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 03/31/97

                                                        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: 5,616,800 shares as of May 7, 1997.


<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") wish 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 on 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,  or of changes in the Company's
organization,  compensation and benefit plans; (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
unforeseen  changes  in  interest  rates;  and (v) the  effect of changes in the
business cycle and downturns in the local, regional or national economies.

<PAGE>



                       SIS BANCORP, INC. AND SUBSIDIARIES


                                    FORM 10-Q

                                      INDEX


                                                                       PAGE NO.

   PART I.     FINANCIAL INFORMATION

   Item 1.     Financial Statements (Unaudited)

   Condensed Consolidated Statement of Operations for the
   three months ended March 31, 1997 and 1996.............................  1

   Condensed Consolidated Statement of Financial Condition
   at March 31, 1997 and December 31, 1996................................  2

   Condensed Consolidated Statement of Cash Flows for the
   three months ended March 31, 1997 and 1996.............................  3

   Condensed Consolidated Statement of Changes in Stockholders' Equity
   for the three months ended March 31, 1997 and 1996.....................  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.......................................... 22

   Item 2.     Changes in Securities...................................... 22

   Item 3.     Default upon  Senior Securities............................ 22

   Item 4.     Submission of Matters to a Vote of Security Holders........ 22

   Item 5.     Other Information.......................................... 22

   Item 6.     Exhibits and Reports on Form 8-K........................... 22



SIGNATURES................................................................ 23



<PAGE>

                       SIS BANCORP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                 (Dollars In Thousands Except Per Share Amounts)


                                                            (Unaudited)
                                                         Three Months Ended
                                                               March 31,
                                                     --------------------------
                                                        1997            1996
                                                     -----------    -----------
Interest and dividend income:
    Loans                                            $    12,984    $    11,552
    Investment securities available for sale               7,788          4,126
    Investment securities held to maturity                 3,363          2,946
    Federal funds sold and short term investments            229            214
                                                     -----------    -----------
              Total interest and dividend income          24,364         18,838
                                                     -----------    -----------
Interest expense:
    Deposits                                               8,337          8,077
    Borrowings                                             3,534          1,190
                                                     -----------    -----------
              Total interest expense                      11,871          9,267
                                                     -----------    -----------
Net interest and dividend income                          12,493          9,571
Less: Provision for possible loan losses                     401            700
                                                     -----------    -----------
Net interest and dividend income after provision
    for possible loan losses                              12,092          8,871

Noninterest income:
    Net gain on sale of loans                                106            270
    Net gain on sale of securities                          --                2
    Fees and other income                                  2,612          2,309
                                                     -----------    -----------
              Total noninterest income                     2,718          2,581
                                                     -----------    -----------

Noninterest expense:
    Operating expenses:
         Salaries and employee benefits                    4,719          4,250
         Occupancy expense of bank premises, net             976            782
         Furniture and equipment expense                     508            542
         Other operating expenses                          3,673          3,116
                                                     -----------    -----------
              Total operating expenses                     9,876          8,690
                                                     -----------    -----------
    Foreclosed real estate (income)expense                   (28)           160
    Net expense (income) of real estate operations           421            (14)
                                                     -----------    -----------
              Total noninterest expense                   10,269          8,836

Income before income tax expense                           4,541          2,616
Income tax expense                                         1,771            212
                                                     -----------    -----------
              Net income                             $     2,770    $     2,404
                                                     ===========    ===========

Earnings per share:
         Primary                                     $      0.50    $      0.45
         Fully diluted                               $      0.50    $      0.45

Weighted average shares outstanding:
         Primary                                       5,559,144      5,336,487
         Fully diluted                                 5,559,284      5,336,487



          See accompanying Notes to the Unaudited Financial Statements

                                       1
<PAGE>
<TABLE>
<CAPTION>

                       SIS BANCORP, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                   (Dollars In Thousands Except Share Amounts)


                                                                                  (Unaudited)
                                                                                   March 31,     December 31,
                                                                                     1997            1996
                                                                                 ------------   -------------
<S>                                                                             <C>            <C>
ASSETS

Cash and due from banks                                                          $    42,524    $    31,902
Federal funds sold and short-term investments                                         21,656         10,045
Investment securities available for sale                                             480,070        449,323
Investment securities held to maturity (fair value: $185,962 
  at March 31, 1997 and $191,617 at December 31, 1996)                               188,614        192,174
Loans receivable, net of allowance for possible losses
  ($16,287 at March 31, 1997 and $15,597 at December 31, 1996)                       616,447        610,597
Accrued interest and dividends receivable                                              8,988          8,982
Investments in real estate and real estate partnerships                                2,730          2,757
Foreclosed real estate, net                                                              344            381
Bank premises, furniture and fixtures, net                                            27,352         27,106
Other assets                                                                          15,020         15,345
                                                                                 -----------    -----------
      Total assets                                                               $ 1,403,745    $ 1,348,612
                                                                                 ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                         $ 1,006,873    $   969,517
Federal Home Loan Bank advances                                                      104,693         68,471
Securities sold under agreements to repurchase                                       154,570        176,577
Loans payable                                                                          2,848          2,848
Mortgage escrow  deposits                                                              6,539          4,396
Accrued expenses and other liabilities                                                26,902         24,886
                                                                                 -----------    -----------
      Total liabilities                                                            1,302,425      1,246,695
                                                                                 -----------    -----------

