enterprises report financial and descriptive  information about
operating  segments.  SFAS 131 defines an operating  segment as components of an
enterprise  about which  separate  financial  information  is available  that is
evaluated by management  in deciding how to allocate  resources and in assessing
performance.  The Company adopted SFAS 131 on January 1, 1998.  Adoption of this
Statement did not have a material impact on the Company's  financial position or
results of operations.

In  February  1998,  the FASB  issued  SFAS 132  "Employers'  Disclosures  about
Pensions and Other Postretirement Benefits - an amendment of FASB Statements No.
87, 88 and 106" (SFAS 132) which revises  employers'  disclosures  about pension
and  other  postretirement   benefit  plans,  though  it  does  not  change  the
measurement  or  recognition  of  those  plans.  The  Company  adopted  SFAS 132
effective  January 1, 1998.  Adoption of this  Statement did not have a material
impact on the Company's financial position or results of operations.

                                       6
<PAGE>

4. Earnings Per Share
Basic and diluted net income per share and weighted  average shares  outstanding
follow (dollars in thousands, except per share amounts):


                                                    (Unaudited)
                                                Three months ended
                                          --------------------------------
                                            March 31,            March 31,
                                              1998                 1997
                                          -----------          ----------
Net income
                                          $    4,076           $    3,280
                                                               
Weighted average shares outstanding:                           
    Basic                                  6,638,457            6,576,684
         Effect of dilutive securities:                        
                Stock options                336,651              235,127
                Restricted stock              28,949               39,785
                                          ----------           ----------
    Diluted                                7,004,057            6,851,596
                                          ==========           ==========
                                                               
Net income per share:                                          
    Basic                                 $     0.61           $     0.50
                                                               
    Diluted                               $     0.58           $     0.48
                                                       


5. Dividend Policy
The Company paid cash dividends in the amount of $0.16 per share on February 23,
1998.  On April 22,  1998 the  Company  declared a  dividend  of $0.16 per share
payable on May 26, 1998 to shareholders of record as of the close of business on
May 4, 1998.

6. Divestment Related Charges
The  Company has certain  subsidiaries  that are engaged in various  real estate
investments,  directly  or in joint  ventures  with  unaffiliated  partners.  In
accordance with the Federal  Deposit  Insurance  Corporation  Improvement Act of
1991  ("FDICIA"),  the  Company  has  terminated  its  real  estate  development
activities  and  is  in  the  process  of  selling  its  remaining  real  estate
investments.  In the first quarter of 1997, the Company established a reserve of
$1.0  million  relating  to the  divestment  of its real estate  investment  and
brokerage subsidiaries,  Colebrook Inc. and subsidiaries ("Colebrook"). The $1.0
million reserve  consists of $0.7 million in severance and benefit  accruals and
$0.3  million  for other  expenses.  As of March 31,  1998,  approximately  $0.1
million of expenses have been paid relating to the divestiture.  This divestment
is scheduled to be completed by June 30, 1998.

                                       7
<PAGE>

ITEM 2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF RESULTS OF  OPERATIONS  AND
         FINANCIAL CONDITION

                             (DOLLARS IN THOUSANDS)

Overview
SIS Bancorp, Inc. (the "Company") is a Massachusetts  corporation formed in 1996
and serves as the bank holding company for  Springfield  Institution for Savings
("SIS Bank"),  and  Glastonbury  Bank & Trust Company  ("GBT").  The Company was
formed for the purpose of reorganizing SIS Bank into a holding company structure
("the Reorganization").  Upon the effectiveness of the Reorganization,  SIS Bank
became  a  wholly-owned   subsidiary  of  the  Company  and  SIS  Bank's  former
stockholders  became  stockholders of the Company.  The Company  acquired GBT on
December 17, 1997.

Established in 1827, SIS Bank is a  Massachusetts  chartered  stock savings bank
headquartered in Springfield,  Massachusetts. GBT, with its headquarters located
in Glastonbury,  Connecticut, is a Connecticut chartered commercial bank founded
in 1919. Substantially all of the Company's operations are conducted through its
subsidiary banks.

The Company provides a wide variety of financial  services through both SIS Bank
and GBT (the  "Banks"),  including  retail and commercial  banking,  residential
mortgage  origination and servicing,  commercial and consumer lending,  merchant
processing  and insurance  sales.  The Banks serve the consumers and  businesses
located in western Massachusetts and central Connecticut through a network of 33
full service branches.

The Company's  revenues are derived  principally from dividend payments received
from the Banks,  which in turn derive their revenues  principally  from interest
payments  on their loan  portfolios  and  mortgage-backed  and other  investment
securities.  The Banks'  primary  sources of funds are deposits,  borrowings and
principal and interest payments on loans and mortgage-backed securities.

Year 2000
During 1997, the Company  conducted a review of its computer systems to identify
those  areas that  could be  affected  by the Year 2000  issue.  The  Company is
addressing  this  issue in  accordance  with the  guidance  set forth in various
statements  that  have  been  issued  by  the  Federal  Financial   Institutions
Examination  Counsel.  The Company has completed the remedial phases  associated
with awareness and assessment.

The  Company  has  developed  an  implementation  plan to resolve  its Year 2000
issues.  A timely  resolution of the Year 2000 issues  depends  largely upon the
expertise and advice of outside  vendors  retained by the Company to both modify
the  Company's  existing  software and develop new  software to address  current
internal  systems  deficiencies.  All of the Company's  third party vendors with
non-compliant  systems have also been  identified  and notified.  The Company is
also preparing plans to test all  modifications to critical internal systems and
verify that critical  third party vendors have  adequately  addressed  their own
systems  issues.  Test plans are scheduled to be completed by June 30, 1998 with
the Company's  internal systems testing to be completed by December 31, 1998 and
external  testing of third party  vendor  systems to be  completed  by March 31,
1999.  Additionally,  the Company is currently assessing the potential impact of
Year 2000 on its larger commercial  borrowers.  The Company is presently unaware
of any  situation  where any vendor will not be able to modify its  products and
systems  in a timely  manner.  The  Company is also  monitored  in its Year 2000
efforts by reports to, and  examinations by, various  regulators,  including the
Federal  Deposit  Insurance  Corporation,  the Federal  Reserve  Board,  and the
Massachusetts and Connecticut Commissioners of Banks.

The primary  costs  associated  with the Year 2000 issue consist of expenses for
the  replacement  or upgrade of third  party  systems,  and the  replacement  of
personal computers. The Company is not aware of any obstacles or issues that are
presently anticipated in connection with the resolution of Year 2000 issues that
are likely to cause significant  operational  problems or are otherwise expected
to have a  material  adverse  effect on the  Company's  financial  condition  or
results of operations.

