Exhibit 13

1 9 9 9  A N N U A L  R E P O R T



|FALMOUTH
BANCORP, Inc. | [LOGO]
|---------------------- | ------

www.falmouthbank.com

TABLE OF CONTENTS

|Company Profile
President's Message
Financial Highlights
Management's Discussion and Analysis of Financial Condition and Results of Operations
Market for the Company's Common Stock
Consolidated Financial Statements | 1
  2
  3
  5
19
20
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|Forward Looking Statements
This Annual Report to Stockholders contains certain forward looking statements consisting of estimates with respect to the financial condition, results of operations and business of the Company and the Bank that are subject to various factors which
could cause actual results to differ materially from these estimates. These factors include: changes in general, economic and market conditions, or the development of an adverse interest rate environment that adversely affects the interest rate spread or
other income anticipated from the Bank's operations and investments; and the factors described under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Year 2000."
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

COMPANY PROFILE

Falmouth Bancorp, Inc. (the "Company") was incorporated for the purpose of becoming the holding company for Falmouth Co-operative Bank (the "Bank"), a Massachusetts-chartered stock
co-operative bank. The Company had total assets of $118.7 million as of September 30, 1999. The Bank conducts its business through an office located in Falmouth, Massachusetts, where it was originally founded in 1925 as a Massachusetts chartered mutual
co-operative Bank, and two branches located in East Falmouth and North Falmouth, Massachusetts. The Bank's deposits are currently insured up to applicable limits by the Bank Insurance Fund of the Federal Deposit Insurance Corporation and the Share
Insurance Fund of the Co-operative Central Bank of Massachusetts.

The Bank considers its primary market area to be the communities of Falmouth and Mashpee in Barnstable County, Massachusetts.

The Bank's business strategy is to operate as a well-capitalized, profitable and independent community bank dedicated to financing home ownership and consumer and small business needs in its market area and to
providing quality service to its customers. The Bank has implemented this strategy by: (i) closely monitoring the needs of customers and providing quality service; (ii) emphasizing consumer-oriented banking by originating residential mortgage loans and
consumer loans, and by offering checking accounts and other financial services and products; (iii) focusing on expanding the volume of the Bank's existing lending activities to produce moderate increases in loan originations; (iv) maintaining asset
quality through conservative underwriting standards; (v) maintaining capital in excess of regulatory requirements; and (vi) producing stable earnings.

Falmouth Bancorp, Inc. is headquartered in Falmouth, Massachusetts. The Company's stock trades on the American Stock Exchange under the symbol "FCB."

PRESIDENT'S MESSAGE

Dear Shareholder,

The Falmouth Bancorp, Inc. achieved impressive results in key performance areas of deposit growth, operating efficiency, capital management and core-earnings for fiscal year ended September 30, 1999. The foundation
of our success lies within our commitment to excellence, quality products and personal attentive service for each of our customers, one at a time.

As the Year 2000 moves closer, the Bank and its operations have continually addressed testing and contingency planning. To date, with the guidance of the Year 2000 Steering Committee, management and the Board of
Directors, all systems and facilities testing has been completed and all identified problems have been addressed. Management and staff have been scheduled to review and re-test critical Bank systems on Saturday, January 1, 2000 and Sunday, January 2, 2000
if necessary. We believe that we are substantially ready for the year's end and will be able to provide our customers the service they expect on Monday January 3, 2000.

Net income for year ended September 30, 1999 was $969,000 as compared to $1,185,000 for year ended September 30, 1998 for a decrease of $216,000. The decrease in net income was due primarily to the decrease of
$506,000 in net gains on sales of securities investments and loans.

While net income declined in fiscal 1999, normalized or core-earnings actually increased. The Company's pre-tax earnings before net gains on sales of assets and one-time write down on leasehold improvements for
fiscal 1999 were $1,460,000 or $1.17 per average share outstanding, an increase of $.16 per share or 16% as compared to $1,382,000 or $1.01, respectively for fiscal 1998. This successful advance in core-earnings performance was primarily driven by the
combination of a 12.2% growth in deposits, improved operating efficiency ratio of 65.7% in fiscal 1999 as compared to 74.8% in fiscal 1998, and the effective implementation of capital management strategies including the stock repurchase programs.

We continue to focus on quality loan originations, as opposed to quantity of loans. Only one small personal loan was seventy one days overdue at September 30, 1999 against a backdrop of an expanding loan portfolio.
Net loans were $80.5 million or 68% of total assets at September 30, 1999, as compared to $77.7 million or 69% of total assets at September 30, 1998, for an increase of $2.8 million. Despite the modest growth in the loan portfolio during fiscal 1999, the
Company had a very productive year of $34.7 million loan originations.

The Company continued to make progress in addressing its capital ratio issue. At September 30, 1999 the Company's capital ratio was $19.2 million or 16.2% of total assets as compared to $22.2 million or 19.6% at
prior year, a decrease of $3.0 million or 3.4 percentage points. The primary reason for the $3.0 million decrease in capital can be attributed to the success of the Company's $3.6 million stock repurchase programs during fiscal 1999. The book value was
$16.38 per share at September 30, 1999 as compared to $15.87 at prior year for an increase of $.51 or 3.2%.

Our vision and determination of becoming a high-performance company, achieving benchmark results in customer satisfaction, growth, efficiency and market share have brought us to where we are today. Tomorrow is here,
now. We look forward to the challenges that await us at the edge of this new century and we also believe that our Company is positioned at the edge of a bright and successful future.



| | /s/ Santo P. Pasqualucci
Santo P. Pasqualucci
President and Chief Executive Officer
| | -----------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS

The selected consolidated financial and other data of the Company and the Bank set forth below is derived in part from and should be read in conjunction with the Financial Statements of the Bank and Notes
thereto.

|                                                    | At September
30,      
|--------------------------------------------------- | ----------------------
|                                                    | 1999                  
|                                                    | (Dollars in thousands)
|Selected Financial Condition Data:
Total amount of: |                       
|Assets                                              | $118,652              
|Loans, net                                          | 80,487                
|Investment securities                               | 27,507                
|Deposits                                            | 92,886                
|Stockholder's equity/net worth (1)                  | 19,259                



|                                                                 | Year Ended September 30,                     
|---------------------------------------------------------------- | ---------------------------------------------
|                                                                 | 1999                                         
|                                                                 | (Dollars in thousands, except per share data)
|Selected Operating Data:Interest and dividend income             | $       7,488                                
|Interest expense on deposits and
   borrowings                   | 3,358                                        
|Net interest income                                              | 4,130                                        
|Provision for possible loan losses                               | 42                                           
|Net interest income after provision 
   for possible loan losses | 4,088                                        
|Other income:                                                    |                                              
|Gain on sales of investment 
     securities, net                | 263                                          
|Other                                                            | 386                                          
|Total other income                                               | 649                                          
|Operating expenses                                               | 2,924                                        
|Income before income taxes                                       | 1,813                                        
|Income taxes                                                     | 844                                          
|Net income                                                       | $          969                               
|                                                                 |                                              
|Per Share Data:                                                  |                                              
|Earnings per share-basic                                         | $           .78                              
|Earnings per share-diluted                                       | .77                                          
|Dividend payout ratio                                            | 35.90%                                       
|Weighted average number of common
   shares outstanding          | 1,243,925                                    

____________________

(1)   Includes unrealized gain on available-for-sale securities of $128,000, $324,000, $416,000, and $144,000, net of tax, at 
        September 30, 1999, 1998, 1997 and 1996, respectively. 
(2)   Because of the Bank's conversion in mid 1996 from mutual to stock ownership, a presentation of earnings per share for 
        fiscal 1996 is meaningful.

|                                                                           | At or for the Year Ended September 30,
|-------------------------------------------------------------------------- | --------------------------------------
|                                                                           | 1999                                  
|Interest rate spread information:(1)                                       |                                       
|Average during period                                                      | 2.98%                                 
|End of period                                                              | 2.93                                  
|Net interest margin(2)                                                     | 3.80                                  
|Return on average assets                                                   | 0.85                                  
|Return on average equity                                                   | 4.61                                  
|                                                                           |                                       
|Asset Quality Ratios:                                                      |                                       
|Non-performing loans as a percent of
   total loans                        | -                                     
|Non-performing assets as a percent of
   total assets                      | -                                     
|Allowance for possible loan losses as a percent
   of non-performing loans | -                                     
|                                                                           |                                       
|Capital Ratios:(3)                                                         |                                       
|Average equity to average assets                                           | 18.35                                 
|Regulatory Tier 1 leverage capital ratio                                   | 13.46                                 

____________________

(1)   Interest rate spread represents the difference between weighted average yield on interest-earning assets and the weighted 
        average cost of interest-bearing liabilities.
(2)   Net interest margin represents net interest income divided by average interest-earning assets.
(3)   Represents Capital Ratios of the Bank.

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

General

Falmouth Bancorp, Inc. (the "Company"), a Delaware corporation, is the holding company for Falmouth Co-operative Bank (the "Bank"), a Massachusetts-chartered stock co-operative bank. At September 30, 1999 there
were 1,175,744 shares outstanding. The Company's sole business activity is ownership of the Bank. The Company also makes investments in long and short-term marketable securities and other liquid investments. The financial data presented in this 1999
Annual Report consists of the activity of the Bank for the fiscal year 1997 and the fiscal year 1998 from October 1, 1997 through October 13, 1997; and the consolidated activity of the Company and subsidiaries from October 14, 1997 for the remainder of
the fiscal year ended September 30, 1998. It has been deemed reasonable to compare the financial condition and operating results of the Company for the year ended September 30, 1999 to that of the Bank for the year ended September 30, 1998.

The business of the Bank consists of attracting deposits from the general public and using these funds to originate mortgage loans secured by one- to four-family residences located primarily in Falmouth,
Massachusetts and surrounding areas and to invest in investment securities. To a lesser extent, the Bank engages in various forms of consumer and home equity lending. The Bank's profitability depends primarily on its net interest income, which is the
difference between the interest income it earns on its loans and investment portfolio and its cost of funds, which consists mainly of interest paid on deposits. Net interest income is affected by the relative amounts of interest-earning assets and
interest-bearing liabilities and the interest rates earned or paid on these balances. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income.