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: 5,732,200 at March 31, 1997 and 5,723,600 at December 31, 1996;
  outstanding: 5,661,800 at March 31, 1997 and 5,723,600 at December 31, 1996)            57             57
Unearned compensation                                                                 (3,624)        (3,693)
Additional paid-in capital                                                            42,891         42,665
Retained earnings                                                                     63,115         60,993
Net unrealized gain on investment securities available for sale                          748          1,895
Treasury stock, at cost (70,400 shares)                                               (1,867)          --
                                                                                 -----------    -----------
      Total stockholders' equity                                                     101,320        101,917
                                                                                 -----------    -----------
Total liabilities and stockholders' equity                                       $ 1,403,745    $ 1,348,612
                                                                                 ===========    ===========
</TABLE>

          See accompanying Notes to the Unaudited Financial Statements

                                       2
<PAGE>
<TABLE>
<CAPTION>
                                              SIS BANCORP, INC. AND SUBSIDIARIES
                                        CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                    (Dollars In Thousands)


                                                                             (Unaudited)
                                                                         Three Months Ended
                                                                              March 31,
                                                                       ----------------------
                                                                           1997        1996
                                                                       ---------    --------- 
<S>                                                                   <C>         <C>
 
Cash Flows From Operating Activities
Net income                                                             $   2,770    $   2,404
Adjustments to reconcile net income to net cash provided by/
   (used for) operating activities
    Provision for possible loan losses                                       401          700
    Depreciation                                                             718          747
    Amortization of premium on investment securities, net                    533          588
    ESOP and restricted stock expenses                                       348          376
    Investment security gains                                               --             (2)
    Income from equity investment in partnerships                             (1)         (87)
    Gain on sale of loans                                                   (106)        (270)
    Disbursements for mortgage loans held for sale                       (15,101)     (33,322)
    Receipts from mortgage loans held for sale                            15,207       33,592
    Changes in other assets and other liabilities:
       Decrease (increase)  in other assets, net                             727       (1,549)
       (Decrease) increase in accrued expenses and other liabilities       2,016         (904)
                                                                       ---------    ---------
         Net cash provided by operating activities                         7,512        2,273
                                                                       ---------    ---------

Cash Flows From Investing Activities

    Proceeds from sales of investment securities available for sale         --          6,600
    Proceeds from maturities and principal payments received
       on investment securities available for sale                        32,203       46,750
    Purchase of investment securities available for sale                 (64,927)    (107,484)
    Proceeds from maturities and principal payments received
       on investment securities held to maturity                          10,713       11,728
    Purchase of investment securities held to maturity                    (7,264)     (23,436)
    Net increase in loans receivable                                      (6,340)      (3,819)
    Net decrease in foreclosed real estate                                    37        1,368
    Proceeds from sale of loans                                               89          284
    Purchase of fixed assets                                                (936)        (553)
                                                                       ---------    ---------
         Net cash used for investing activities                          (36,425)     (68,562)
                                                                       ---------    ---------
</TABLE>

          See accompanying Notes to the Unaudited Financial Statements

                                       3
<PAGE>

<TABLE>
<CAPTION>

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

                                                                   (Unaudited)
                                                                Three Months Ended
                                                                     March 31,
                                                              ---------------------
                                                                1997         1996
                                                              --------    ---------
<S>                                                           <C>         <C>

Cash Flows from Financing Activities

  Net increase in deposits                                      37,356      25,738
  Net increase in borrowings                                    14,215      34,845
  Net increase in mortgagors' escrow deposits                    2,143       1,975
  Net proceeds from exercise of stock options                      175        --
  Repurchase of common stock                                    (2,095)       --
  Cash dividends paid                                             (648)       --
                                                              --------    --------
         Net cash provided by financing activities              51,146      62,558
                                                              --------    --------

Increase (decrease) in cash and cash equivalents                22,233      (3,731)

Cash and cash equivalents, beginning of period                  41,947      38,422
                                                              --------    --------
Cash and cash equivalents, end of period                      $ 64,180    $ 34,691
                                                              ========    ========

Supplemental disclosures of cash flow information:
     Cash paid during the period for interest to depositors
          and interest on debt                                $ 11,733    $  9,220

Non-cash investing activities:
     Transfers to foreclosed real estate, net                 $   --      $    341
</TABLE>







          See accompanying Notes to the Unaudited Financial Statements

                                       4

<PAGE>
<TABLE>
<CAPTION>


                                                   SIS BANCORP, INC. AND SUBSIDIARIES
                                   CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                           For The Three Months Ended March 31, 1997 and 1996
                                                         (Dollars In Thousands)

                                                                                               Net unrealized
                                                                                                 gain (loss)
                                                                                                on investment
                                                                Unearned  Additional            securities     Treasury
                                                       Common    Compen-    Paid-In  Retained    available      Stock          
                                                        Stock    sation     Capital  Earnings    for sale       at Cost    Total
                                                       -------   -------  ---------- --------  -------------   ---------  -------
<S>                                                   <C>      <C>        <C>       <C>       <C>            <C>        <C>

Balance at December 31, 1996                           $   57   $(3,693)   $42,665   $60,993   $  1,895       $    --    $ 101,917 
Net income                                                 --        --         --     2,770         --            --        2,770
Cash dividends declared ($0.12 per share)                  --        --         --      (648)        --            --         (648)
Issuance of common stock in connection with employee                                                         
    and non-employee directors benefit programs            --       (98)        45        --         --           228          175
Decrease in unearned compensation                          --       167        181        --         --            --          348
Change in unrealized gain (loss) on investment                                                                
     securities available for sale                         --        --         --        --     (1,147)           --       (1,147)
Treasury stock purchased                                   --        --         --        --         --        (2,095)      (2,095)
                                                       ------   -------    -------   -------   --------      ---------   ---------
Balance at March 31, 1997                              $   57   $(3,624)   $42,891   $63,115   $    748      $ (1,867)   $ 101,320
                                                       ======   =======    =======   =======   ========      =========   =========
                                                                                                           