Results of  Operations  for the Three  Months Ended March 31, 1998 and March 31,
1997

The Company reported net income of $4.1 million,  or $0.58 per diluted share for
the three months ended March 31, 1998 as compared to net income of $3.3 million,
or  $0.48  per  diluted  share  for the  same  period  last  year.  The  Company

                                       8
<PAGE>
experienced an increase in pre-tax operating earnings primarily  attributable to
increased net interest income and noninterest income as well as lower provisions
for possible loan losses.

Net Interest Income
Net interest income represents the difference between income on interest-earning
assets and  expense on  interest-bearing  liabilities.  Net  interest  income is
affected by the mix and volume of assets and  liabilities,  and the movement and
level of  interest  rates.  The  Company  invests  in certain  assets  that have
preferential  tax treatment.  In order to present yields on a comparable  basis,
net  interest  income  is  presented  on a fully  taxable  equivalent  basis for
purposes of yield and margin analysis.

The following  table sets forth,  for the period  indicated,  average  balances,
interest  income  and  expense,  and  yields  earned or rates  paid on the major
categories of assets and  liabilities.  Non-accrual  loans have been included in
the  appropriate   average  balance  loan  category,   but  unpaid  interest  on
non-accrual  loans has not been  included for purposes of  determining  interest
income. In addition,  investment  securities available for sale are reflected at
amortized cost.
<TABLE>
<CAPTION>
                                                                            Three Months Ended March 31,
                                                -----------------------------------------------------------------------------------
                                                                 1998                                          1997
                                                ----------------------------------------     --------------------------------------
                                                  Average                      Average          Average                  Average
                                                  Balance (3)   Interest (1)  Yield/Cost (1)    Balance   Interest (1) Yield/Cost(1)
                                                -------------  ------------- --------------  ------------ ------------ -------------
                                                                        (Dollars In Thousands)
<S>                                             <C>          <C>               <C>          <C>          <C>              <C>
Interest-earning assets:
Fed funds sold and short-term
investments                                      $   43,617   $      615         5.64%       $   26,498   $      295       4.45%
Investment securities held to maturity              203,385        3,472         6.83%          221,176        3,778       6.83%
Investment securities available for sale            552,713        8,660         6.27%          498,938        8,626       6.92%
Investment securites held for trading                  --           --            --                479            2       1.67%
Residential real estate loans                       272,174        5,415         7.96%          291,103        5,757       7.91%
Commercial real estate loans                        188,598        4,223         8.96%          168,419        3,832       9.10%
Commercial loans                                    217,274        4,644         8.55%          188,598        4,076       8.64%
Home equity loans                                   159,455        3,326         8.46%          119,950        2,373       8.02%
Consumer loans                                       12,443          293         9.42%            9,124          245      10.74%
                                                 ----------   ----------        -----        ----------   ----------      -----
Total interest-earning assets                     1,649,659       30,648         7.43%        1,524,285       28,984       7.61%
                                                 
Allowance for loan losses                           (23,036)                                    (19,884)
Non-interest-earning assets                         120,672                                     111,427
                                                 ----------                                  ----------
                                                 $1,747,295   $   30,648                     $1,615,828   $   28,984
                                                 ==========   ==========                     ==========   ==========
Interest-bearing liabilities:
Deposits
  Savings accounts                               $  239,392   $    1,234         2.09%       $  257,140   $    1,478       2.33%
  NOW accounts (2)                                   40,027          152         1.54%           79,725          229       1.16%
  Money manager accounts (2)                         48,663          143         1.19%             --           --          --
  Money market accounts                             235,772        1,938         3.33%          205,236        1,677       3.31%
  Time deposit accounts                             539,236        7,110         5.35%          513,258        6,672       5.27%
                                                 ----------   ----------        -----        ----------   ----------      -----
Total interest-bearing deposits                   1,103,090       10,577         3.89%        1,055,359       10,056       3.86%
                                                                                                          
Borrowed funds                                      310,483        4,475         5.77%          279,007        3,856       5.53%
                                                 ----------   ----------        -----        ----------   ----------      -----
Total interest-bearing liabilities                1,413,573       15,052         4.32%        1,334,366       13,912       4.23%
                                                                                                          
Non-interest-bearing liabilities                    209,507                                     163,409
                                                 ----------                                  ----------
Total liabilities                                 1,623,080                                   1,497,775
Total stockholders' equity                          124,215                                     118,053
                                                 ----------                                  ----------
    Total liabilities and stockholders'equity    $1,747,295   $   15,052                     $1,615,828   $   13,912
                                                 ==========   ==========                     ==========   ==========           

Net interest income/spread                                    $   15,596         3.11%                    $   15,072       3.38%
                                                              ==========        =====                     ==========      =====

Net interest margin as a % of interest-
earning assets                                                                   3.78%                                     3.96%
                                                                                ======                                    =====
Tax equivalent adjustment
                                                              $      197                                  $      159               
                                                              ----------                                  ----------
Net interest income/spread per Condensed Consolidated
Statement of Operations                                       $   15,399                                  $   14,913
                                                              ==========                                  ==========
<FN>
(1)  On a fully taxable equivalent basis. Calculated using a Federal income tax rate of 34% for 1998 and 1997.
(2)  During July 1997,  the Company  implemented a program which  converted  certain NOW accounts to money  manager  accounts.  This
     program has no effect on the Company's depositors, but has provided additional investable funds to the Company by substantially
     reducing the reserve balances required to be maintained at the Federal Reserve Bank of Boston.
(3)  A  reclassification  of some savings  accounts to money market  accounts  affecting  average  balance  outstanding  was made in
     connection with the GBT acquisition.
</FN>
</TABLE>
                                        9
<PAGE>
Net interest  income on a fully  taxable  equivalent  basis for the three months
ended March 31, 1998 was $15.6  million  compared to $15.1 million for the three
months ended March 31, 1997, an increase of $0.5 million or 3.5%.  This increase
was the result of a $125.4 million increase in interest-earning assets partially
offset by an 18 basis point decrease in the net interest margin.

Total interest income was $30.6 million on a fully taxable  equivalent basis for
the three months ended March 31, 1998,  an increase of $1.7 million or 5.7% from
the same period last year.  This  increase is  attributable  to higher levels of
interest-earning  assets,  partially offset by lower yields on  interest-earning
assets.  Average  interest-earning  assets  totaled  $1.6  billion  in the first
quarter  of 1998  compared  to $1.5  billion in the first  quarter  of 1997,  an
increase of $125.4 million or 8.2%. Average investments  increased $35.5 million
or 4.9% and were funded by higher  deposit  levels and borrowed  funds.  Average
loans  increased  $72.8  million  as  the  Company  continued  to  focus  on the
commercial and home equity market segments, which grew by $28.7 million or 15.2%
and $39.5 million or 32.9%, respectively. Commercial real estate loans increased
$20.2 million or 12.0%  reflecting  growth in commercial  construction  lending.
Residential  real estate loan  balances  declined  $18.9 million or 6.5% for the
three months ended March 31, 1998,  reflecting  amortization  and prepayments of
the existing loan portfolio. Yields on interest-earning assets declined 18 basis
points  from the first  quarter  of 1997  primarily  reflecting  lower  level of
interest  rates  as  well  as  accelerated   amortization   and  prepayments  of
mortgage-backed  securities  and  residential  real  estate  loans.  Accelerated
prepayment  speeds  were the  result of lower  long-term  interest  rates  which
significantly increased refinancing activity.