The Bank's profitability is also affected by the level of noninterest income and expense. Noninterest income or other income consists primarily of service fees and gain on sales of investment securities. Noninterest
expense or operating expenses consist of salaries and benefits, deposit insurance premiums paid to the Federal Deposit Insurance Corporation ("FDIC"), occupancy related expenses and other operating expenses.

The operations of the Bank, and banking institutions in general, are influenced significantly by general economic conditions and related monetary and fiscal policies of financial institutions' regulatory agencies.
Deposit flows and the cost of funds are influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for financing real estate and other types of loans, which in turn are
affected by the interest rates at which such financing may be offered and other factors affecting loan demand and the availability of funds.

Business Strategy

The Bank's business strategy is to operate as a well-capitalized, profitable and independent community bank dedicated to financing home ownership and consumer needs in its market area and to providing quality
service to its customers. The Bank has implemented this strategy by: (i) closely monitoring the needs of customers and providing quality service; (ii) emphasizing consumer-oriented banking by originating residential mortgage loans and consumer loans and
by offering checking accounts and other financial services and products; (iii) focusing on expanding lending activities to produce moderate increases in loan originations; (iv) maintaining asset quality; (v) maintaining capital in excess of regulatory
requirements; and (vi) producing stable earnings.

Comparison of Financial Condition at September 30, 1999 and 1998

The Company's total assets increased by $5.9 million or 5.2% for the year ended September 30, 1999 from $112.8 million at September 30, 1998 to $118.7 million at September 30, 1999. Total net loans were $80.5
million or 86.7% of total deposits at September 30, 1999 as compared to $77.7 million or 95.3% of total deposits at September 30, 1998, representing an increase of $2.8 million. Investment securities were $27.5 million or 23.2% of total assets at
September 30, 1999 as compared to $24.5 million or 21.7% of total assets at September 30, 1998. The proceeds from maturing securities were in part allocated to fund the volume of loan production, with the balance redeployed into short-term securities
investments. Total deposits were $92.9 million at September 30, 1999 as compared to $81.5 million at September 30, 1998, a 14.0% increase. Total deposits increased by $11.4 million for the year ended September 30, 1999. Stockholders' equity was $19.3
million at September 30, 1999 as compared to $22.2 million at September 30, 1998, a decrease of $2.9 million. Stockholders' equity reported at September 30, 1999 included an unrealized gain in available-for-sale securities of $128,000 and retained
earnings of $10.8 million. The ratio of stockholders' equity to total assets was 16.2% at September 30, 1999 and the book value per share of common stock was $16.38. Net income per share of common stock for the fiscal year ended September 30, 1999
was $0.78, as compared to $0.86 for the prior year. The decrease in net income per share was due primarily to the $577,000 decrease in net gains from sales of investment securities in fiscal 1999, as compared to the prior year.

Comparison of Financial Condition at September 30, 1998 and 1997

The Company's total assets increased by $16.4 million or 17.0% for the year ended September 30, 1998 from $96.4 million in September 30, 1997 to $112.8 million at September 30, 1998. Total net loans were $77.7
million or 95.3% of total deposits at September 30, 1998 as compared to $53.9 million or 74.6% of total deposits at September 30, 1997, representing an increase of $23.8 million. Investment securities were $24.5 million or 21.7% of total assets at
September 30, 1998 as compared to $36.4 million or 38.7% of total assets at September 30, 1997. The proceeds from maturing securities were in part allocated to fund an increased volume of loan production, with the balance redeployed into short-term
securities investments. Total deposits were $81.5 million at September 30, 1998 as compared to $72.2 million at September 30, 1997, a 12.9% increase. Total deposits increased by $9.3 million for the year ended September 30, 1998. Stockholders' equity was
$22.2 million at September 30, 1998 as compared to $22.8 million at September 30, 1997, a decrease of $564,000. Stockholders' equity reported at September 30, 1998 included an unrealized gain in available-for-sale securities of $324,000 and retained
earnings of $10.2 million. The ratio of stockholders' equity to total assets was 19.7% at September 30, 1998 and the book value per share of common stock was $15.87. Net income per share of common stock for the fiscal year ended September 30, 1998
was $0.86, as compared to $0.55 for the prior year.

Comparison of Operating Results at September 30, 1999 and 1998

Net Income.The Company's net income for the twelve months ended September 30, 1999 was $969,000, as compared to $1.2 million for the twelve months ended September 30, 1998. The
$216,000 decrease in net income was due primarily to the $577,000 decrease in net gain from sales of investment securities as compared to the prior year. Additionally, total other expense for the twelve months ended September 30, 1999 was $2,924,000 as
compared to $3,177,000 for the prior year. The $252,000 decrease in total other expenses was due primarily to the $327,000 decrease in write-down of long lived assets associated with the relocation of the East Falmouth branch office.

Net Interest and Dividend Income.Net interest and dividend income for the twelve months ended September 30, 1999 was $4.1 million, representing no change from the $4.1 million for
the twelve months ended September 30, 1998. The zero net change in net interest and dividend income was the result of the increase in interest income offset by an increase in total interest expense. The net interest margin for the twelve months ended
September 30, 1999 was 3.80%, a decrease of 30 basis points, as compared to 4.10% for the twelve months ended September 30, 1998. The return on average assets for the twelve months ended September 30, 1998 was 0.85%, a decrease of 29 basis points, as
compared to 1.14% for the prior year. The primary reason for the decrease in the return on average assets was the decrease in net securities gains from $840,000 for the year ended September 30, 1998 to $263,000 for the year ended September 30, 1999, a
difference of $578,000.

Interest and Dividend Income.Total interest and dividend income for the twelve months ended September 30, 1999 was $7.5 million, an increase of $282,000, as compared to $7.2
million for the twelve months ended September 30, 1998. The increase in interest and dividend income was due primarily to a $513,000 increase in interest income on loans off-set, in part, by a $231,000 decrease in interest and dividends on securities and
short-term investments. The increase in interest income on loans was primarily the result of an increase in the volume of loans held in portfolio, while the decrease in interest and dividends on securities was the result of utilizing maturing securities
to fund the purchase of treasury shares.

Interest Expense.Interest expense for the twelve months ended September 30, 1999 was $3.4 million, an increase of $218,000 as compared to $3.1 million for the twelve months ended
September 30, 1998. The increase in interest expense was due primarily to an increase in deposit accounts of $11.4 million during the period, coupled with an increase of interest on borrowings of $173,000 over the previous year.

Provision for Possible Loan Losses.The provision for possible loan losses for the twelve months ended September 30, 1999 was $42,000 compared to $26,000 for the twelve months
ended September 30, 1998. The increase in the amount of the provision for possible loan losses was the result of the Bank's efforts to maintain adequate reserves for the increased net loans. The allowance for loan losses at September 30, 1999 was
$569,000, as compared to $527,000 at September 30, 1998.

Non-interest Income.Non-interest income or other income for the twelve months ended September 30, 1999 was $649,000, as compared to $1.1 million for the twelve months ended
September 30, 1998. The $401,000 decrease was due to reduced net securities gains of $578,000, coupled with increases of $35,000 in service charge income, $71,000 in gains on mortgages sold, and a $50,000 increase in other income.

Other Expense.Other expense for the twelve months ended September 30, 1999 was $2.9 million as compared to $3.2 million for the twelve months ended September 30, 1998. The
$252,000 decrease was primarily due to the combination of an increase in salaries and employee benefits of $52,000, a decrease in occupancy expense of $10,000, a decrease in legal and professional fees of $81,000, an increase in data processing fees of
$38,000, a decrease in directors' fees of $6,000, an increase in equipment expense of $17,000, an increase in other operating expenses of $65,000 and a one time write-down of $327,000 that was made to leasehold improvements during the fourth quarter of
1998 due to the relocation of the East Falmouth branch office. There were no write-downs during the year ended September 30, 1999.

Comparison of Operating Results at September 30, 1998 and 1997

Net Income. The Company's net income for the twelve months ended September 30, 1998 was $1.2 million as compared to $752,000 for the twelve months ended September 30, 1997. The $433,000 increase in net
income was primarily due to the increase in net gain from sales of investment securities as compared to the prior year. The $601,000 increase in net interest and dividend income for the year ended September 30, 1998, as compared to the prior year, was
off-set by the $650,000 increase in total operating expenses for fiscal 1998.

Net Interest and Dividend Income. Net interest and dividend income for the twelve months ended September 30, 1998 was $4.1 million as compared to $3.5 million for the twelve months ended September 30, 1997.
The $601,000 increase in net interest income was the result of the increase in interest income on loans. The net interest margin for the twelve months ended September 30, 1998 was 4.10%, an increase of 20 basis points, or 5.10% as compared to 3.90% for
the twelve months ended September 30, 1997. The return on average assets for the twelve months ended September 30, 1998 was 1.14%, an increase of 31 basis points, or 37.3%, as compared to .83% for the same period of the prior year. The primary reason for
the increase in the return on average assets was the deployment of proceeds from maturing securities into an increased volume of residential and commercial loan originations during the year ended September 30, 1998.

Interest and Dividend Income.Total interest and dividend income for the twelve months ended September 30, 1998 was $7.2 million, an increase of $947,000 as compared to $6.3 million for the twelve months ended
September 30, 1997. The increase in interest and dividend income was due primarily to a $1.5 million increase in interest income on loans and a $593,000 decrease in interest and dividends on securities and short-term investments. The increases in interest
income on loans was, for the most part, the result of an increase in the volume of loans originated and held.

Interest Expense. Interest expense for the twelve months ended September 30, 1998 was $3.1 million, an increase of $346,000 as compared to $2.8 million for the twelve months ended September 30, 1997. The
increase in interest expense was due to the increase in deposit accounts of $9.3 million.

Provision for Possible Loan Losses. The provision for possible loan losses for the twelve months ended September 30, 1998 was $26,000 compared to zero for the twelve months ended September 30, 1997. The
increase in the amount of the provision for possible loan losses was the result of the Bank's efforts to maintain adequate reserves for the increase in net loans.