Balance at December 31, 1995                           $   57   $(4,937)   $41,790   $42,833   $  1,726       $    --    $  81,469 
Net Income                                                 --        --         --     2,404         --            --        2,404 
Issuance of common stock in connection with employee       
   and non-employee directors benefit programs             --      (241)       241        --         --            --           -- 
Decrease in unearned compensation                          --       529         76        --         --            --          605 
Change in unrealized gain (loss) on investment             
   securities available for sale                           --        --         --        --       (241)           --         (241) 
                                                       ------   -------    -------   -------   --------      ---------   --------- 
Balance at March 31, 1996                              $   57   $(4,649)   $42,107   $45,237   $  1,485      $     --    $  84,237 
                                                       ======   =======    =======   =======   ========      =========   ========= 
</TABLE>
                                              

          See accompanying Notes to the Unaudited Financial Statements


                                       5                        

<PAGE>

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

1. Holding Company Formation
SIS Bancorp,  Inc., a  Massachusetts  corporation,  was organized by Springfield
Institution  for Savings (the "Bank") for the purpose of  reorganizing  the Bank
into a holding company  structure.  The Company acquired 100% of the outstanding
shares of the Bank's common stock,  par value $1.00 per share, in a 1:1 exchange
for shares of the Company's common stock, par value $.01 per share (the "Company
Common Stock").  Upon the  effectiveness of such  share-for-share  exchange (the
"Reorganization") on June 21, 1996, the Bank became the wholly-owned  subsidiary
of the Company and the Bank's former  stockholders  became  stockholders  of the
Company.  The  Reorganization was accounted for in a manner similar to a pooling
of  interests,  and  accordingly,  the  information  included  in the  financial
statements and their  accompanying  notes  presents the combined  results of the
Bank and the Company as if the  Reorganization  had been  effected on January 1,
1996.

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, 1996.
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
Effective January 1, 1997, the Company adopted Statement of Financial Accounting
Standards  ("SFAS") No. 125 "Accounting for Transfers and Servicing of Financial
Assets  and  Extinguishments  of  Liabilities",  that  provides  accounting  and
reporting  standards which require that after a transfer of financial assets, an
entity  recognizes  the  financial  and  servicing  assets it  controls  and the
liabilities it has incurred, derecognizes financial assets when control has been
surrendered,  and  derecognizes  liabilities when  extinguished.  In addition to
setting requirements  regarding the initial recording and subsequent  accounting
for assets,  liabilities  and  derivatives  acquired in  transfers  of financial
assets, this Statement requires that debtors reclassify financial assets pledged
as  collateral  and that  secured  parties  recognize  those  assets  and  their
obligation  to return them in certain  circumstances  in which the secured party
has taken  control of those  assets.  SFAS 125 is  effective  prospectively  for
transfers and servicing of financial assets and  extinguishments  of liabilities
occurring after December 31, 1996 and for collateral  related matters on January
1, 1998.  The adoption of this  statement did not have a material  affect on the
Company's  financial  position  as of March 31,  1997 or on the  results  of its
operations for the three month period then ended.

In February of 1997 the Financial  Accounting  Standards  Board issued SFAS 128,
"Earnings  Per  Share".  SFAS  128  establishes   standards  for  computing  and
presenting earnings per share ("EPS") and applies to entities with publicly held
common stock or potential common stock. This statement  simplifies the standards
for computing EPS previously  found in APB Opinion No. 15, "Earnings Per Share,"
and makes them  comparable  to  international  EPS  standards.  It replaces  the
presentation  of primary EPS with a presentation  of basic EPS. It also requires
dual  presentation of basic and diluted EPS on the face of the income  statement
for all entities with complex capital structures and requires  reconciliation of
the numerator and  denominator of the basic EPS computation to the numerator and
denominator  of the  diluted EPS  computation.  SFAS 128 will be  effective  for
financial  statements issued after December 15, 1997, and will be adopted by the
Company in its 1997 annual report.

If SFAS 128 had been effective during the first quarter of 1997, pro forma basic
and diluted EPS for the three  months ended March 31, 1997 would have been $0.53
and $0.50, respectively.

                                       6
<PAGE>

4. Dividend Policy
The Company paid its first  quarterly  cash  dividend in the amount of $0.12 per
share on February 20, 1997. On April 24, 1997 the Company declared a dividend of
$0.12 per share  payable  on May 23,  1997 to  shareholders  of record as of the
close of business on May 5, 1997.

5. 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").  This
amount is included in net  expense of real  estate  operations  in the March 31,
1997 Condensed  Consolidated  Statement of Operations.  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, 1997, no amounts have been paid relating to the
divestiture. This divestment is scheduled to be completed within one year.

                                       7

<PAGE>


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

                             (DOLLARS IN THOUSANDS)


Overview

SIS Bancorp, Inc., a Massachusetts corporation (the "Company"), was organized by
Springfield Institution for Savings (the "Bank") for the purpose of reorganizing
the Bank into a  holding  company  structure  ("the  Reorganization").  Upon the
effectiveness of the Reorganization, the Bank became the wholly-owned subsidiary
of the Company and the Bank's former  stockholders  became  stockholders  of the
Company. Substantially all of the Company's operations are conducted through the
Bank.  The Bank  provides a wide variety of  financial  services  which  include
retail and commercial banking,  residential  mortgage origination and servicing,
and commercial and consumer lending. The Bank's revenues are derived principally
from interest  payments on its loan  portfolios  and  mortgage-backed  and other
investment  securities.  The  Bank's  primary  sources  of funds  are  deposits,
borrowings  and  principal  and interest  payments on loans and  mortgage-backed
securities.