Total  interest  expense was $15.1  million for the three months ended March 31,
1998  compared to $13.9  million  during the same period in 1997, an increase of
$1.1  million  or  8.2%.   This  increase  is   attributable   to  increases  in
interest-bearing  deposits and borrowed funds. Average interest-bearing deposits
increased $47.7 million or 4.5%. This growth occurred primarily in time deposits
which  increased  $26.0  million or 5.1% largely due to growth in time  deposits
with local municipalities.  Borrowed funds averaged $310.5 million for the three
months  ended March 31, 1998  compared to $279.0  million for the same period in
1997.  These  borrowings were used to match fund fixed rate assets and to extend
the maturity of the Company's liabilities.

The  following  table  presents the changes in net  interest  income (on a fully
taxable equivalent basis) resulting from changes in interest rates or changes in
the volume of interest-earning  assets and  interest-bearing  liabilities during
the periods  indicated.  Changes which are  attributable to both rate and volume
have been allocated evenly between the change in rate and volume components.

                                       10
<PAGE>

                                               Three months ended March 31,
                                                     1998 versus 1997
                                             ---------------------------------
                                                Increase (Decrease) Due to
                                             ---------------------------------
                                               Volume       Rate      Net
                                             --------   ---------- ---------
                                                  (Dollars In Thousands)
Interest-earning assets:
  Federal funds sold and
     interest bearing deposits               $   222    $    80    $   302 
  Investment securities held to maturity        (304)        (2)      (306)
  Investment securities available for sale       885       (833)        52
  Investment securities held for trading
                                                  (2)        --         (2)
  Residential real estate loans                 (375)        33       (342)
  Commercial real estate loans                   455        (64)       391
  Commercial loans                               616        (48)       568
  Home equity loans                              803        150        953
  Consumer loans                                  84        (36)        48
                                             -------    -------    -------
Total interest-earning assets                  2,384       (720)     1,664
                                             -------    -------    -------
Interest-bearing liabilities:
Deposits:
  Savings accounts                               (97)      (147)      (244)
  NOW accounts                                  (132)        55        (77)
  Money manager account                           72         71        143
  Money market accounts                          250         11        261
  Time deposit accounts                          340         98        438
                                             -------    -------    -------
Total deposits                                   433         88        521

Borrowed funds                                   444        175        619
                                             -------    -------    -------
Total interest-bearing liabilities               877        263      1,140
                                             -------    -------    -------
Change in net interest income                $ 1,507    $  (983)   $   524
                                             =======    =======    =======

Provision for Possible Loan Losses
The Company's  provision for possible loan losses was $0.3 million for the first
quarter  of 1998  compared  to $0.5  million in the first  quarter of 1997.  The
provision  for possible loan losses is based upon  management's  judgment of the
amount  necessary to maintain the  allowance for possible loan losses at a level
which is considered adequate.

                                       11

<PAGE>
Non-interest Income
Non-interest  income is  composed of fee income for bank  services  and gains or
losses from the sale of assets.  The components of  non-interest  income for the
periods presented are as follows:

                                                    Three months ended
                                                        March 31,
                                                ------------------------
                                                  1998           1997
                                                --------        -------
                                                  (Dollars in Thousands)
Net gain on sale of loans                       $   255         $   106 
Net loss on securities held for trading            --               (11)
Loan charges and fees                               745             745
Deposit related fees                              1,889           1,763
Merchant processing fees                            438             367
Other charges and fees                              649             423
                                                -------         -------
                                                $ 3,976         $ 3,393
                                                =======         =======

Non-interest  income totaled $4.0 million for the first quarter of 1998 compared
to $3.4  million  for the same period in 1997,  an  increase of $0.6  million or
17.2%.  Other charges and fees are up $0.2 million due to increases in brokerage
service fees as well as fees associated with Business Manager, a commercial cash
management product introduced by the Company in 1997, which involves the funding
and  management  of  accounts  receivable  for  small-to-medium-sized   business
customers.  Net gain on sale of loans  increased $0.1 million due to an increase
in mortgage  production and the sale of loans to the secondary  market.  Deposit
service  charges and fees increased $0.1 million due to fees associated with the
Company's larger  non-interest  bearing deposit base.  Merchant  processing fees
increased $0.1 million reflecting increased merchant activity.

Non-interest Expense

Salaries and Benefits Expense
Salaries and benefits expense totaled $6.2 million for the first quarter of 1998
compared  to $5.9  million  for the same  period in 1997,  an  increase  of $0.3
million reflecting standard wage increases as well as increased staffing related
to new branch openings and branch-related support.

Furniture and Equipment Expense
Furniture and equipment  expense  increased  $0.2 million  reflecting new branch
openings as well as investments in new technology.

Other Operating Expense
The  components  of other  operating  expense for the periods  presented  are as
follows:
                                            Three months ended
                                                 March 31,
                                      ------------------------------
                                        1998                  1997
                                      ---------            ---------
                                           (Dollars in Thousands)
Marketing                             $  560                 $  640
Insurance                                152                    189
Professional services                    670                    856
Outside processing                     1,287                  1,185
Other                                  1,412                  1,331
                                      ------                 ------
                                      $4,081                 $4,201
                                      ======                 ======

                                       12
<PAGE>
Other  operating  expenses  totaled $4.1  million for the first  quarter of 1998
compared  to $4.2  million  for the first  quarter of 1997,  a decrease  of $0.1
million.  Professional  services  decreased  $0.2 million due to lower levels of
legal  and  consulting  expenses.  Both  outside  processing  charges  and other
operating expenses increased $0.1 million from the comparable period, reflecting
costs  associated with higher  transaction and account volume resulting from the
Company's consumer strategy.

Foreclosed Real Estate Expense
Foreclosed real estate expense reflects gains or losses on sales, writedowns and
net operating results of foreclosed  properties.  Foreclosed real estate expense
was $0.1  million  for the  first  quarter  of 1998  compared  to income of $0.1
million for the first quarter of 1997.  The results in the first quarter of 1997
reflect $0.1 million in gains on the sale of foreclosed  properties  compared to
losses and  writedowns  of $0.1 million in  foreclosed  properties  in the first
quarter of 1998.