Non-interest Income. Non-interest income or other income for the twelve months ended September 30, 1998 was $1.1 million as compared to $245,000 for the twelve months ended September 30, 1997. The $806,000
increase was due to an increase of $728,000 on sales of investment securities, and marked increases in income from service charges and other fee income.

Other Expense. Other expense for the twelve months ended September 30, 1998 was $3.2 million as compared to $2.5 million for the twelve months ended September 30, 1997. The $650,000 increase was due in part to
an increase in salaries and employee benefits of $118,000, an increase in legal and professional fees of $53,000 and a decrease in other operating expenses of $40,000. During the fourth quarter, a one-time (write down) charge-off of $327,000 was made to
leasehold improvements due to the relocation of the East Falmouth branch office.

Liquidity and Capital Resources

The Bank's primary sources of funds consist of deposits, repayment and prepayment of loans and mortgage-backed securities, maturities of investments and interest-bearing deposits, other borrowed funds and funds
provided from operations. While scheduled repayments of loans and mortgage-backed securities and maturities of investment securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by the general level of
interest rates, economic conditions and competition. The Bank uses its liquidity resources principally to fund existing and future loan commitments, to fund net deposit outflows, to invest in other interest-earning assets, to maintain liquidity and to
meet operating expenses. Management believes that loan repayments and other sources of funds will be adequate to meet the Bank's liquidity needs for fiscal year 2000.

The Bank is required to maintain adequate levels of liquid assets. This guideline, which may be varied depending upon economic conditions and deposit flows, is based upon a percentage of deposits and short-term
borrowings. The Bank has historically maintained a level of liquid assets in excess of regulatory requirements. The Bank's liquidity ratio at September 30, 1999 was 31.5%.

A major portion of the Bank's liquidity consists of short-term U.S. Government and high grade corporate obligations. The level of these assets is dependent on the Bank's operating, investing, lending and financing
activities during any given period. At September 30, 1999, net cash and short term assets totaled $30.8 million.

The primary investing activities of the Bank include the origination of loans and the purchase of investment securities. During the year ended September 30, 1999, purchases of investment securities and
mortgage-backed securities totaled $22.1 million, while loan originations totaled $34.9 million. These investments were funded primarily from loan repayments of $24.2 million, investment security maturities of $14.2 million, loans sold of $7.8 million and
borrowed funds from the FHLB of Boston.

Liquidity management is both a daily and long-term function of management. If the Bank requires more funds than it can generate internally, the Bank will borrow additional funds from the FHLB of Boston. At September
30, 1999, the Bank had $5.4 million in outstanding advances from the FHLB of Boston.

At September 30, 1999, the Bank had $5.1 million in outstanding commitments to originate loans. The Bank anticipates that it will have sufficient funds available to meet its current loan origination commitments.
Certificates of deposit which are scheduled to mature in one year or less totaled $35.0 million at September 30, 1999. Based on historical experience, management believes that a significant portion of such deposits will remain with the Bank.

At September 30, 1999, the Company and the Bank exceeded all of their respective regulatory capital requirements.

Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and results of
operations in terms of historical dollars without considering changes in the relative purchasing power of money over time because of inflation. Unlike for instance industrial companies, virtually all of the assets and liabilities of the Bank are monetary
in nature. As a result, interest rates have a more significant impact on the Bank's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods
and services.

Asset/Liability Management

A principal operating objective of the Bank is to produce stable earnings by achieving a favorable interest rate spread that can be sustained during fluctuations in prevailing interest rates. Since the Bank's
principal interest-earning assets have longer terms to maturity than its primary source of funds (deposit liabilities), increases in general interest rates will generally result in an increase in the Bank's cost of funds before the yield on its asset
portfolio adjusts upwards. Banking institutions generally have sought to reduce their exposure to adverse changes in interest rates by attempting to achieve a closer match between the periods in which their interest-bearing liabilities and
interest-earning assets can be expected to reprice through the origination of adjustable-rate mortgages and loans with shorter terms and the purchase of other shorter term interest-earning assets.

The term "interest rate sensitivity" refers to those assets and liabilities which mature and reprice periodically in response to fluctuations in market rates and yields. Thrift institutions historically have operated
in a mismatched position with interest-sensitive liabilities exceeding interest-sensitive assets over short-term time periods. As noted above, one of the principal goals of the Bank's asset/liability program is to more closely match the interest rate
sensitivity characteristics of the asset and liability portfolios.

In order to properly manage interest rate risk, the Bank's Board of Directors has an Executive Committee to monitor the difference between the Bank's maturing and repricing assets and liabilities and to develop and
implement strategies to decrease the "negative gap" between the two. The primary responsibilities of the committee are to assess the Bank's asset/liability mix, recommend strategies to the Board of Directors that will enhance income while managing the
Bank's sensitivity to changes in interest rates and report to the Board of Directors the results of the strategies used.

Since the mid 1980s, the Bank has stressed the origination of adjustable-rate residential mortgage loans and adjustable-rate home equity loans. Historically, the Bank did not retain fixed rate loans with terms in
excess of 15 years in its portfolio. Beginning in March 1995, however, the Bank retained a portion of its fixed rate loans with terms in excess of 15 years in the portfolio. At September 30, 1999, the Bank's loan portfolio included $19.1 million of
adjustable-rate mortgages and $4.3 million of adjustable-rate home equity loans which together represent 28.9% of the Bank's total loans.

In order to increase the interest rate sensitivity of its assets, the Bank has also maintained a consistent level of investment securities and other assets of maturities of three years or less. At September 30, 1999,
the Bank had $20.0 million of investment securities maturing within one year or less and $5.0 million of investment securities maturing over one through five years.

In the future, in managing its interest rate sensitivity, the Bank intends to continue to stress the origination of adjustable-rate mortgages and loans with shorter maturities and the maintenance of a consistent
level of short-term securities.

Interest Rate Sensitivity Analysis

The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are "interest rate sensitive" and by monitoring an institution's amount of interest rate
sensitive assets. Generally, during a period of rising interest rates, a negative gap would adversely affect net interest income while a positive gap would result in an increase in net interest income. Conversely, during a period of falling interest
rates, a negative gap would result in an increase in net interest income, and a positive gap would adversely affect net interest income. An asset or liability is said to be interest rate sensitive within a specific period if it will mature or reprice
within that period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing
within that time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities, and is considered negative when the amount of interest rate sensitive liabilities exceeds
the amount of interest-rate-sensitive assets.

Year 2000

The "Year 2000 Problem" centers on the inability of computer systems to recognize the Year 2000. Many existing computer programs and systems were originally programmed with six digit dates that provided only two
digits to identify the calendar year in the date field, without considering the upcoming change in the century. With the impending millennium, these programs and computers will recognize "00" as the year 1900 rather than the year 2000. Like most financial
service providers, the Bank and its operations may be significantly affected by the Year 2000 Problem due to the nature of financial information. Software, hardware and equipment both within and outside the Bank's direct control and with whom the Bank
electronically or operationally interfaces (e.g. third party vendors providing data processing, information system management, maintenance of computer systems and credit bureau information) are likely to be affected. Furthermore, if computer systems are
not adequately changed to identify the Year 2000, many computer applications could fail or create erroneous results. As a result, many calculations which rely on the date field information (such as interest, payment or due dates, pensions, personnel
benefits and investments), could be adversely affected. The Year 2000 date change could affect record keeping, such as inventory, maintenance, file retention and other operating functions, generating results which could be significantly misstated. The
Bank could also experience a temporary inability to process transactions, send invoices or engage in similar normal business activities.

In addition, noninformational technology systems and equipment, such as telephones, copiers and elevators, may contain embedded technology which controls operation and which may be affected by the Year 2000 Problem.
When the Year 2000 arrives, systems, including some of those with embedded chips, may not work properly because of the way they store date information. They may not be able to process the date 01/01/00, and may not be able to understand operational
'cycles' such as 'do X every 100 days.' Thus, even noninformational technology systems may affect the normal operations of the Bank upon the arrival of the Year 2000.

Under certain circumstances, failure to adequately address the Year 2000 Problem could adversely affect the viability of the Bank's suppliers and creditors and the creditworthiness of its borrowers. Thus, if not
adequately addressed, the Year 2000 Problem could result in a significantly adverse impact on the Bank's products, services and competitive condition.

The Bank, through its Year 2000 Steering Committee, has created a Year 2000 Plan which includes five phases of review, testing and implementation. These phases of Awareness, Assessment, Renovation, Validation and
Implementation are well under way or have been substantially completed. The Steering Committee adopted its formal Year 2000 Plan in March 1998. This Plan has been followed, reviewed and updated as progress has been made on Year 2000 issues. In June 1998,
the Bank adopted its Year 2000 Test Plan. The goal of the Test Plan is to provide testing guidance on all critical applications. It is necessary to provide reasonable assurance that the applications identified will function normally in the next
millennium. Testing time and resources have been, and will continue to be, allocated to successfully complete the entire testing project. It is anticipated that this phase of the Year 2000 readiness plan will require the most extensive application of Bank
resources.

The Awareness Phase -- where problems are identified and overall strategies are developed, has been completed.

The Assessment Phase -- where the Steering Committee assesses the size and complexity of the problems and identifies all systems that will be affected by the Year 2000 date change, has been completed.

The Renovation Phase -- where the Bank undertakes hardware and software changes to systems under its control and obtains vendor certifications of Year 2000 readiness, has been completed. The Steering Committee has
completed, and will continue to follow critical vendor readiness programs as they develop and change. Hardware within the Bank has been upgraded or replaced, where requested. The testing plans of the Bank's critical vendors, such as the on-line service
provider, check clearing and statement rendering servicer, and in-house general ledger software providers, are well underway.

The Validation Phase -- which includes testing and verification of changes to systems and coordination with outside parties, has been completed in all areas except with the on-line service provider and the in-house
general ledger software. A test bank has been established in both cases for testing. Transaction scripts have been developed to be posted to the test banks. The test scripts consist of an extensive list of transaction types which will fully test the
application of the applicable software. Each test script will be re-posted on each critical date recognized, such as 9/9/1999, 1/1/2000, 2/29/2000 and others.