Results of  Operations  for the Three  Months Ended March 31, 1997 and March 31,
1996

The  Company  reported  net  income of $2.8  million,  or $0.50 per share  fully
diluted for the first quarter of 1997 as compared to net income of $2.4 million,
or $0.45 per share fully  diluted for the same  period last year.  The  improved
results are primarily  attributable to increased net interest  income  partially
offset by higher noninterest expenses and income tax expense.

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.

                                       8
<PAGE>
<TABLE>
<CAPTION>
                                                                            Three Months Ended March 31,
                                                   ------------------------------------------------------------------------------
                                                                  1997                                    1996
                                                   --------------------------------------  --------------------------------------
                                                     Average                   Average      Average                    Average
                                                     Balance   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 interest-bearing deposits        $   17,569   $  229         5.21%     $   15,792    $  214         5.36%
Investment securities held to maturity                 193,075    3,363         6.97%        174,574     2,946         6.75%
Investment securities available for sale               457,804    7,873         6.88%        260,110     4,126         6.35%
Residential real estate loans                          237,316    4,732         7.98%        255,386     5,033         7.88%
Commercial real estate loans                           115,275    2,557         8.87%        118,681     2,444         8.24%
Commercial loans                                       165,508    3,527         8.52%        111,522     2,492         8.84%
Home equity loans                                      106,078    2,075         7.93%         69,350     1,486         8.62%
Consumer loans                                           4,452      128        11.50%          6,858        97         5.66%
                                                    ----------   ------       ------      ----------    ------        -----  
Total interest-earning assets                        1,297,077   24,484         7.55%      1,012,273    18,838         7.44%

Allowance for loan losses                              (15,883)                              (15,422)
Non-interest-earning assets                             89,906                                80,504
                                                    ----------                            ----------
Total assets                                        $1,371,100  $24,484                   $1,077,355   $18,838
                                                    ==========  =======                   ==========   =======
Interest-bearing liabilities:
Deposits
  Savings accounts                                   $ 198,288  $ 1,098         2.25%     $  188,855   $ 1,177         2.51%
  NOW accounts                                          58,035      144         1.01%         54,246       168         1.25%
  Money market accounts                                205,236    1,677         3.31%        203,808     1,696         3.35%
  Time deposit accounts                                421,806    5,418         5.21%        370,581     5,036         5.47%
                                                    ----------   ------       ------      ----------    ------        -----  
Total interest-bearing deposits                        883,365    8,337         3.83%        817,490     8,077         3.97%

Borrowed funds                                         256,880    3,534         5.50%         83,721     1,190         5.62%
                                                    ----------   ------       ------      ----------    ------        -----  

Total interest-bearing liabilities                   1,140,245   11,871        4.22%         901,211     9,267         4.14%
Non-interest-bearing liabilities                       130,405                                96,523
                                                    ----------                            ----------
Total liabilities                                    1,270,650                               997,734
Total stockholders' equity                             100,450                                79,621
                                                    ----------                            ----------
    Total liabilities and stockholders' equity      $1,371,100  $11,871                   $1,077,355   $ 9,267
                                                    ==========  =======                   ==========   =======
   
Net interest income/spread                                      $12,613        3.33%                   $ 9,571         3.30%
                                                                =======        ====                    =======        =====
Net interest margin as a % of interest-
earning assets                                                                 3.89%                                   3.78%
                                                                               ====                                   =====
Tax equivalent adjustment                                       $   120                                $    --
                                                                -------                                -------
Net interest income/spread per Condensed Consolidated
Statement of Operations                                         $12,493                                $ 9,571
                                                                =======                                =======
<FN>
(1) On a fully taxable equivalent basis.  Calculated using a Federal income tax rate of 34% for 1997 and 1996.
</FN>
</TABLE>

Net interest  income on a fully  taxable  equivalent  basis for the three months
ended March 31, 1997 was $12.6  million  compared to $9.6  million for the three
months  ended  March 31,  1996,  an  increase  of $3.0  million or 31.8%.  Total
interest  income was $24.5 million on a fully taxable  equivalent  basis for the
three months ended March 31, 1997, an increase of $5.6 million or 30.0% from the
same period  last year.  These  increases  are  primarily  due to an increase in
average interest-earning assets.

Average  interest-earning  assets  totaled $1.3 billion in the first  quarter of
1997  compared  to $1.0  billion in the first  quarter of 1996,  an  increase of
$284.8 million or 28.1%.  Total  investments  increased  $216.2 million and were
funded by higher deposit levels and borrowed funds.  Total loans increased $66.8
million as the  Company  continued  to focus on the  commercial  and home equity
market  segments,  which  grew by $54.0  million  or 48.4% and $36.7  million or
53.0%,  respectively.  Residential  real estate  loan  balances  declined  $18.1
million  or  7.1%  for  the  three  months  ended  March  31,  1997,  reflecting
amortization and prepayments of the existing loan portfolio  partially offset by
adjustable rate mortgage production. 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.