Net Expense of Real Estate Operations
The Company's real estate investment and brokerage subsidiary, Colebrook engages
in  various  real  estate  investments,  directly  or  in  joint  ventures  with
unaffiliated partners. In accordance with FDICIA, the Company has terminated its
real  estate  development  activities  and  is in the  process  of  selling  its
remaining real estate investments. Net expense of real estate operations for the
first quarter of 1998 were zero compared to expense of $0.4 million for the same
period in 1997.  In the first  quarter  of 1997 the  Company  recognized  a $0.6
million  gain on the sale of a real  estate  property  which  was  offset by the
establishment  of a  reserve  of $1.0  million  relating  to the  divestment  of
Colebrook.  The $1.0 million  reserve  consists of $0.7 million in severance and
benefit  accruals  and $0.3  million for other  expenses.  As of March 31, 1998,
approximately   $0.1  million  of  expenses  have  been  paid  relating  to  the
divestiture. This divestment is scheduled to be completed by June 30, 1998.

Income Taxes
For the three  months  ended  March 31,  1998 the  Company  recorded  income tax
expense of $2.5 million compared to expense of $2.1 million for the three months
ended March 31,  1997.  This  increase is  attributable  to a 22.6%  increase in
pre-tax earnings.

                                       13
<PAGE>
Balance Sheet Analysis - Comparison Of March 31, 1998 To December 31, 1997

Total assets increased from $1.7 billion at December 31, 1997 to $1.8 billion at
March 31, 1998. This increase primarily reflects growth in investment securities
and loans funded through an increase in deposits and wholesale borrowings.

Investments
The Company's  investment  portfolio increased $13.2 million from $769.1 million
at December 31, 1997 to $782.4 million at March 31, 1998.

The Company  engages in investment  activities for both investment and liquidity
purposes.  The  Company  maintains  an  investment  securities  portfolio  which
consists  primarily  of  U.S.   Government  and  Agency  securities,   corporate
obligations,  asset-backed securities, collateralized mortgage obligations, FHLB
stock, and marketable equity  securities.  Other short-term  investments held by
the Company  periodically  include  interest-bearing  deposits and federal funds
sold.  The  Company  also  maintains  a  mortgage-backed   securities  portfolio
consisting of securities  issued and guaranteed by the Federal National Mortgage
Association  ("FNMA"),  the Federal Home Loan Mortgage Corporation ("FHLMC") and
the Government  National Mortgage  Association  ("GNMA") in addition to publicly
traded  mortgage-backed  securities issued by private  financial  intermediaries
which are rated "AA" or higher by rating agencies of national prominence.

Securities  which the Company has the intent and ability to hold until  maturity
are  classified as  held-to-maturity  and are carried at amortized  cost,  while
those  securities which have been identified as assets that may be sold prior to
maturity or assets for which there is not a positive  intent to hold to maturity
are  classified  as  available-for-sale  and are  carried  at fair  value,  with
unrealized  gains and losses  excluded  from earnings and reported net of tax as
accumulated other comprehensive  income as a separate component of stockholders'
equity.

The table below sets forth certain information  regarding the amortized cost and
fair value of the Company's investment portfolio at the dates indicated.
<TABLE>
<CAPTION>
                                                                    March 31, 1998
                                              ----------------------------------------------------------
                                                   Available for Sale              Held to Maturity
                                              --------------------------       -------------------------
                                                                   (Dollars In Thousands)
                                              Amortized                       Amortized
                                                Cost          Fair Value        Cost          Fair Value
                                              ---------       ----------      ---------       ----------
<S>                                          <C>             <C>             <C>             <C>     
U.S. Government and Agency obligations        $  7,603        $  7,608        $    900        $    897
Collateralized mortgage obligations             46,673          46,745          10,772          10,820
Mortgage-backed securities                     466,845         466,972         143,751         143,899
Asset-backed securities                           --              --            57,745          57,904
Other bonds and short term obligations           8,967           9,287             340             341
Other securities                                36,913          38,241            --              --
                                              --------        --------        --------        --------
    Total                                     $567,001        $568,853        $213,508        $213,861
                                              ========        ========        ========        ========
                                                          
<CAPTION>
                                                                  December 31, 1997
                                              ----------------------------------------------------------
                                                   Available for Sale              Held to Maturity
                                              --------------------------       -------------------------
                                                                   (Dollars In Thousands)
                                              Amortized                       Amortized
                                                Cost          Fair Value        Cost          Fair Value
                                              ---------       ----------      ---------       ----------
<S>                                          <C>             <C>             <C>             <C>     
                                  
U.S. Government and Agency obligations        $ 15,608        $ 15,636        $  2,400        $  2,391
Collateralized mortgage obligations             51,273          51,415           2,934           2,953
Mortgage-backed securities                     458,659         460,478         141,282         141,563
Asset-backed securities                           --              --            46,046          46,143              
Other bonds and short term obligations           8,966           9,355             345             346
Other securities                                38,128          39,224            --              --
                                              --------        --------        --------        --------
    Total                                     $572,634        $576,108        $193,007        $193,396
                                              ========        ========        ========        ========
</TABLE>

                                       14
<PAGE>
Loan Portfolio Composition
Gross loans  comprised  $858.4  million or 47.9% of total assets as of March 31,
1998. The following table sets forth  information  concerning the Company's loan
portfolio in dollar amounts and  percentages,  by type of loan at March 31, 1998
and at December 31, 1997.
<TABLE>
<CAPTION>
                                            March 31, 1998            December 31, 1997
                                     -------------------------   -----------------------
                                                   Percent of                 Percent of
                                       Amount         Total         Amount      Total
                                     ----------    -----------   -----------  ----------
                                                   (Dollars In Thousands)

<S>                                  <C>            <C>         <C>            <C>   
Residential real estate loans         $277,226       32.29%      $281,457       33.13%
Commercial real estate loans           188,273       21.93%       185,226       21.80%
Commercial loans                       221,877       25.85%       212,869       25.06%
Home equity loans                      158,971       18.52%       158,753       18.69%
Consumer loans                          12,066        1.41%        11,189        1.32%
                                      --------      ------       --------      ------
   Total loans receivable, gross       858,413      100.00%       849,494      100.00%
                                      --------      ------       --------      ------
Less:                                                         
Unearned income and fees                (2,162)                    (1,991)
Allowance for loan losses               23,239                     22,724
                                      --------                   --------
   Total loans receivable, net        $837,336                   $828,761
                                      ========                   ========
</TABLE>

The Company continues to actively  originate loans secured by first mortgages on
one to four family residences, and offers a variety of fixed and adjustable rate
mortgage loan products.  The Company  originates  long-term fixed rate mortgages
for sale in the secondary  market and generally holds  adjustable rate mortgages
in the Company's loan  portfolio.  During the three months ended March 31, 1998,
the Company  experienced  an  increase in  prepayments  in its  adjustable  rate
mortgage portfolio.  These prepayments offset new originations and resulted in a
$4.2 million  decrease in residential  real estate balances between December 31,
1997 and March 31, 1998.