The Implementation Phase -- which provides the deadlines for full certification of Year 2000 readiness on each application, is underway. Predetermined dates for compliance or replacement, known as the "drop dead
dates" have been determined and reviewed regularly by the Steering Committee and at least quarterly by the full Board of Directors. These dates may be changed slightly as applications are reviewed; but ultimately, every noncompliant application must be
replaced.

The Bank's on-line service provider has been providing on-line access to its test bank since November 2, 1998 and at varying intervals going forward. Testing and reviewing with the on-line service provider has been
completed. The Bank began testing its general ledger software and has completed the validation phase. All other applications are in the implementation phase and are deemed by the Steering Committee to be substantially compliant.

To date, the costs for Year 2000 readiness have not been considered material. All internal preparations have been completed by existing officer and staff personnel during the normal work day with some extended hours.
Hardware and software upgrades and replacements have been completed with predetermined budget estimates and have not been extensive or excessive. Additional costs for Year 2000 preparedness are expected to be within budget and are not anticipated to
materially affect the profitability of the Bank or the Company.

The costs of the project and the date on which the Bank plans to complete the Year 2000 modifications are based on management's best estimates, derived from numerous assumptions of future events including the
continued availability of certain resources, third party modification plans and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those plans. Specific factors that
might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes and similar uncertainties.

The Bank's Contingency Plan -- in connection with the Year 2000 Plan was adopted by the Board of Directors at their regularly scheduled meeting on July 21, 1998. Organizational planning provides for the establishment
of a continuity project work group and the assignment of roles and responsibilities. The potential impact of mission critical system failures on the core business process is also assessed. The plan evaluates options and provides guidance for selecting
reasonable contingency strategies and for the remediation of contingency plans and Year 2000 issues.

Corporations have faced limited litigation surrounding the Year 2000 Problem and their Year 2000 compliance efforts. To date, no such litigation has resulted in a decision to impose liability on the corporate entity.
Nonetheless, the law in this area will likely continue to develop well into the new millennium. Should the Company experience a Year 2000 failure, exposure to the Company could be significant and material, unless there is legislative action to limit such
liability. Legislation has been introduced in several jurisdictions regarding the Year 2000 Problem. However, no assurance can be given that legislation will be enacted in jurisdictions where the Company does business that will have the effect of limiting
any potential liability.

The Bank believes that it is substantially compliant at this time. The Board of Directors, officers, employees and the public, in general, are continually being informed of the issues regarding the Year 2000 problem.
With the support of the Directors and senior management, the Committee has mailed letters to business relationships informing them of the Bank's commitment to Year 2000 issues and requesting information regarding their Year 2000 policies and procedures.
Newsletters, stuffers and other means of communications have been utilized to increase awareness and obtain information.

Impact of New Accounting Standards

In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information," ("SFAS 131"). SFAS 131 is effective for financial
statements for periods beginning after December 15, 1997 and is not expected to have a material effect on the Company. SFAS 131 establishes standards for the way that public companies report information about operating segments in annual financial
statements and selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. Generally, financial
information is required to be reported on the basis that it is used internally for evaluating segment performance and for deciding how to allocate resources to segments.

SFAS 131 also requires companies to report information about the way the operating segments were determined, the product and services provided by the operating segments, differences between the measurements used in
reporting segment information and those used by the company in its general purpose financial statements, and changes in the measurement of segment amounts from period to period.

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). Accounting principles generally require all
recognized revenue, expenses, gains and losses to be included in net income. Various FASB statements, however, require companies to report certain changes in assets and liabilities as a separate component of the equity section of the balance sheet, such
as unrealized gains and losses on available for sale securities. Such an item, along with net income, is a component of comprehensive income. SFAS 130 is effective for fiscal years beginning after December 15, 1997 and is not expected to have a
material impact on the Company.

In February 1998, the FASB issued Statement of Financial Accounting Standards No. 132, "Employers' Disclosure about Pensions and Other Postretirement Benefits" ("SFAS 132"), which amends the disclosure requirements
of Statements of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions" ("SFAS 87"), No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" ("SFAS 88") and No.
106, "Employers' Accounting Postretirement Benefits Other Than Pensions" ("SFAS 106").

SFAS 132 standardizes the disclosure requirements of SFAS 87 and SFAS 106 to the extent practicable and recommends a parallel format for presenting information about pensions and other postretirement benefits. SFAS
132 only addresses disclosure and does not change any of the measurement of recognition provisions provided for in SFAS 87, SFAS 88 or SFAS 106. SFAS 132 is effective for fiscal years beginning after December 15, 1997 and is not expected to have a
material impact on the Company.

In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 standardizes the accounting for derivative
instruments, including certain derivative instruments imbedded in other contracts. Under the standard, entities are required to carry all derivative instruments at fair value in the statement of financial position. The accounting for the changes in fair
value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it. The gain or loss due to changes in fair value is recognized in earnings or as other
comprehensive income in the statement of shareholders' equity, depending on the type of instrument and whether or not it is considered a hedge. SFAS 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. The Company
has not yet determined the impact this new statement may have on its future financial condition or its results of operations.

In October 1998, the FASB issued Statement of Financial Accounting Standards No. 134, "Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise, an amendment of FASB Statement No. 65" ("SFAS 134"). SFAS 134 amends Statement of Financial Accounting Standards No. 65, "Accounting for Certain Mortgage Banking Activities" ("SFAS 65") to conform the subsequent accounting for securities
retained after the securitization of mortgage loans by a mortgage banking enterprise with the subsequent accounting for securities retained after the securitization of other types of assets by a nonmortgage banking enterprise. SFAS 134 is effective for
the first quarter beginning after December 15, 1998 and is not expected to have a material impact on the Company.

The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at September 30, 1999 which are expected to mature or reprice in each of the time periods shown. The
investment securities and mortgage-backed securities in the following table are presented at amortized cost.

|                                        | At September 30, 1999
|--------------------------------------- | ---------------------
|                                        | One Yearor Less      
|Interest-earning assets:                |                      
|Investment securities                   | $ 20,016             
|Mortgage-backed securities              | -                    
|Other interest-earning assets           | 5,200                
|Adjustable rate 1-4 family loans        | 10,091               
|Fixed rate 1-4 family loans             | 50                   
|Commercial real estate loans            | 6,671                
|Consumer and commercial loans           | 1,176                
|Total                                   | $ 43,204             
|Interest-bearing liabilities:           |                      
|Certificates of deposit                 | $ 34,881             
|Money market accounts                   | 14,188               
|NOW accounts                            | 9,389                
|Passbook accounts                       | 17,781               
|Repurchase agreements                   | 858                  
|FHLB advances                           | 1,579                
|Total                                   | $ 78,676             
|Interest sensitivity gap                | (35,472)             
|Cumulative interest sensitivity gap     | (35,472)             
|Ratio of cumulative gap to total assets | (29.90)%             

Management believes the current one-year gap of negative 29.90% presents a risk to net interest income should a sustained increase occur in the current level of interest rates. If interest rates increase, the Bank's negative one-year
gap should cause the net interest margin to decrease. A conservative rate-gap policy provides a stable net interest income margin. Accordingly, management emphasizes a structured schedule of investments spread by term to maturity with greater emphasis on
maturities of one year or less. The preceding table utilized no assumptions or adjustments regarding prepayment of loans and decay rates based upon Falmouth's actual experience. Accordingly, it is possible that the actual interest rate sensitivity of the
Bank's assets and liabilities could vary significantly from the information set forth in the table due to market and other factors.

Certain shortcomings are inherent in the method of analysis presented in the preceding table. Although certain assets and liabilities may have similar maturity or periods of repricing, they may react in different degrees to changes in market interest
rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while rates on other types of assets and liabilities may lag behind changes in market interest rates. Certain assets, such
as adjustable-rate mortgages, generally have features which restrict changes in interest rates on a short-term basis and over the life of the asset. In the event of a change in interest rates, prepayments and early withdrawal levels would likely deviate
significantly from those assumed in calculating the table. Additionally, an increased credit risk may result as the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. Virtually all of the
adjustable-rate loans in the Bank's portfolio contain conditions which restrict the periodic change in interest rate.

Average Balances, Interest and Average Yields

The following table sets forth certain information relating to the Bank's average balance sheet and reflects the average yield on assets, average cost of liabilities, interest earned and interest paid for the
periods indicated. Such yields and costs are derived by dividing income or expense by the average monthly balance of assets or liabilities, respectively, for the periods presented. Average balances are derived from monthly balances. Management does not
believe that the use of monthly balances instead of daily balances has caused any material difference in the information presented. Interest earned on loan portfolios is net of reserves for uncollected interest.

|                                                                                    | Year Ended September 30,
|----------------------------------------------------------------------------------- | ------------------------
|                                                                                    | 1999                    
|                                                                                    | AverageBalance          
|Assets:                                                                             |                         
|Interest-earning assets                                                             |                         
|Loans, net:                                                                         |                         
|Mortgages                                                                           | $  70,742               
|Consumer and other                                                                  | 6,915                   
|Total loans, net                                                                    | 77,657                  
|Investments                                                                         | 22,946                  
|Other earning assets                                                                | 8,314                   
|Total interest-earning 
     assets                                                 | 108,917                 
|Cash and due from banks                                                             | 2,720                   
|Other assets                                                                        | 2,879                   
|Total assets                                                                        | $114,516                
|Liabilities:                                                                        |                         
|Interest-bearing liabilities:                                                       |                         
|Deposits:                                                                           |                         
|Savings deposits                                                                    | $  17,471               
|NOW                                                                                 | 7,533                   
|Money market deposits                                                               | 11,884                  
|Certificates of deposit                                                             | 42,245                  
|Borrowed money                                                                      | 6,936                   
|Total interest-bearing
     liabilities                                             | 86,069                  
|Non-interest bearing 
 liabilities                                                  | 7,431                   
|Total liabilities                                                                   | 93,500                  
|Stockholders' equity                                                                | 21,016                  
|Total liabilities and
     stockholders' equity                                     | $114,516                
|Net interest and dividend
 income                                                   |                         
|Interest rate spread                                                                |                         
|Net interest margin                                                                 |                         
|Ratio of average interest-
 earning assets to average
 interest-bearing liabilities | 126.55%                 

Rate/Volume Analysis

The following table sets forth certain information regarding changes in interest income and interest expense of the Bank for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is
provided on changes attributable to: (i) changes in volume (change in volume multiplied by old rate); and (ii) changes in rates (change in rate multiplied by old volume). Changes in rate-volume (change in rate multiplied by change in volume) are allocated
between changes in rates and changes in volume.

|                                   | Year Ended September 30,              
|---------------------------------- | --------------------------------------
|                                   | 1999 vs. 1998Increase (Decrease)Due To
|                                   | Volume                                
|                                   | (In thousands)                        
|Interest-earning assets:           |                                       
|Loans                              | $630                                  
|Investments                        | 72                                    
|Total interest-earning assets      | 702                                   
|Interest-bearing liabilities:      |                                       
|Savings deposits                   | 38                                    
|NOW                                | 5                                     
|Money market deposits              | 66                                    
|Certificates of deposit            | 130                                   
|Borrowed money                     | 159                                   
|Total interest-bearing liabilities | 398                                   
|Net change in net interest income  | $304                                  

Falmouth Bancorp, Inc.'s common stock is traded on the American Stock Exchange and quoted under the symbol "FCB." The table below shows the high and low sales price during the periods indicated.