Total  interest  expense was $11.9  million for the three months ended March 31,
1997  compared to $9.3  million  during the same period in 1996,  an increase of
$2.6  million  or  28.1%.   This  increase  is   attributable  to  increases  in
interest-bearing deposits and borrowed funds.  Interest-bearing deposits totaled
$883.4  million for the quarter ended March 31, 1997 compared to $817.5  million
for the same period in 1996, an increase of $65.9  million or 8.1%.  This growth
occurred  primarily in time  deposits  which  increased  $51.2  million  largely
attributable  to the  introduction  of new CD products.  Borrowed funds averaged
$256.9  million for the three  months  ended  March 31,  1997  compared to $83.7

                                       9
<PAGE>

million for the same period in 1996 reflecting the use of Federal Home Loan Bank
("FHLB")  advances  and  repurchase  agreements  to  leverage  a portion  of the
Company's capital.

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.

                                                Three Months Ended March 31,
                                                      1997 versus 1996
                                             --------------------------------
                                                 Increase (Decrease) Due to
                                             --------------------------------
                                              Volume      Rate         Net
                                             --------   --------   ---------- 
                                                  (Dollars In Thousands)
Interest-earning assets:
  Federal funds sold and
     interest bearing deposits               $    24    $    (9)   $    15
  Investment securities held to maturity         317        100        417
  Investment securities available for sale     3,268        479      3,747
  Residential real estate loans                 (358)        57       (301)
  Commercial real estate loans                   (73)       186        113
  Commercial loans                             1,178       (143)     1,035
  Home equity loans                              753       (164)       589
  Consumer loans                                 (52)        83         31
                                             -------    -------    -------
Total interest-earning assets                  5,057        589      5,646
                                             -------    -------    -------
Interest-bearing liabilities:
Deposits:
  Savings accounts                                56       (135)       (79)
  NOW accounts                                    11        (35)       (24)
  Money market accounts                           12        (31)       (19)
  Time deposit accounts                          676       (294)       382
                                             -------    -------    -------
Total deposits                                   755       (495)       260
Borrowed funds                                 2,422        (78)     2,344
                                             -------    -------    -------
Total interest-bearing liabilities             3,177       (573)     2,604
                                             -------    -------    -------
Change in net interest income                $ 1,880    $ 1,162    $ 3,042
                                             =======    =======    =======

Provision for Possible Loan Losses
The Company's  provision for possible loan losses was $0.4 million for the first
quarter  of 1997  compared  to $0.7  million in the first  quarter of 1996.  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.
                                       10
<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,
                                        -------------------------
                                           1997            1996
                                        ---------        --------

Net gain on sale of loans                $  106           $  270
Net gain on sale of securities             --                  2
Loan charges and fees                       685              707
Deposit related fees                      1,604            1,403
Other charges and fees                      323              199
                                         ------           ------
                                         $2,718           $2,581
                                         ======           ======
                                                 


Net gain on sale of loans  decreased  $0.2 million.  Management  attributes  the
decrease to reduced  production and sale of fixed rate single family residential
mortgage loans due to a higher interest rate environment.

Deposit service charges  increased $0.2 million due primarily to fees associated
with the Company's larger noninterest bearing account base.

Non Interest Expense

Salaries and Benefits Expense
Salaries and benefits expense totaled $4.7 million for the first quarter of 1997
compared  to $4.3  million  for the same  period in 1996,  an  increase  of $0.4
million  reflecting  standard wage  increases as well as an increase in staffing
related to new branch  openings and branch  related  support  personnel  for the
Company's consumer strategy.

Occupancy Expense of Bank Premises
Occupancy  expense of bank  premises  totaled $1.0 million for the first quarter
1997  compared to $0.8 million for the same period in 1996,  an increase of $0.2
million.  This increase is primarily due to costs  associated with the expansion
of the retail branch network and the addition of stand alone ATMs.

                                       11
<PAGE>


Other Operating Expense
The  components  of other  operating  expense for the periods  presented  are as
follows:


                                          Three months ended
                                                March 31,
                                     ------------------------------
                                       1997                  1996
                                     --------              --------

Marketing                            $  591                $  330
Insurance                               139                   101
Professional services                   747                   640
Outside processing                    1,117                   957
Other                                 1,079                 1,088
                                     ------                ------
                                     $3,673                $3,116
                                     ======                ======
                                             


Marketing  expense  increased $0.3 million  related to advertising and marketing
expenses associated with the promotion of home equity lines and loans.

Outside  processing  increased $0.2 million,  reflecting higher  transaction and
account volume resulting from the Company's consumer strategy.

Net Expense of Real Estate Operations
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.  Net  expense of real estate  operations  was $0.4  million  higher
during the first  quarter of 1997  compared to the same  period in 1996.  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, 1997, no amounts have been paid relating to the
divestiture. This divestment is scheduled to be completed within one year.

Income Taxes
For the three  months  ended  March 31,  1997 the  Company  recorded  income tax
expense of $1.8 million compared with income tax expense of $0.2 million for the
three  months  ended  March 31,  1996.  The  increase  in income tax  expense is
attributable  to the Company  becoming  fully  taxable for  financial  reporting
purposes beginning in the fourth quarter of 1996 and a 73.6% increase in pre-tax
earnings.

                                       12
<PAGE>


Balance Sheet Analysis - Comparison Of March 31, 1997 To December 31, 1996

Total assets increased from $1.3 billion at December 31, 1996 to $1.4 billion at
March 31, 1997. This increase primarily reflects growth in loans and investments
funded through an increase in deposits and wholesale borrowings.