During the three months ended March 31, 1998, commercial loan balances increased
$9.0 million,  reflecting the Company's continued focus on lending activities in
the local business market.  During this same period  commercial real estate loan
balances  increased $3.0 million  primarily due to new  originations,  partially
offset by prepayments.

                                       15
<PAGE>
Non-performing Assets
Non-performing  assets declined  slightly from $8.1 million at December 31, 1997
to $7.7 million at March 31, 1998.  The following  table sets forth  information
regarding the components of non-performing assets for the periods presented:

                                            March 31,      December 31,
                                              1998           1997
                                           ----------     ------------
                                            (Dollars In Thousands)
Non-accrual loans (1):
   Residential real estate loans            $1,446          $1,211
   Commercial real estate loans              1,539           1,542
   Commercial loans                          2,391           2,414
   Home equity loans                           214             181
   Consumer loans                               15               4
                                            ------          ------
   Total non-accrual loans                   5,605           5,352
                                            ------          ------
                                                           
Loans past due 90 days still accruing (2)      183             431
                                            ------          ------
   Total non-performing loans                5,788           5,783
Foreclosed real estate (3)                     817           1,209
Restructured loans on accrual status (4)     1,120           1,124
                                            ------          ------
   Total non-performing assets              $7,725          $8,116
                                            ======          ======
Total non-performing loans to total
   gross loans                                0.67%           0.68%

Total non-performing assets to total
   assets                                     0.43%           0.47%

Allowance for possible losses to
   non-performing loans                     401.50%         392.94%


(1) Non-accrual loans are loans that are contractually  past due in excess of 90
days, for which the Company has stopped the accrual of interest,  or loans which
are not past due but on which the  Company  has  stopped the accrual of interest
based on management's assessment of the circumstances surrounding
these loans.

(2) Accruing loans past due 90 days or more are loans which have not been placed
on non-accrual status as, in management's  opinion,  the collection of the loan,
in full, is not in doubt.

(3)  Foreclosed  real estate  includes  OREO,  defined as real  estate  acquired
through foreclosure or acceptance of a deed in lieu of foreclosure.  The Company
carries  foreclosed  real estate at the lower of cost or net  realizable  value,
which approximates fair value less estimated selling costs.

(4) Restructured loans are loans for which concessions,  including  reduction of
interest rates or deferral of interest or principal payments,  have been granted
due to the borrower's  financial  condition.  Restructured  loans on non-accrual
status are reported in the  non-accrual  loan  category.  Restructured  loans on
accrual status are those loans that have complied with terms of a  restructuring
agreement for a satisfactory period (generally six months).

                                       16
<PAGE>
The principal  amount of  non-performing  loans  aggregated $5.8 million at both
March 31,  1998 and  December  31,  1997.  Interest  income that would have been
recorded if the loans had been  performing  in  accordance  with their  original
terms  aggregated $0.2 million and $0.1 million for the three months ended March
31, 1998 and 1997, respectively. Interest income recorded on these loans for the
three months  ended March 31, 1998 and 1997 was $0.1  million and $0.1  million,
respectively.

The principal amount of restructured loans aggregated $1.1 million at both March
31, 1998 and December 31, 1997. Interest income that would have been recorded if
the loans  had been  performing  within  their  original  terms  aggregated  $27
thousand  and $62  thousand  for the  periods  ended  March  31,  1998 and 1997,
respectively.  Interest  income recorded on these loans amounted to $38 thousand
and  $27  thousand  for  the  three  months  ended  March  31,  1998  and  1997,
respectively.

Watch List Loans
The Company maintains a "watch list" of loans, which represents performing loans
that have  potential  weaknesses  that  require  Management's  attention.  These
potential  weaknesses may stem from a variety of factors including,  among other
things,  economic or market  conditions,  adverse  conditions  in the  obligor's
operations  or financial  condition  weaknesses.  Watch list loans totaled $18.2
million and $24.1 million at March 31, 1998 and December 31, 1997, respectively.

Classified Loans
The Company's Credit Grade Policy (the "Policy") provides for the classification
of loans  considered to be of lesser quality as  "substandard",  "doubtful",  or
"loss" loans. A loan is considered  substandard under the Company's Policy if it
is inadequately  protected by the current sound worth and paying capacity of the
obligor or of the collateral  pledged,  if any.  Substandard loans include those
characterized by the "distinct  possibility" that the Company will sustain "some
loss" if the  deficiencies are not corrected.  Loans classified as doubtful,  of
which  the  Company  has  none,  have all of the  weaknesses  inherent  in those
classified as  substandard  with the added  characteristic  that the  weaknesses
present  make  "collection  or  liquidation  in full" on the basis of  currently
existing facts,  conditions and values,  "improbable."  Loans  characterized  as
loss, of which the Company has none, are those considered "uncollectible" and of
such little value that their  continuance  as bankable  assets is not warranted.
Classified loans, all of which are categorized substandard, totaled $9.6 million
and $6.2 million at March 31, 1998 and December 31, 1997, respectively. Included
in these  amounts  are $5.6  million  and $5.4  million of loans which have been
reported as  non-performing  assets at March 31,  1998 and  December  31,  1997,
respectively.

Allowance for Possible Loan Losses
The allowance for possible loan losses  reflects an amount that, in management's
judgment, is adequate to provide for potential losses in the loan portfolio.  In
addition,  examinations  of the adequacy of the loan loss reserve are  conducted
periodically  by various  regulatory  agencies.  The allowance for possible loan
losses at March 31, 1998 was $23.2  million,  compared to $20.3 million at March
31, 1997.  The activity in the  allowance for possible loan losses for the three
months ended March 31, 1998 and 1997 was as follows:

                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                                                Three Months Ended
                                                                                     March 31,
                                                                         --------------------------------
                                                                            1998                  1997
                                                                         ----------            ----------
                                                                                (Dollars In Thousands)

<S>                                                                      <C>                   <C>       
Balance, beginning of period                                              $ 22,724              $ 19,549  
Provision for loan losses                                                      251                   500
Charge-offs:                                                                                    
  Residential real estate loans                                                (30)                   (3)
  Commercial real estate loans                                                  (1)                 --
  Commercial loans                                                             (82)                 (128)
  Home equity loans                                                             (9)                  (15)
  Consumer loans                                                               (67)                  (44)
  Merchant processing                                                          (51)                  (32)
                                                                          --------              --------
    Total charge-offs                                                         (240)                 (222)
Recoveries:                                                                                     
  Residential real estate loans                                               --                       1
  Commercial real estate loans                                                 443                   426
  Commercial loans                                                              51                    67
  Home equity loans                                                              1                     5
  Consumer loans                                                                 9                    11
  Merchant processing                                                         --                    --
                                                                          --------              --------
    Total recoveries                                                           504                   510
                                                                          --------              --------
Net recoveries (charge-offs)                                                   264                   288
Balance, end of period                                                    $ 23,239              $ 20,337
                                                                          ========              ========
                                                                                      