At September 30, 1999, the last trading date in the Bank's fiscal year, the Bank's common stock closed at $15.875. At September 30, 1999, there were 1,175,744 shares of the Company's common stock outstanding, which
were held of record by approximately 611 stockholders, not including persons or entities who hold the stock in nominee or "street" name through various brokerage firms.

On November 17, 1999, the Board of Directors of the Company declared a quarterly cash dividend of $0.07 per share of common stock, which was paid on December 21, 1999 to stockholders of record on December 7, 1999.

The Board of Directors considers paying dividends, dependant on the results of operations and financial condition of the Company, tax considerations, industry standards, economic conditions, regulatory restrictions
and other factors. There are significant regulatory limitations on the Company's ability to pay dividends depending on the dividends it receives from the Bank, which are subject to regulations and the Bank's continued compliance with all regulatory
capital requirements and the overall health of the institution.

|                                        | Price Range |        
|--------------------------------------- | ----------- | -------
|Quarter Ended                           | High        | Low    
|                                        |             |        
|Fiscal year ended September 30, 1998:   |             |        
|First Quarter ended December 31, 1997   | $22-5/8     | $19-1/4
|Second Quarter ended March 31, 1998     | 24          | 19     
|Third Quarter ended June 30, 1998       | 23-1/8      | 19     
|Fourth Quarter ended September 30, 1998 | 20-7/8      | 16     
|                                        |             |        
|Fiscal year ended September 30, 1999:   |             |        
|First Quarter ended December 31, 1998   | $17-1/4     | $12    
|Second Quarter ended March 31, 1999     | 16-3/4      | 13-3/4 
|Third Quarter ended June 30, 1999       | 17-7/8      | 13-1/8 
|Fourth Quarter ended September 30, 1999 | 17-1/4      | 15     

SHATSWELL, MacLEOD & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTS

83 PINE STREET
WEST PEABODY, MASSACHUSETTS 01960-3635
TELEPHONE (978) 535-0206
FACSIMILE (978) 535-9908



The Board of Directors
Falmouth Bancorp, Inc.
Falmouth, Massachusetts

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying consolidated balance sheets of Falmouth Bancorp, Inc. and Subsidiaries as of September 30, 1999 and 1998 and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of
the years in the three-year period ended September 30, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Falmouth Bancorp, Inc. and Subsidiaries as of September 30, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the years in the three-year period ended September 30, 1999, in conformity with generally accepted accounting principles.



| | /s/ SHATSWELL, MacLEOD & COMPANY, P.C.
SHATSWELL, MacLEOD & COMPANY, P.C.
| | -------------------------------------------------------------------------

West Peabody, Massachusetts
October 25, 1999

FALMOUTH BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 1999 and 1998

|ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 1999                                                                                                                                                                                                                                                                                            | 1998                                                                                                                                                                                                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cash and due from banks
Federal funds sold
      Total cash and cash equivalents
Investments in available for sale securities (at fair value)
Investments in held-to-maturity securities (fair values of $9,631,547
 as of September 30 1999 and $7,078,556 as of September 30 1998)
Federal Home Loan Bank stock, at cost
Loans, net
Premises and equipment
Accrued interest receivable
Cooperative Central Bank Reserve Fund Deposit
Other assets
      Total assets
LIABILITIES AND STOCKHOLDERS' EQUITYDeposits:
  Noninterest-bearing
  Interest-bearing
      Total deposits
Securities sold under agreements to repurchase
Advances from Federal Home Loan Bank of Boston
Other liabilities
      Total liabilities
Stockholders' equity:
  Preferred stock, par value $.01 per share, authorized 500,000 shares; 
   none issued
  Common stock, par value $.01 per share, authorized 2,500,000 shares; 
   issued 1,454,750 shares; outstanding 1,175,744 shares as of
   September 30 1999 and 1,401,784 shares as of September 30, 1998
  Paid-in capital
  Retained earnings
  Unallocated Employee Stock Ownership Plan shares
  Treasury stock (279,006 shares as of September 30, 1999 and 52,966
   shares as of September 30, 1998)
  Unearned compensation
  Accumulated other comprehensive income
      Total stockholders' equity
      Total liabilities and stockholders' equity | $    2,472,3604,805,0007,277,360
17,144,442
9,641,817
720,700
80,487,395
2,023,577
729,668
395,395231,928
$118,652,282$    8,091,41884,794,29092,885,708
857,727
5,431,290218,104
    99,392,82914,547
13,907,812
10,818,456
(565,853)
(4,600,671)
(443,284)128,446
    19,259,453
$118,652,282 | $    1,705,345 5,581,2337,286,578 
16,923,523 
7,037,287 
562,800 
77,654,939 
2,108,344 
631,590 
395,395 192,170 
$112,792,626$    5,334,868 76,183,899 
81,518,767 
1,080,554 
7,599,000 352,815 90,551,136 
14,547 
13,899,014 
10,204,737 
(654,038)
(952,668)
(594,417)324,315 22,241,490 $112,792,626

The accompanying notes are an integral part of these consolidated financial statements.

FALMOUTH BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years Ended September 30, 1999, 1998 and 1997

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 1999                                                                                                                                                                                                                                                         | 1998                                                                                                                                                                                                                                                                       | 1997                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Interest and dividend income:
  Interest and fees on loans
  Interest and dividends on securities:
    Taxable
    Dividends on marketable equity securities
Dividends on Cooperative Bank Investment and Liquidity Funds
Other interest
      Total interest and dividend income
Interest expense:
  Interest on deposits
  Interest on securities sold under agreements to repurchase
  Interest on Federal Home Loan Bank advances
  Interest on other borrowings
      Total interest expense
      Net interest and dividend income
Provision for loan losses
      Net interest income after provision for loan losses
Other income:
  Service charges on deposit accounts
  Gains on sales of available-for-sale securities, net
  Net gain on sale of loans
  Other income
      Total other income
Other expense:
  Salaries and employee benefits
  Occupancy expense
  Equipment expense
  Writedown on impairment of long lived assets
  Data processing expense
  Director's fees
  Legal and professional fees
  Other expenses
      Total other expense
     Income before income taxes
Income taxes
      Net income | $5,829,184
1,112,344
107,164
158,851280,827
  7,488,3702,990,151
48,173
319,4643,357,7884,130,58242,000
  4,088,582108,416
262,511
91,317186,992
     649,2361,587,684
189,519
159,508
245,310
52,200
170,772519,472
  2,924,4651,813,353844,440
$   968,913 | $5,316,011
1,316,020
152,341
198,015223,391
  7,205,7782,944,707
24,100
148,13822,556
  3,139,5014,066,27726,000
  4,040,27773,667
840,208
19,607117,177
  1,050,6591,535,625
199,759
142,429
327,307
207,061
57,950
251,734454,695
  3,176,5601,914,376729,300
$1,185,076 | $3,775,916
1,901,373
183,353
241,095157,115
6,258,8522,728,40265,576
2,793,9783,464,8743,464,87454,412
112,035
53978,139
245,1251,418,021
109,101
98,327
150,838
57,000
199,344494,383
2,527,0141,182,985
     430,900
$   752,085
|Earnings per common share
Earnings per common share, assuming dilution                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $           .78
$           .77                                                                                                                                                                                                                              | $           .86
$           .84                                                                                                                                                                                                                                            | $           .55
$           .55                                                                                                                                                                                                   

The accompanying notes are an integral part of these consolidated financial statements.