Investments  
The Company's  investment  portfolio increased $27.2 million from $641.5 million
at December 31, 1996 to $668.7 million at March 31, 1997.

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,
Federal Home Loan Bank 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")  and the  Federal  Home  Loan  Mortgage  Company
("FHLMC") 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 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, 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       $ 30,898       $ 30,652       $   --         $   --  
Collateralized mortgage obligations            27,594         27,359           --             --
Mortgage-backed securities                    401,198        402,574        142,020        139,930
Asset-backed securities                          --             --           46,394         45,832
Other bonds and short term obligations           --             --              200            200
Other securities                               19,331         19,485           --             --
                                             --------       --------       --------       --------
    Total                                    $479,021       $480,070       $188,614       $185,962
                                             ========       ========       ========       ========
<CAPTION>
                                                                 December 31, 1996
                                           -----------------------------------------------------------
                                                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       $ 29,901       $ 29,943       $   --         $   --    
Collateralized mortgage obligations            28,965         29,007           --             --
Mortgage-backed securities                    371,921        374,218        149,856        149,252
Asset-backed securities                          --             --           42,118         42,165
Other bonds and short term obligations          1,681          1,681            200            200
Other securities                               14,276         14,474           --             --
                                             --------       --------       --------       --------
    Total                                    $446,744       $449,323       $192,174       $191,617
                                             ========       ========       ========       ========
</TABLE>

                                       13
<PAGE>


Loan Portfolio Composition
Gross loans  comprised  $631.4  million or 45.0% of total assets as of March 31,
1997. The following table sets forth  information  concerning the Company's loan
portfolio in dollar amounts and  percentages,  by type of loan at March 31, 1997
and at December 31, 1996.
<TABLE>
<CAPTION>
                                             March 31, 1997         December 31, 1996
                                       ----------------------- ------------------------
                                                   Percent of                Percent of
                                         Amount      Total         Amount      Total
                                       ---------   ----------  ------------  ----------
                                                      (Dollars In Thousands)
<S>                                   <C>          <C>        <C>           <C>    

Residential real estate loans          $236,622      37.47%    $242,410       38.79%
Commercial real estate loans            112,280      17.78%     118,442       18.95%
Commercial loans                        170,782      27.05%     155,808       24.93%
Home equity loans                       106,460      16.86%     104,206       16.67%
Consumer loans                            5,278       0.84%       4,132        0.66%
                                       --------     ------     --------      ------
   Total loans receivable, gross        631,422     100.00%     624,998      100.00%
                                       --------     ------     --------      ------
Less:                                                        
Unearned income and fees                 (1,312)                 (1,196)
Allowance for loan losses                16,287                  15,597
                                       --------                --------
   Total loans receivable, net         $616,447               $ 610,597                 
                                       ========               =========
</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, 1997,
the Company  experienced  an  increase in  prepayments  in its  adjustable  rate
mortgage portfolio.  These prepayments offset new originations and resulted in a
$5.8 million  decrease in residential  real estate balances between December 31,
1996 and March 31, 1997.

During the three months ended March 31, 1997, commercial loan balances increased
$15.0 million, reflecting the Company's continued focus on lending activities in
the local business market.  During this same period  commercial real estate loan
balances decreased $6.1 million primarily due to prepayments.

Home equity loans  outstanding  have  increased  $2.3 million since December 31,
1996.  Management  attributes  this  increase to the active  promotion  of these
products.

Non-performing Assets
Non-performing assets totaled $6.4 million as of March 31, 1997 compared to $7.6
million as of  December  31,  1996,  a decrease  of $1.2  million or 15.3%.  The
decrease  was  principally  attributable  to  a  decrease  of  $2.1  million  in
non-accruing  commercial  real estate loans  partially  offset by an increase of
$0.9  million  in loans past due 90 days but still  accruing.  The  decrease  in
non-accruing  commercial  real estate  loans is  attributable  primarily  to the
payment in full of two loans.

                                       14
<PAGE>

The  following  table  sets  forth  information   regarding  the  components  of
non-performing assets for the periods presented:

                                              March 31,    December 31,
                                                 1997          1996
                                             -----------   -----------
                                                (Dollars In Thousands)
Non-accrual loans (1):
   Residential real estate loans                $1,415       $1,287
   Commercial real estate loans                  2,362        4,428
   Commercial loans                                577          674
   Home equity loans                               188          157
   Consumer loans                                    3            1
                                                ------       ------
   Total non-accrual loans                       4,545        6,547
                                                ------       ------
                                                           
Loans past due 90 days still accruing (2)        1,315          428
                                                ------       ------
   Total non-performing loans                    5,860        6,975

Foreclosed real estate (3)                         344          381
Restructured loans on accrual status (4)           197          198
                                                ======       ======
   Total non-performing assets                  $6,401       $7,554
                                                ======       ======
                                                       
Total non-performing loans to total
   gross loans                                    0.93%        1.12%

Total non-performing assets to total
   assets                                         0.46%        0.56%

Allowance for possible losses to
   non-performing loans                         277.94%      223.61%


(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 Bank 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).