Ratio of net loan recoveries (charge-offs) during the period to
    average loans outstanding during the period                               0.03%                 0.04%
Ratio of allowance for possible loan losses to total loans
    at the end of the period                                                  2.71%                 2.60%
Ratio of allowance for possible loan losses to non-performing
    loans at the end of the period                                          401.50%               275.94%
</TABLE>

At March 31, 1998, the recorded investment in loans that are considered impaired
under SFAS 114  "Accounting  by  Creditors  for  Impairment  of a Loan" was $9.3
million. Included in this amount is $0.9 million of impaired loans for which the
related SFAS 114  allowance  is $0.2 million and $8.4 million of impaired  loans
for which the SFAS 114  allowance is zero.  The average  recorded  investment in
impaired  loans during the three  months ended March 31, 1998 was  approximately
$7.6  million.  For the three month  period  ended March 31,  1998,  the Company
recognized interest income on these impaired loans of $0.1 million.

                                       18
<PAGE>
The  following  table shows the  allocation  of the  allowance for possible loan
losses to the various types of loans as well as the  percentage of allowance for
possible loan losses in each category to total allowance for possible loan loss.
<TABLE>
<CAPTION>
                                                   March 31, 1998                    December 31, 1997
                                          -----------------------------        ---------------------------
                                                             % of                                % of
                                                             Total                               Total
                                                         Allowance for                       Allowance for
                                            Amount        Loan Losses           Amount        Loan Losses
                                          ----------    ---------------        ---------     -------------
                                                              (Dollars In Thousands)
<S>                                       <C>               <C>               <C>               <C>   
Residential real estate loans              $ 3,096           13.32%            $ 3,664           16.12%
Commercial real estate loans                 6,395           27.52%              5,632           24.78%
Commercial loans                             8,265           35.57%              8,328           36.65%
Home equity loans                            3,066           13.19%              3,183           14.01%
Consumer loans                               1,231            5.30%              1,274            5.61%
Merchant processing                          1,186            5.10%                643            2.83%
                                           -------          ------             -------          ------
Total allowance for possible loan losses   $23,239          100.00%            $22,724          100.00%
                                           =======          ======             =======          ======
                                                                                       
</TABLE>
Deposit Distribution
The principal  source of funds for the Company are deposits from local consumers
and  businesses.  There were no brokered  deposits at March 31, 1998 or December
31, 1997.  The  Company's  deposits  consist of demand and NOW  accounts,  money
manager accounts, passbook and statement savings accounts, money market accounts
and time deposits.  The following  table presents the composition of deposits at
the dates indicated:

                                    March 31, 1998         December 31, 1997
                             ------------------------   ----------------------
                                              Percent                Percent
                                                of                     of
                                Amount        Total        Amount     Total
                             -----------    ---------   ----------  ---------
                                        (Dollars In Thousands)
Demand deposits              $  177,258       13.54%    $  171,343    13.52%
NOW accounts                     50,562        3.86%        51,412     4.06%
Money manager accounts (1)       46,230        3.53%        39,447     3.11%
Savings accounts                219,232       16.74%       263,449    20.79%
Money market accounts           259,172       19.79%       211,286    16.67%
Time deposits                   556,948       42.54%       530,361    41.85%
                             ----------      ------     ----------   ------
   Total deposits            $1,309,402      100.00%    $1,267,298   100.00%
                             ==========      ======     ==========   ======
                                                    
(1)  Money  manager  accounts  represent  NOW account  balances  which have been
     transferred to money market accounts to provide additional investable funds
     to the Company by substantially  reducing the reserve balances  required to
     be  maintained at the Federal  Reserve Bank of Boston.  This program has no
     effect on the Company's depositors.

                                       19
<PAGE>
Total  deposits  were $1.3 billion at both March 31, 1998 and December 31, 1997.
Deposits  increased  $42.1  million  with growth  occurring  primarily in demand
deposits,  money manager accounts and time deposits.  The $44.2 million decrease
in savings accounts is offset by a comparable increase in money market accounts,
which is attributable  to the conversion of some savings  accounts in connection
with the GBT acquisition.  Demand deposits increased $5.9 million,  as customers
continue to take advantage of free checking  accounts offered as a result of the
Company's  consumer deposit strategy to attract and retain core deposits,  which
provide  the  Company  with a lower  cost  source  of funds.  The $26.6  million
increase in time deposits is primarily  attributable  to growth in deposits with
local municipalities.

Borrowings
Borrowings  consist  of FHLB  advances,  securities  sold  under  agreements  to
repurchase,  and loans  payable  related  to the  Company's  ESOP.  The  Company
generally  uses  borrowings to fund loan growth and to leverage a portion of its
capital  position.  Borrowings  increased  $10.0 million from $300.0  million at
December  31, 1997 to $310.0  million at March 31, 1998  reflecting a portion of
the funding for the growth in loans and investments.

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

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  the Company to  maintain  minimum  amounts and ratios (set forth in the
table  below) of total and Tier 1 capital  to  risk-weighted  assets  and Tier 1
capital to total average assets. Management believes, as of March 31, 1998, that
the Company meets all capital adequacy requirements to which it is subject.

Under the FDIC's  regulatory  framework for prompt corrective  action,  both SIS
Bank and GBT are  considered  well  capitalized  as of  March  31,  1998.  To be
categorized  as  well   capitalized  the  Banks  must  maintain   minimum  total
risk-based,  Tier 1 risk-based,  and Tier 1 leverage  ratios as set forth in the
table below. As of March 31, 1998 the Company also qualified as well capitalized
under the applicable Federal Reserve Board regulations.

                                       20
<PAGE>
The actual  capital  amounts  and ratios for the  Company,  SIS Bank and GBT are
presented  in the  table  below,  no  deductions  were  made  from  capital  for
interest-rate risk.
<TABLE>
<CAPTION>
                                                                         Minimum                 Minimum
                                                                       Requirements            Requirements
                                                                        For Capital            To Qualify As
                                                 Actual              Adequacy Purposes       Well Capitalized
                                         -----------------------  ----------------------  ----------------------
                                            Amount       Ratio       Amount       Ratio    Amount         Ratio
                                         ----------    ---------  ----------    -------  ----------     --------
                                                              (Dollars In Thousands)
<S>                                       <C>           <C>       <C>           <C>        <C>           <C>

As of March 31, 1998:

Tier I Capital (to Average Assets)
   Company                                 $126,978      7.3%      $ 69,892      4.0%        N/A    
   SIS Bank                                $107,134      7.2%      $ 59,301      4.0%      $ 74,126       5.0%
   GBT                                     $ 17,610      6.7%      $ 10,570      4.0%      $ 13,212       5.0%
Tier I Capital (to Risk Weighted Assets)                                                   
   Company                                 $126,978     11.5%      $ 44,173      4.0%      $ 66,259       6.0%
   SIS Bank                                $107,134     11.7%      $ 36,495      4.0%      $ 54,743       6.0%
   GBT                                     $ 17,610      9.2%      $  7,668      4.0%      $ 11,502       6.0%
Total Capital (to Risk Weighted Assets)                                                    
   Company                                 $140,888     12.8%      $ 88,346      8.0%      $110,432      10.0%
   SIS Bank                                $118,632     13.0%      $ 72,991      8.0%      $ 91,238      10.0%
   GBT                                     $ 20,022     10.4%      $ 15,336      8.0%      $ 19,170      10.0%
                                                                                           
As of December 31, 1997:                                                                   
                                                                                           
Tier I Capital (to Average Assets)                                                         
   Company                                 $123,340      7.2%      $ 68,834      4.0%         N/A
   SIS Bank                                $103,780      7.1%      $ 58,358      4.0%      $ 72,947       5.0%
   GBT                                     $ 17,291      6.6%      $ 10,422      4.0%      $ 13,028       5.0%
                                                                                           
Tier I Capital (to Risk Weighted Assets)                                                   
   Company                                 $123,340     11.9%      $ 41,568      4.0%      $ 62,352       6.0%
   SIS Bank                                $103,780     11.9%      $ 35,044      4.0%      $ 52,565       6.0%
   GBT                                     $ 17,291     10.6%      $  6,507      4.0%      $  9,761       6.0%
                                                                                           
Total Capital (to Risk Weighted Assets)                                                    
   Company                                 $136,438     13.1%      $ 83,137      8.0%      $103,921      10.0%
   SIS Bank                                $114,825     13.1%      $ 70,087      8.0%      $ 87,609      10.0%
   GBT                                     $ 19,344     11.9%      $ 13,014      8.0%      $ 16,268      10.0%
</TABLE>

Interest Rate Risk Management
Using management's  estimates of asset prepayments and core deposit decay in its
computation, the Company estimates that its cumulative one-year gap position was
liability sensitive by $62.7 million or 3.49% of total assets at March 31, 1998.
The following table sets forth the amounts of assets and liabilities outstanding
at March 31, 1998,  which are anticipated by the Company to mature or reprice in
each of the future time periods  shown using  certain  assumptions  based on its
historical  experience,  the current interest rate  environment,  and other data
available to management.  Management believes that these assumptions approximate
actual  experience  and considers  such  assumptions  reasonable,  however,  the
interest rate  sensitivity of the Company's  assets and  liabilities  could vary
substantially if different  assumptions were used or actual  experience  differs
from  the  assumptions   used.   Management   periodically   reviews  and,  when
appropriate, changes the assumptions used in creating this table.

                                       21
<PAGE>
<TABLE>
<CAPTION>
                                                                              GAP Position
                                                                            At March 31, 1998
                                                ---------------------------------------------------------------------------
                                                                More than six
                                                 Less than     months less
                                                 six months    than one year    1 - 5 Years     Over 5 Yrs        TOTAL
                                                -------------  --------------- -------------  -------------  --------------
                                                                      (Dollars In Thousands)
<S>                                            <C>               <C>           <C>                 <C>           <C>
Assets:
Federal funds sold and
   interest bearing deposits                    $   54,458        $     --      $     --        $     --          $   54,458
Investment securities                              274,982           181,129       269,102          57,148           782,361
Residential real estate loans                       86,785            46,597       112,142          30,427           275,951
Commercial real estate loans                        51,390            18,634       104,141          12,803           186,968
Commercial loans                                    90,438            12,468       100,437          16,698           220,041
Home equity loans                                  119,655             2,388        22,502          15,799           160,344
Consumer loans                                       6,460               630         4,679             258            12,027
Other assets                                          --                --            --           101,818           101,818
                                                ----------        ----------    ----------      ----------        ----------       
Total assets                                    $  684,168        $  261,846    $  613,003      $  234,951        $1,793,968
                                                ==========        ==========    ==========      ==========        ==========
                                                                                                                 
Liabilities & stockholders' equity:                                                                              
Savings accounts                                $   32,904        $   32,904    $  153,424      $     --          $  219,232
NOW accounts                                        14,518            14,518        67,756            --              96,792
Money market accounts                               77,752            77,752       103,668            --             259,172
Time deposits                                      302,492           189,293        65,163            --             556,948
Borrowed funds                                     161,613            34,120       114,210            --             309,943
Other liabilities & stockholders' equity            35,418            35,418       106,254         174,791           351,881
                                                ----------        ----------    ----------      ----------        ----------
Total liabilities & stockholders' equity        $  624,697        $  384,005    $  610,475      $  174,791        $1,793,968
                                                ==========        ==========    ==========      ==========        ==========
                                                                                                            
Period GAP position                             $   59,471        $ (122,159)   $    2,528      $   60,160
Net period GAP as a percentage of total assets        3.32%            (6.81%)        0.14%           3.35%
Cumulative GAP                                     $59,471        $  (62,688)   $  (60,160)            --
Cumulative GAP as a percentage of total
   assets                                             3.32%            (3.49%)       (3.35%)           --
Cumulative GAP as a percentage of total
   interest-earning assets                            3.51%            (3.70%)       (3.56%)           --
Cumulative interest-earning assets as a
   percentage of cumulative interest-bearing 
   liabilities                                      116.10%           100.87%       108.11%         117.34%
<FN>
For purposes of the above interest sensitivity analysis:

     Residential  loans held for sale at March 31, 1998 totaling $15.9 million are in the less than six month  interest  sensitivity
     period.

     Fixed rate assets are scheduled by contractual  maturity and adjustable rate assets are scheduled by their next repricing date.
     In both cases, assets that have prepayment optionality are adjusted for the Company's estimate of prepayments.

     Loans do not include non-accrual loans of $5.6 million.

     Loans do not include the allowance for loan loss of $23.2 million.

     In certain deposit categories where there is no contractual maturity, Management assumed the sensitivity characteristics listed
     below based on the current  interest  rate  environment  and the  Company's  historical  experience.  Management  reviews these
     assumptions on a quarterly basis and may modify them as circumstances dictate.

          -    Savings accounts are assumed to decay at an annual rate of 30%.
          -    NOW accounts are assumed to decay at an annual rate of 30%.
          -    Money market accounts are assumed to decay at an annual rate of 60%.
          -    Non-interest  bearing  accounts of $177.3  million are included in other  liabilities  and are assumed to decay at an
               annual rate of 40%.
</FN>
</TABLE>
                                       22
<PAGE>
Certain  shortcomings  are  inherent in the method of analysis  presented in the
foregoing  table.  For example,  while certain assets and  liabilities  may have
similar  contractual  maturities  or  periods  to  repricing,  they may react in
different ways to changes in market interest rates.  Further,  in the event of a
change in interest rates,  prepayment and early  withdrawal  levels would likely
deviate significantly from those assumed in calculating the table. Additionally,
certain assets, such as adjustable rate mortgages,  have features which restrict
changes in interest rates on a short-term  basis and over the life of the asset.
Finally, the ability of borrowers to service their adjustable rate mortgages may
decrease in the event of an interest rate increase.