FALMOUTH BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Years Ended September 30, 1999, 1998 and 1997

|                                                                                                                | CommonStock | Paid-inCapital | RetainedEarnings | Unallocated
Employee
Stock
Ownership
PlanShares | TreasuryStock | UnearnedCompensation | Accumulated
Other
ComprehensiveIncome | Total      
|--------------------------------------------------------------------------------------------------------------- | ----------- | -------------- | ---------------- | ----------------------------------------------- | ------------- | -------------------- | ------------------------------------- | -----------
|Balance, September 30, 1996                                                                                     | $145,475    | $13,598,174    | $  8,856,291     | $(829,208)                                      | $             | $                    | $ 143,685                             | $21,914,417
|Employee Stock Ownership Plan                                                                                   |             | 41,103         |                  |                                                 |               |                      |                                       | 41,103     
|Adjustment of costs incurred on
 issuance of common stock                                                       |             | 12,293         |                  |                                                 |               |                      |                                       | 12,293     
|ESOP shares released                                                                                            |             |                |                  | 87,285                                          |               |                      |                                       | 87,285     
|Dividends declared ($.20 per share)                                                                             |             |                | (274,365)        |                                                 |               |                      |                                       | (274,365)  
|Comprehensive income:
  Net income                                                                              |             |                | 752,085          |                                                 |               |                      |                                       |            
|Change in net unrealized
   holding gain on available-
   for-sale securities, net of
   tax effect of $183,931 |             |                |                  |                                                 |               |                      | 272,698                               |            
|Comprehensive income                                                                                            |             |                |                  |                                                 |               |                      |                                       | 1,024,783  
|Balance, September 30, 1997                                                                                     | 145,475     | 13,651,570     | 9,334,011        | (741,923)                                       |               |                      | 416,383                               | 22,805,516 
|Employee Stock Ownership Plan                                                                                   |             | 94,566         |                  |                                                 |               |                      |                                       | 94,566     
|ESOP shares released                                                                                            |             |                |                  | 87,885                                          |               |                      |                                       | 87,885     
|Purchase of shares for recognition
 and retention plan (RRP)                                                    |             |                |                  |                                                 |               | (751,433)            |                                       | (751,433)  
|Recognition and retention plan                                                                                  |             | 158,760        |                  |                                                 |               |                      |                                       | 158,760    
|Distribution of RRP shares                                                                                      |             | (157,016)      |                  |                                                 |               | 157,016              |                                       |            
|Tax benefit from RRP                                                                                            |             | 20,206         |                  |                                                 |               |                      |                                       | 20,206     
|Formation of the Holding Company,
 change in par value                                                          | (130,928)   | 130,928        |                  |                                                 |               |                      |                                       |            
|Purchase of treasury stock                                                                                      |             |                |                  |                                                 | (952,668)     |                      |                                       | (952,668)  
|Dividends declared ($.23 per share)                                                                             |             |                | (314,350)        |                                                 |               |                      |                                       | (314,350)  
|Comprehensive income:
  Net income                                                                              |             |                | 1,185,076        |                                                 |               |                      |                                       |            
|Change in net unrealized
   holding gain on available-
   for-sale securities, net of tax
   effect of $54,071  |             |                |                  |                                                 |               |                      | (92,068)                              |            
|Comprehensive income                                                                                            |             |                |                  |                                                 |               |                      |                                       | 1,093,008  
|Balance, September 30, 1998                                                                                     | 14,547      | 13,899,014     | 10,204,737       | (654,038)                                       | (952,668)     | (594,417)            | 324,315                               | 22,241,490 
|Employee Stock Ownership Plan                                                                                   |             | 49,149         |                  |                                                 |               |                      |                                       | 49,149     
|ESOP shares released                                                                                            |             |                |                  | 88,185                                          |               |                      |                                       | 88,185     
|Purchase of shares for recognition
 and retention plan (RRP)                                                    |             |                |                  |                                                 |               | (9,558)              |                                       | (9,558)    
|Recognition and retention plan                                                                                  |             | 114,417        |                  |                                                 |               |                      |                                       | 114,417    
|Distribution of RRP shares                                                                                      |             | (160,691)      |                  |                                                 |               |                      |                                       | 160,691    
|Tax benefit from RRP                                                                                            |             | 9,388          |                  |                                                 |               |                      |                                       | 9,388      
|Purchase of treasury stock                                                                                      |             |                |                  |                                                 | (3,665,778)   |                      |                                       | (3,665,778)
|Exercise of stock options and
 related tax benefit                                                              |             | (3,465)        |                  |                                                 | 17,775        |                      |                                       | 14,310     
|Dividends declared ($.28 per share)                                                                             |             |                | (355,194)        |                                                 |               |                      |                                       | (355,194)  
|Comprehensive income:
  Net income                                                                              |             |                | 968,913          |                                                 |               |                      |                                       |            
|Change in net unrealized
   holding gain on available-
   for-sale securities, net of tax
   effect             |             |                |                  |                                                 |               |                      | (195,869)                             |            
|Comprehensive income                                                                                            |             |                |                  |                                                 |               |                      |                                       | 773,044    
|Balance, September 30, 1999                                                                                     | $  14,547   | $13,907,812    | $10,818,456      | $(565,853)                                      | $(4,600,671)  | $(443,284)           | $ 128,446                             | $19,259,453

FALMOUTH BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Years Ended September 30, 1999, 1998 and 1997(continued)

|Reclassification disclosure for the year ended September 30, 1999:
Net unrealized losses on available-for-sale securities
Reclassification adjustment for realized gains in net income
  Other comprehensive loss before income tax effect
Income tax benefit
  Other comprehensive loss, net of tax | $  (72,067)(262,511)
(334,578)138,709
$(195,869)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------

Accumulated other comprehensive income as of September 30, 1999, 1998 and 1997 consists of net unrealized holding gains on available-for-sale securities, net of taxes.

The accompanying notes are an integral part of these consolidated financial statements.

FALMOUTH BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended September 30, 1999, 1998 and 1997

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 1999                                                                                                                                                                                                                                                                                                                                                                                                               | 1998                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 1997                                                                                                                                                                                                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cash flows from operating activities:
  Net income
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Recognition and retention plan (RRP)
    Disposal of fixed assets
    Writedown on impairment of long lived assets
    Loss on sale of equipment
    Loss on trade-in of equipment
    Provision for loan losses
    (Accretion) amortization of investment securities, net
    Change in unearned income
    Net gains on sale of loans
    Gains on sales of available-for-sale securities, net
    Deferred tax (benefit) expense
    Depreciation and amortization
    (Increase) decrease in accrued interest receivable
    (Increase) decrease in other assets
    Increase (decrease) in other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
  Proceeds from sales of loans
  Purchases of available-for-sale securities
  Proceeds from sales of available-for-sale securities
  Proceeds from maturities of available-for-sale securities
  Purchases of held-to-maturity securities
  Proceeds from maturities of held-to-maturity securities
  Purchases of Federal Home Loan Bank stock
  Increase in deposit with Cooperative Central Bank Reserve Fund
  Net increase in loans
  Capital expenditures
  Proceeds from sale of equipment
Net cash used in investing activities
Cash flows from financing activities:
  Dividends paid
  Employee Stock Ownership Plan
  Payment of Employee Stock Ownership Plan loan
  Adjustment of costs incurred on issuance of common stock
  Purchases of treasury stock
  Unallocated ESOP shares released
  Proceeds from exercise of stock options
  Purchase of company shares for RRP Trust
  Net increase in demand deposits, NOW and savings accounts
  Net increase (decrease) in time deposits
  Net increase (decrease) in securities sold under agreements to repurchase
  Proceeds from Federal Home Loan Bank advances
  Repayments of Federal Home Loan Bank advances
Net cash provided by financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosures:
  Interest paid
  Income taxes paid | $     968,913 
114,417 
42,000 
105,788 
(64,575)
(91,317)
(262,511)
1,903 
167,096 
(98,078)
86,716 (114,991)
855,361
7,679,217 
(12,976,478)
4,807,124 
7,801,411 
(8,989,501)
6,354,140 
(157,900)
(10,397,781)
(82,329)
(5,962,097)
(355,194)
49,149 
(3,665,778)
88,185 
14,310 
(9,558)
9,874,877 
1,492,064 
(222,827)
4,772,000 (6,939,710)
5,097,518
(9,218)7,286,578 
$  7,277,360
$  3,357,788 
907,571 | $  1,185,076 
158,760 
327,307 
5,245 
8,869 
26,000 
24,417 
(51,047)
(19,607)
(840,208)
(118,872)
170,714 
(17,301)
100,308 (106,691)
852,970
3,358,900 
(7,426,624)
9,886,752 
6,827,890 
(2,000,000)
5,417,562 
(157,600)
(109,715)
(27,088,014)
(1,626,772)6,000
(12,911,621)
(314,350)
94,566 
(741,923)
(952,668)
87,885 
(751,433)
4,516,180 
4,811,498 
1,080,554 
8,148,000 (549,000)
15,429,309
3,370,658 3,915,920 $  7,286,578
$  3,139,501 
859,664 | $   752,085 
21,840 
(129,033)
(46,627)
(539)
(112,035)
49,904 
93,381 
132,312 
(180,305)89,937
670,920
55,393 
(15,406,219)
2,810,711 
9,425,805 
(6,330,000)
18,753,311 
(104,300)
(13,652,552)
(588,867)
(5,036,718)
(274,365)
41,103 
12,293 
6,680,674 
(933,185)
5,526,520
1,160,722 2,755,198 
$  3,915,920
$  2,859,554 
472,023
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The accompanying notes are an integral part of these consolidated financial statements.

FALMOUTH BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended September 30, 1999, 1998 and 1997

NOTE 1 - NATURE OF OPERATIONS

Falmouth Bancorp, Inc. (the "Company"), a Delaware corporation was organized by the Falmouth Co-Operative Bank (the "Bank") on November 25, 1996 to be a bank holding company with the Bank as its wholly-owned subsidiary.

On October 14, 1997, the Company acquired all of the capital stock of the Bank and stockholders of the Bank became stockholders of the Company in a share for share exchange pursuant to a plan of reorganization approved by the Bank's stockholders on
January 21, 1997.

The Bank was organized in 1925 and is headquartered in Falmouth, Massachusetts. The Bank is engaged principally in the business of attracting deposits from the general public and investing those deposits in residential, real estate, consumer and small
business loans.

NOTE 2 - ACCOUNTING POLICIES

The accounting and reporting policies of the Company and its subsidiaries conform to generally accepted accounting principles and predominant practices within the savings institution industry. The consolidated financial statements were prepared
using the accrual method of accounting. The significant accounting policies are summarized below to assist the reader in better understanding the consolidated financial statements and other data contained herein.

PERVASIVENESS OF ESTIMATES:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

BASIS OF PRESENTATION:

The consolidated financial statements include the accounts of the Company, the RRP Trust, the Company's wholly-owned subsidiary, the Bank and the Bank's wholly-owned subsidiary, Falmouth Securities Corporation. All significant intercompany accounts and
transactions have been eliminated in the consolidation.

The RRP Trust was formed on October 21, 1997 in connection with the Bank's 1997 Recognition and Retention Plan for Outside Directors, officers and employees of Falmouth Bancorp, Inc. (the "RRP"). The Company contributes to the RRP Trust from time to
time. The RRP Trust invests the assets of the Trust in shares of the Company.