                                       15
<PAGE>


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, 1997 was $16.3  million,  compared to $14.6 million at March
31, 1996.  The activity in the  allowance for possible loan losses for the three
months ended March 31, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                                  March 31,
                                                                      ----------------------------
                                                                          1997            1996
                                                                      ----------       -----------
                                                                        (Dollars In Thousands)
<S>                                                                  <C>              <C>
Balance, beginning of period                                          $ 15,597          $ 14,986  
Provision for loan losses                                                  401               700
Charge-offs:                                                                         
  Residential real estate loans                                             (3)             --
  Commercial real estate loans                                            --              (1,866)
  Commercial loans                                                        (128)             --
  Home equity loans                                                        (15)              (63)
  Consumer loans                                                           (44)              (18)
                                                                      --------          --------
    Total charge-offs                                                     (190)           (1,947)
Recoveries:                                                                          
  Residential real estate loans                                              1               408
  Commercial real estate loans                                             426               407
  Commercial loans                                                          39                45
  Home equity loans                                                          5                11
  Consumer loans                                                             8                 9
                                                                      --------          --------
    Total recoveries                                                       479               880
                                                                      --------          --------
Net recoveries/(charge offs)                                               289            (1,067)
Balance, end of period                                                $ 16,287          $ 14,619
                                                                     =========           =======

Ratio of net loan recoveries/(charge offs) during the period to
    average loans outstanding during the period                           0.05%            (0.19%)
Ratio of allowance for possible loan losses to total loans
    at the end of the period                                              2.58%             2.54%
Ratio of allowance for possible loan losses to non-performing
    loans at the end of the period                                      277.94%           133.73%
</TABLE>

                                       16
<PAGE>


At March 31, 1997, the recorded investment in loans that are considered impaired
under SFAS 114  "Accounting  by  Creditors  for  Impairment  of a Loan" was $9.6
million. Included in this amount is $1.4 million of impaired loans for which the
related SFAS 114  allowance  is $0.3 million and $8.2 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, 1997 was  approximately
$8.6  million.  For the three month  period  ended March 31,  1997,  the Company
recognized interest income on these impaired loans of $0.1 million.

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 loans in each
category to total loans.
<TABLE>
<CAPTION>
                                                              March 31, 1997                   December 31, 1996
                                                     -------------------------------  --------------------------------
                                                                          % of                             % of
                                                                          Total                            Total
                                                                      Allowance for                     Allowance for
                                                          Amount       Loan Losses      Amount           Loan Losses
                                                     -------------    -------------   ------------     --------------
<S>                                                  <C>               <C>           <C>               <C>
Residential real estate loans                          $ 2,289           14.05%        $ 1,540            9.87%
Commercial real estate loans                             4,986           30.61%          5,808           37.24%
Commercial loans                                         6,831           41.95%          6,711           43.03%
Home equity loans                                        1,585            9.73%          1,207            7.74%
Consumer loans                                             596            3.66%            331            2.12%
                                                       -------          ------         -------          ------
Total allowance for possible loan losses               $16,287          100.00%        $15,597          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, 1997. The Company's
deposits  consist of demand and NOW  accounts,  passbook and  statement  savings
accounts, money market accounts and time deposits.

Total deposits were $1.0 billion at March 31, 1997 compared to $969.5 million at
December 31, 1996, an increase of $37.4 million.  This growth occurred primarily
in demand  deposits,  savings  accounts and time deposits.  Demand  deposits and
savings  accounts  increased  $9.6 million and $9.7  million,  respectively,  as
customers  continue to take  advantage  of free  savings and  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 $16.4 million growth in time deposits is primarily  attributable  to
the introduction of new CD products.

The  following  table  presents  the  composition  of  deposits  for the periods
indicated:


                                   March 31, 1997          December 31, 1996
                             ------------------------ --------------------------
                                             Percent                   Percent
                                               of                         of
                                 Amount      Total        Amount         Total
                             -----------   ---------   -----------    ----------
                                        (Dollars In Thousands)
Demand deposits              $  110,128      10.94%     $  100,527       10.37% 
NOW accounts                     61,185       6.08%         57,980        5.98%
Savings accounts                205,117      20.37%        195,418       20.16%
Money market accounts           207,995      20.66%        209,523       21.61%
Time deposits                   422,448      41.95%        406,069       41.88%
                             ----------     ------      ----------      ------
    Total deposits           $1,006,873     100.00%     $  969,517      100.00%
                             ==========     ======      ==========      ======
  
                                     17
<PAGE>


Borrowings
Borrowings  consist  of FHLB  advances,  securities  sold  under  agreements  to
repurchase,  and loans payable.  The Company  generally uses  borrowings to fund
loan  growth  and to  leverage  a portion of its  capital  position.  Borrowings
increased  $14.2  million  from $247.9  million at  December  31, 1996 to $262.1
million at March 31, 1997  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  both the Company and the Bank 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  average  assets.  As of March 31,  1997 both the
Company and the Bank exceed all capital adequacy  requirements to which they are
subject and qualify as "well  capitalized"  under applicable  regulations of the
Board of Governors of the Federal  Reserve System (the "Federal  Reserve Board")
and the FDIC. <FN1>

The Company's and Bank's actual capital  amounts and ratios are presented in the
table. 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
                                          ---------   -------   ---------  -------  ----------  --------
As of March 31, 1997:
<S>                                       <C>         <C>      <C>         <C>     <C>          <C>
Tier I Capital (to Average Assets)
   Company                                 $ 96,695      7.1%   $ 54,689     4.0%       N/A
   Bank                                    $ 95,618      7.0%   $ 54,650     4.0%   $ 68,313      5.0%
Tier I Capital (to Risk Weighted Assets)                                           
   Company                                 $ 96,695     12.5%   $ 31,056     4.0%   $ 46,584      6.0%
   Bank                                    $ 95,618     12.3%   $ 31,038     4.0%   $ 46,557      6.0%
Total Capital (to Risk Weighted Assets)                                            
   Company                                 $106,476     13.7%   $ 62,112     8.0%   $ 77,640     10.0%
   Bank                                    $105,399     13.6%   $ 62,076     8.0%   $ 77,595     10.0%
                      