The Company also utilizes income  simulation  modeling in measuring its interest
rate risk and managing its interest rate sensitivity. Income simulation not only
considers  the  impact of  changing  market  interest  rates on  forecasted  net
interest income, but also takes into  consideration  other factors such as yield
curve  relationships,  the volume and mix of assets  and  liabilities,  customer
preferences and general market conditions.

Liquidity
Liquidity  measures the ability of the Company to meet its maturing  obligations
and existing commitments,  to withstand  fluctuations in deposit levels, to fund
its operations and to provide for customer credit needs. If the Company requires
funds  beyond  its  ability  to  generate  them  internally,  it has  additional
borrowing  capacity  with  the  FHLB  and  collateral  eligible  for  repurchase
agreements.  Because the Company has a stable retail  deposit  base,  management
believes  that  significant  borrowings  will not be  necessary  to maintain its
current liquidity position. Management intends to continue seeking opportunities
for expansion and believes that the Company's  liquidity,  capital resources and
borrowing capabilities are adequate for its current and intended operations.

Market Risk
As a financial  institution,  the  Company's  chief market risk is interest rate
risk. The Company has no exposure to foreign currency or commodity  prices.  Its
exposure to equity prices is limited to marketable equity  securities  contained
within  its  available  for sale  investment  portfolio.  At March 31,  1998 the
Company did not have a trading portfolio.

Interest rate risk is the  sensitivity of income to variations in interest rates
over defined time horizons. The primary goal of interest rate risk management is
to control  this risk within  limits and  guidelines  approved by the  Company's
Asset/Liability  Committee  (ALCO).  These  limits and  guidelines  reflect  the
Company's tolerance for interest rate risk.

The Company  attempts to control  interest rate risk by  identifying  exposures,
quantifying them, and identifying their impact on income. The Company quantifies
its  interest  rate  risk  exposures  using  simulation  models  as  well as gap
analyses. The Company manages its interest rate exposures using a combination of
on-balance sheet instruments,  consisting principally of fixed and variable rate
securities,  deposit pricing and FHLB borrowings.  See the GAP Position analysis
under this Item 2 and the notes to the Consolidated  Financial  Statements under
Item 8 in the  Company's  Form 10-K for the year  ended  December  31,  1997 for
further information regarding market risk of these instruments.

At March  31,  1998 and  December  31,  1997,  the  Company  had no  outstanding
exposures to off-balance sheet interest rate instruments such as swaps, forwards
or futures. GBT held derivative  financial  instruments during 1997. However, in
December,  1997  concurrent  with the  acquisition  of GBT, the Company sold its
position  in these  instruments.  At March 31,  1998 and  December  31, 1997 the
Company held no derivative financial instruments.

                                       23
<PAGE>
Part II.  OTHER INFORMATION
Item 1.  Legal Proceedings
         Not applicable

Item 2.  Changes in Securities
         Not applicable

Item 3.  Default upon Senior Securities
         Not applicable

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

(a)      On May 7, 1998, the Annual Meeting of the  Stockholders of SIS Bancorp,
         Inc.  was  held  at  the  Springfield   Sheraton  Hotel,   Springfield,
         Massachusetts.

(b)      Directors elected at the Annual Meeting     (Term to Expire in 2001)
              Charles L. Johnson
                  Consultant- Associated Energy Managers,
                  Investment Management Firm
              F. William Marshall, Jr.
                  President and Chief Executive Officer, SIS Bancorp, Inc.
                  and SIS Bank

         Continuing Directors  (Term to Expire in 1999)
              William B. Hart, Jr.
                  President, The Dunfey Group
                  an investment corporation
              Thomas O'Brien
                  Dean, University of Massachusetts
                  School of Management
              Stephen A. Shatz
                  Attorney, Partner in Shatz, Schwartz & Fentin, P.C.

         Continuing Directors:  (Term to Expire in 2000)
              Sister Mary Caritas, S.P.
                  Retired; former President and Chief Executive Officer of 
                  Mercy Hospital
              John M. Naughton
                  Retired, former Executive Vice President, Massachusetts
                  Mutual Life Insurance Co.
              Ronald E. Bourbeau
                  Owner, Yankee Boat Yard & Marina, Inc.;  Treasurer, Northeast 
                  Yacht Sales

(c)      The matters voted on at the meeting and the results of such voting were
         as follows:

          1.   To elect two Directors  for a three-year  term ending in the Year
               2001 (Proposal 1);

                                    Votes For (shares)   Votes Withheld (shares)
               Charles L. Johnson        5,974,045             36,704
               F. William Marshall, Jr.  5,994,304             16,445

          2.   To approve and adopt the Amended and Restated  SIS Bancorp,  Inc.
               Stock Option Plan, as more fully described in the Proxy statement
               for the meeting
<TABLE>
<CAPTION>
          Votes For (shares)     Votes Against (shares)      Votes Abstained (shares)     Broker Non-Votes (shares)
                <S>                <C>                              <C>                                <C>
                 4,271,816          1,676,902                         62,031                            --
</TABLE>

Item 5.  Other Information
         Not applicable
    
Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits:
         10.   Material Contracts

                                       24
<PAGE>

         10 (g) SIS Bancorp,  Inc.  Stock Option Plan amended and restated as of
         March 1, 1998- Incorporated by reference to Exhibit A to the definitive
         Proxy  Statement  and Notice of Meeting  filed as Schedule 14A with the
         SEC on March 31, 1998.

(b)      Reports on Form 8-K
         On February 13, 1998,  the Company  filed a Form 8-K for  reporting the
         results of the combined  financial  operations  for the Company and its
         subsidiaries, including Glastonbury Bank & Trust Company, for the month
         ended January 31, 1998.




                                       25

<PAGE>


SIGNATURES


Under the requirements of the Securities  Exchange Act of 1934, as amended,  the
Company  has  duly  caused  this  report  to be  signed  on  its  behalf  by the
undersigned thereunto duly authorized.


                                     SIS BANCORP, INC.
                                       (Registrant)


May 14, 1998                          /s/  F. William Marshall, Jr.
Date                                  F. William Marshall, Jr.
                                      President and Chief Executive Officer




May 14, 1998                          /s/ John F. Treanor
Date                                  John F. Treanor
                                      Executive Vice President, Chief Operating
                                      Officer and Chief Financial Officer

                                       26