The Trustees of the RRP Trust are also directors of the Company. The RRP is administered by the compensation committee of the Board of Directors of the Company which consists of certain non-employee members of the Board of Directors of the Company.

Falmouth Securities Corporation, an active security corporation, was established solely for the purpose of acquiring and holding investments which are permissible for banks to hold under Massachusetts law.

CASH AND CASH EQUIVALENTS:

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash items, due from banks and federal funds sold.

SECURITIES:

Investments in debt securities are adjusted for amortization of premiums and accretion of discounts computed on the straight-line method which has substantially the same effect as using the interest method. Gains or losses on sales of investment
securities are computed on a specific identification basis.

The Company classifies debt and equity securities into one of three categories: held-to-maturity, available-for-sale, or trading. This security classification may be modified after acquisition only under certain specified conditions. In general,
securities may be classified as held-to-maturity only if the Company has the positive intent and ability to hold them to maturity. Trading securities are defined as those bought and held principally for the purpose of selling them in the near term. All
other securities must be classified as available-for-sale.

--    Held-to-maturity securities are measured at amortized cost on the balance sheet. Unrealized holding gains and losses are not included in earnings or in a separate component of capital. They are merely disclosed in the notes to
the consolidated financial statements.

--    Available-for-sale securities are carried at fair value on the balance sheet. Unrealized holding gains and losses are not included in earnings, but are reported as a net amount (less expected tax) in a separate component of
capital until realized.

--    Trading securities are carried at fair value on the balance sheet. Unrealized holding gains and losses for trading securities are included in earnings.

LOANS:

Loans receivable that management has the intent and ability to hold until maturity or payoff, are reported at their outstanding principal balances reduced by amounts due to borrowers on unadvanced loans, any charge-offs, the allowance for loan losses
and any deferred fees, costs on originated loans or unamortized premiums or discounts on purchased loans.

Interest on loans is recognized on a simple interest basis.

Loan origination, commitment fees and certain direct origination costs are deferred and the net amount amortized as an adjustment of the related loan's yield. The Company is amortizing these amounts over the contractual life of the related loans.

Cash receipts of interest income on impaired loans is credited to principal to the extent necessary to eliminate doubt as to the collectibility of the net carrying amount of the loan. Some or all of the cash receipts of interest income on impaired
loans is recognized as interest income if the remaining net carrying amount of the loan is deemed to be fully collectible. When recognition of interest income on an impaired loan on a cash basis is appropriate, the amount of income that is recognized is
limited to that which would have been accrued on the net carrying amount of the loan at the contractual interest rate. Any cash interest payments received in excess of the limit and not applied to reduce the net carrying amount of the loan are recorded as
recoveries of charge-offs until the charge-offs are fully recovered.

ALLOWANCE FOR LOAN LOSSES:

The allowance is increased by provisions charged to current operations and is decreased by loan losses, net of recoveries. The provision for loan losses is based on management's evaluation of current and anticipated economic conditions, changes in the
character and size of the loan portfolio and other indicators.

The Company considers a loan to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Company measures impaired
loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the fair value of the collateral if the loan is collateral dependent.

The Company considers for impairment all loans, except large groups of smaller balance homogeneous loans that are collectively evaluated for impairment, loans that are measured at fair value or at the lower of cost or fair value, leases, and
convertible or nonconvertible debentures and bonds and other debt securities. The Company considers its residential real estate loans and consumer loans that are not individually significant to be large groups of smaller balance homogeneous loans.

Factors considered by management in determining impairment include payment status, net worth and collateral value. An insignificant payment delay or an insignificant shortfall in payment does not in itself result in the review of a loan for impairment.
The Company applies SFAS No. 114 on a loan-by-loan basis. The Company does not apply SFAS No. 114 to aggregations of loans that have risk characteristics in common with other impaired loans. Interest on a loan is not generally accrued when the loan
becomes ninety or more days overdue. The Company may place a loan on nonaccrual status but not classify it as impaired, if (i) it is probable that the Company will collect all amounts due in accordance with the contractual terms of the loan or (ii) the
loan is an individually insignificant residential mortgage loan or consumer loan. Impaired loans are charged-off when management believes that the collectibility of the loan's principal is remote.

PREMISES AND EQUIPMENT:

Premises and equipment are stated at cost, less accumulated depreciation and amortization. Cost and related allowances for depreciation and amortization of premises and equipment retired or otherwise disposed of are removed from the respective accounts
with any gain or loss included in income or expense. Depreciation and amortization are calculated principally on the straight-line method over the estimated useful lives of the assets.

OTHER REAL ESTATE OWNED AND IN-SUBSTANCE FORECLOSURES:

Other real estate owned includes properties acquired through foreclosure and properties classified as in-substance foreclosures in accordance with Financial Accounting Standards Board Statement No. 15, "Accounting by Debtors and Creditors for Troubled
Debt Restructuring." These properties are carried at the lower of cost or estimated fair value less estimated costs to sell. Any write-down from cost to estimated fair value, required at the time of foreclosure or classification as in-substance
foreclosure, is charged to the allowance for loan losses. Expenses incurred in connection with maintaining these assets, subsequent write-downs and gains or losses recognized upon sale are included in other expense.

In accordance with Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan," the Company classifies loans as in-substance repossessed or foreclosed if the Company receives physical possession of the
debtor's assets regardless of whether formal foreclosure proceedings take place.

COOPERATIVE CENTRAL BANK RESERVE FUND DEPOSIT:

The Reserve Fund was established for liquidity purposes and consists of deposits required of all insured cooperative banks in Massachusetts. The Fund is used by the Central Bank to advance funds to member banks, but such advances generally are not made
until Federal Home Loan Bank and commercial bank sources of borrowings have been exhausted. The Company has not borrowed funds from the Central Bank since rejoining the Federal Home Loan Bank on January 2, 1975.

INCOME TAXES:

The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are established for the temporary differences between the accounting basis and the tax basis of the Company 's assets and
liabilities at enacted tax rates expected to be in effect when the amounts related to such temporary differences are realized or settled.

RETIREMENT PLAN:

The compensation cost of an employee's pension benefit is recognized on the net periodic pension cost method over the employee's approximate service period. The aggregate cost method is used for funding purposes.

FAIR VALUES OF FINANCIAL INSTRUMENTS:

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments," requires that the Company disclose estimated fair value for its financial instruments. Fair value methods and assumptions used by the Company
in estimating its fair value disclosures are as follows:

Cash and cash equivalents: The carrying amounts reported in the balance sheet for cash and cash equivalents approximate those assets' fair values.

Securities (including mortgage-backed securities): Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.

Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair values for other loans are estimated using discounted cash flow analyses, using interest
rates currently being offered for loans with similar terms to borrowers of similar credit quality. The carrying amount of accrued interest approximates its fair value.

Accrued interest receivable and Cooperative Central Bank Reserve Fund Deposit: The carrying amounts of accrued interest receivable and Cooperative Central Bank Reserve Fund Deposit approximate their fair values.

Deposit liabilities: The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their
carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on
time deposits.

Securities sold under agreements to repurchase: The carrying amount reported on the balance sheet for securities sold under agreement to repurchase approximates those liabilities' fair values.

Federal Home Loan Bank Advances: Fair values for Federal Home Loan Bank advances are estimated using a discounted cash flow technique that applies interest rates currently being offered on advances to a schedule of aggregated expected monthly
maturities on Federal Home Loan Bank advances.

Employee Stock Ownership Plan loan: The fair value of the Employee Stock Ownership Plan loan was estimated using a discounted cash flow calculation that applies current interest rates.

Off-balance sheet instruments: The fair value of commitments to originate loans is estimated using the fees currently charged to enter similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed-rate loan commitments and the unadvanced portion of loans, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligation with the counterparties at the reporting date.

STOCK BASED COMPENSATION:

In accordance with SFAS No. 123, entities can recognize stock-based compensation expense in the basic financial statements using either (i) the intrinsic value approach set forth in APB Opinion No. 25 or (ii) the fair value method in SFAS No. 123.
Entities electing to follow the provisions of APB Opinion No. 25 must make pro forma disclosure of net income and earnings per share, as if the fair value method of accounting defined in SFAS No. 123 had been applied. Management measures stock-based
compensation costs in accordance with APB Opinion No. 25 and has made the pro forma disclosure requirements of SFAS No. 123 for the years ended September 30, 1999, 1998 and 1997.

EARNINGS PER SHARE:

In the year ended September 30, 1998, the Company adopted Statement of Financial Accounting Standards No. 128 (SFAS No. 128) "Earnings per Share" (EPS) issued by the Financial Accounting Standards Board. SFAS No. 128 required restatement of all
prior-period EPS presented that was not in accordance with SFAS No. 128. This statement simplifies the standards for computing earnings per share. It replaces the presentation of primary EPS with a presentation of Basic EPS which excludes dilution and is
computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS, if applicable, reflects the potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The adoption of SFAS No. 128 had no material effect on the Company's 1998 financial statements.