<CAPTION>                                                 
As of December 31, 1996:   
<S>                                       <C>         <C>      <C>         <C>     <C>          <C>
                                                        
Tier I Capital (to Average Assets)                                                 
   Company                                 $ 96,317      7.4%   $ 52,007     4.0%              N/A
   Bank                                    $ 95,816      7.4%   $ 51,999     4.0%   $ 64,999      5.0%
Tier I Capital (to Risk Weighted Assets)                                           
   Company                                 $ 96,317     12.8%   $ 30,118     4.0%   $ 45,177      6.0%
   Bank                                    $ 95,816     12.7%   $ 30,110     4.0%   $ 45,165      6.0%
Total Capital (to Risk Weighted Assets)                                            
   Company                                 $105,804     14.1%   $ 60,236     8.0%   $ 75,296     10.0%
   Bank                                    $105,300     14.0%   $ 60,220     8.0%   $ 75,275     10.0%
                                                                                 
</TABLE>
<FN1>Recent  amendments  to the  Federal  Reserve  Board's  Regulation  Y, which
     included a definition  of "well  capitalized"  for bank holding  companies,
     became effective on April 21, 1997.



                                       18
<PAGE>


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 $37.0 million or 2.64% of total assets at March 31, 1997.
The following table sets forth the amounts of assets and liabilities outstanding
at March 31, 1997,  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 assumptions used in creating this table.

                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                                           GAP Position
                                                                        At March 31, 1997
                                                ----------------------------------------------------------------------
                                                              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                     $   21,656   $     --        $     --     $     --        $   21,656
Investment securities                               296,215      160,763         180,267       31,439         668,684
Residential real estate loans                        77,393       43,204         101,559       13,366         235,522
Commercial real estate loans                         28,185       16,628          58,568        6,554         109,935
Commercial loans                                     77,672       10,492          73,827        8,508         170,499
Home equity loans                                    83,464        1,193          13,357        8,983         106,997
Consumer loans                                        4,727           52             217          241           5,237
Other assets                                           --           --              --         85,215          85,215
                                                 ----------   ----------      ----------   ----------      ----------
Total assets                                     $  589,312   $  232,332      $  427,795   $  154,306      $1,403,745
                                                 ==========   ==========      ==========   ==========      ==========
                                                                                                          
Liabilities & stockholders' equity:                                                                       
Savings accounts                                 $   30,768   $   30,768      $  143,581   $     --        $  205,117
NOW accounts                                          9,178        9,178          42,829         --            61,185     
Money market accounts                                62,398       62,398          83,199         --           207,995     
Time deposits                                       251,785      111,421          59,242         --           422,448
Borrowed funds                                      246,660          250           7,330        7,871         262,111
Other liabilities & stockholders' equity             21,922       21,922          65,766      135,279         244,889
                                                 ----------   ----------      ----------   ----------      ----------
Total liabilities & stockholders' equity         $  622,711   $  235,937      $  401,947   $  143,150      $1,403,745
                                                 ==========   ==========      ==========   ==========      ==========
                                                                                                 
Period GAP position                              $  (33,399)  $   (3,605)     $   25,848   $   11,156
                                                                                
Net period GAP as a percentage of total assets        (2.38%)      (0.26%)          1.84%        0.79%

Cumulative GAP                                   $  (33,399)  $  (37,004)     $  (11,156)         --
                                                                   
Cumulative GAP as a percentage of total
   assets                                             (2.38%)      (2.64%)         (0.79%)        --
<FN>
For purposes of the above interest sensitivity analysis:

     Residential loans held for sale at March 31, 1997 totaling $2.4 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 $4.5 million.

     Loans do not include the allowance for loan loss of $16.3 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 $110.1 million are included in 
            other liabilities and are assumed to decay at an annual rate of 40%.
</FN>
</TABLE>
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 

                                       20
<PAGE>

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.

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.

                                       21

<PAGE>


      PART II. OTHER INFORMATION

      Item 1. Legal Proceedings

        The Company is involved in  litigation  arising in the normal  course of
business. Management does not believe that the ultimate liabilities arising from
such  litigation,  if any,  would be material  in  relation to the  consolidated
results of operations or financial position of the Company.

Item 2. Changes in Securities

        Not applicable

Item 3. Defaults upon Senior Securities

        Not applicable

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

        Not applicable

Item 5. Other Information

        Not applicable

      Item 6. Exhibits and Reports on Form 8-K

        (a) Exhibits - none

        (b) Reports on Form 8-K

               On January 23, 1997, a Form 8-K was filed by the Company relating
         to (i) the adoption of a  Shareholder  Rights Plan on January 22, 1997;
         (ii) a Stock Repurchase Program authorizing the purchase of up to 5% of
         the Company's Common Stock; (iii) and a Press Release issued on 1/23/97
         relating to the  announcement  of financial  results for the year ended
         12/31/96 and the  declaration of a quarterly cash dividend of $0.12 per
         share payable on February 20, 1997 to holders of record as of the close
         of business on February 3, 1997.


                                       22

<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 13, 1997                         /s/ F. William  Marshall, Jr.
Date                                 F. William Marshall, Jr.
                                     President and Chief Executive Officer




May 13, 1997                         /s/ John F. Treanor
Date                                John F. Treanor
                                    Executive Vice President
                                    and Chief Financial Officer




                                       23