NOTE 3 - INVESTMENTS IN SECURITIES

Debt and equity securities have been classified in the consolidated balance sheets according to management's intent. The carrying amount of securities and their approximate fair values are as follows as of September 30:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Amortized
CostBasis                                                                                                                                                                            | Gross
Unrealized
HoldingGains                                                                                                                  | Gross
Unrealized
HoldingLosses                                                                        | FairValue                                                                                                                                                                                     
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Available-for-sale:
  September 30, 1999:
    Debt securities issued by the U.S. Treasury
     and other U.S. government corporations
     and agencies
    Other debt securities
    Mortgage-backed securities
    Marketable equity securities
  September 30, 1998:
    Debt securities issued by the U.S. Treasury 
     and other U.S. government corporations 
     and agencies
    Other debt securities
    Mortgage-backed securities
    Marketable equity securities
Held-to-maturity:
  September 30, 1999:
    Debt securities issued by the U.S. Treasury
     and other U.S. government corporations
     and agencies
    Other debt securities
    Mortgage-backed securities
  September 30, 1998:
    Debt securities issued by the U.S. Treasury 
     and other U.S. government corporations 
     and agencies
    Other debt securities
    Mortgage-backed securities | $  6,258,966
5,160,463
1,637,6873,862,481
$16,919,597$  3,704,394
4,997,163
2,239,1135,423,430
$16,364,100$  3,999,291
5,320,989321,537
$  9,641,817$  1,199,929
5,362,298475,060
$  7,037,287 | $         64
1,184
24,770524,379
$550,397$    8,396
55,559
64,766780,691
$909,412$       146
1,1068,849
$  10,101$ 3,931
20,26417,074
$ 41,269 | $    4,465
4,679316,408
$325,552$             349,989
$349,989$  11,136
9,235$  20,371$             $ | $  6,254,565
5,156,968
1,662,4574,070,452
$17,144,442$  3,712,790
5,052,722
2,303,8795,854,132
$16,923,523$  3,988,301
5,312,860330,386
$  9,631,547$  1,203,860
5,382,562492,134
$  7,078,556

The scheduled maturities of held-to-maturity securities and available-for-sale securities (other than equity securities) were as follows as of September 30, 1999:

|                                                                                                                                                                             | Available-for-salesecurities:                       | Held-to-maturitysecurities:                        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------
|                                                                                                                                                                             | Amortized
CostBasis                                 | FairValue                                          
|Debt securities other than mortgage-backed securities:
  Due within one year
  Due after one year through five years
  Due in more than ten years
Mortgage-backed securities | $  9,601,298
1,537,686
280,4451,637,687
$13,057,116 | $  9,594,033
1,538,890
278,6101,662,457
$13,073,990

For the year ended September 30, 1999, proceeds from sales of securities available-for-sale amounted to $4,807,124. Gross realized gains and gross realized losses on those sales amounted to $498,147 and $235,636, respectively. For the year
ended September 30, 1998, proceeds from sales of securities available-for-sale amounted to $9,886,752. Gross realized gains and gross realized losses on those sales amounted to $898,379 and $58,171, respectively. For the year ended September 30, 1997,
proceeds from sales of securities available-for-sale amounted to $2,810,711. Gross realized gains and gross realized losses on those sales amounted to $155,042 and $43,007, respectively.

A total carrying amount of $500,625 of debt securities were pledged to secure repurchase agreements as of September 30, 1999.

NOTE 4 - LOANS

Loans consisted of the following as of September 30:

|                                                                                                                                                                                                                   | 1999                                                                                            | 1998                                                                                            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------
|Commercial, financial and agricultural
Real estate - construction and land development
Real estate - residential
Real estate - commercial
Consumer
Unearned income, net
Allowance for loan losses
      Loans, net | $  2,175,375 
4,322,578 
67,279,811 
6,682,463 577,482 
81,037,709 
19,123 (569,437)$80,487,395 | $  1,422,493 
2,588,234 
67,997,194 
5,653,489 566,418 
78,227,828 
(45,452)(527,437)$77,654,939

Certain directors and executive officers of the Company were customers of the Bank during the year ended September 30, 1999. Total loans to such persons and their companies amounted to $587,402 as of September 30, 1999. During the year
ended September 30, 1999, total payments amounted to $458,581 and principal advances were $861,250.

Changes in the allowance for loan losses were as follows for the years ended September 30:

|                                                                                                                                               | 1999                    | 1998                    | 1997                      
|---------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | ----------------------- | --------------------------
|Balance at beginning of period
Provision for loan losses
Recoveries of loans previously charged off
Loans charged off
Balance at end of period | $527,437
42,000$569,437 | $501,437
26,000$527,437 | $498,223
3,259(45)$501,437

As of September 30, 1999 and 1998 there were no loans that met the definition of an impaired loan in Statement of Financial Accounting Standards No. 114. There was no investment in impaired loans or related interest-income recognized on
impaired loans during the years ended September 30, 1999 and 1998.

Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights," (SFAS No. 122), became effective for the Company on October 1, 1996. SFAS No. 122 was superseded by Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," (SFAS No. 125) effective for transfers and servicing occurring after December 31, 1996. In the fiscal years ending September 30, 1999 and 1998 the Company
sold mortgage loans totaling approximately $0 and $7,037,000, respectively and retained the servicing rights. The fair value of those rights under SFAS No. 122 and SFAS No. 125 is not material and has not been recognized in the consolidated financial
statements for the years ended September 30, 1999 and 1998.

NOTE 5 - PREMISES AND EQUIPMENT

The following is a summary of premises and equipment as of September 30:

|                                                                                        | 1999                                                      | 1998                                                     
|--------------------------------------------------------------------------------------- | --------------------------------------------------------- | ---------------------------------------------------------
|Bank building
Furniture and equipment
Vehicle
Accumulated depreciation and amortization | $2,152,148 
781,269 21,000 
2,954,417 (930,840)$2,023,577 | $2,114,769 
736,319 21,000 
2,872,088 (763,744)$2,108,344

During the fiscal year 1998 the Company determined that the carrying amounts of the leasehold improvements and equipment at a former branch office are probably not recoverable and that the assets are impaired as defined by SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of." The impairment loss was $327,307 and is reflected in the 1998 consolidated statement of income. The Company closed this branch office in 1998.

NOTE 6 - DEPOSITS

The aggregate amount of time deposit accounts in denominations of $100,000 or more as of September 30, 1999 and 1998 was $8,046,253 and $8,020,846, respectively.

For time deposits as of September 30, 1999, the scheduled maturities for each of the following four years ended September 30 and thereafter are as follows:

|                               | (in thousands)                  
|------------------------------ | --------------------------------
|2000
2001
2002
2003
Thereafter | $34,881
7,007
1,432
9917
$43,436

NOTE 7 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

The securities sold under agreements to repurchase are securities sold on a short term basis by the Company that have been accounted not as sales but as borrowings. The securities consisted of U.S. Treasury Notes. The securities were held in the
Company 's safekeeping account at Investors Bank & Trust Company under the control of the Company and pledged to the purchasers of the securities. The purchasers have agreed to sell to the Company substantially identical securities at the maturity of
the agreements.

NOTE 8 - ADVANCES FROM FEDERAL HOME LOAN BANK OF BOSTON

Advances consist of funds borrowed from the Federal Home Loan Bank of Boston.

Maturities of advances from the Federal Home Loan Bank of Boston for the five fiscal years ending after September 30, 1999 and thereafter are summarized as follows:



|                                    | INTEREST RATE RANGE                                                 | AMOUNT                                                       
|----------------------------------- | ------------------------------------------------------------------- | -------------------------------------------------------------
|2000
2001
2002
2003
2004
Thereafter | 4.93% - 5.94%
5.79% - 5.94%
5.94%
5.79% - 5.94%
5.94%
4.99% - 5.94% | $1,579,329
584,014
89,772
595,290
101,0612,481,824
$5,431,290

At September 30 1999, $2,000,000 of advances from the FHLB was redeemable at par at the option of the FHLB on October 8, 1999 and each quarter thereafter.

Advances are secured by the Company's stock in that institution, its residential real estate mortgage portfolio and the remaining U.S. government and agencies obligation not otherwise pledged.

NOTE 9 - INCOME TAXES

The components of income tax expense are as follows for the years ended September 30:

|                                                                                                                     | 1999                                                         | 1998                                                                 | 1997                                                                     
|-------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | -------------------------------------------------------------------- | -------------------------------------------------------------------------
|Current:
  Federal
  State
Deferred:
  Federal
  State
Changes in valuation allowance
      Total income tax expense | $634,485208,052
  842,5371,413490
      1,903844,440$844,440 | $599,930248,242 
  848,172(88,378)(30,494)(118,872)
729,300 $729,300 | $334,704 146,100 
  480,804(5,717)(1,973)(7,690)
473,114 (42,214)$430,900

The tax effects of each type of item that gives rise to deferred taxes are as follows as of September 30:

|                                                                                                                                                                                                                                                                                                                                                   | 1999                                                                                           | 1998                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------
|Deferred tax assets:
  Allowance for loan losses
  Deferred income
  Reserve for contingencies
  Employee benefit plan
  Impairment loss on leasehold improvements and equipment
Deferred tax liabilities:
  Unrealized gain on available-for-sale securities
  Excess depreciation
  Deferred loan costs
      Net deferred tax asset (liability) | $173,041 
107,384 
7,944 
23,443 133,967 445,779 
(96,399)
(109,119)(113,787)(319,305)$126,474 | $139,566 
119,362 
7,775 
22,269 133,967 422,939 
(235,108)
(98,829)(99,334)(433,271)$ (10,332)

Deferred tax assets as of September 30, 1999 and 1998 have not been reduced by a valuation allowance because management believes that it is more likely than not that the full amount of deferred tax assets will be realized.

The reasons for the differences between the tax at the statutory federal income rate and the effective tax rate are summarized as follows for the years ended September 30:



|                                                                                                                                                                                                                                            | 1999                            | 1998                             | 1997                                   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------- | -------------------------------- | ---------------------------------------
|Tax at statutory rate of 34%
Increase (decrease) resulting from:
  State taxes, net of federal tax benefit
  Utilization (provision) of deferred tax asset valuation reserve
  Dividend received deduction
  Other, net
Effective tax rates | 34.0%
7.6   
(0.9)  5.9   46.6% | 34.0%
7.5   
(1.5)  (1.9)  38.1% | 34.0%
8.0   
(3.6)  
(3.2)  1.2   36.4%

As part of the Adoption Tax Credit within the Minimum Wage Bill that was enacted into law on August 20, 1996 the Section 593 tax additions to the reserve for bad debts was repealed, effective for taxable years beginning after December 31,
1995. Thus, the Company was allowed a tax deduction for bad debts under the experience method only starting with the year beginning October 1, 1996.

As part of this legislation the Company will have to recapture in taxable income the excess of the tax reserve for bad debts at September 30, 1996 over the tax reserve at April 30, 1988. The recapture amount is $238,709 resulting in Federal and
Massachusetts income taxes of approximately $98,000 which is being paid over a six year period starting with the tax year beginning October 1, 1998. This tax has been provided for in past years and will not result in any charge to earnings.

In prior years, the Company was allowed a special tax-basis bad debt deduction under certain provisions of the Internal Revenue Code. As a result, retained earnings of the Company as of September 30, 1999 includes $1,639,418 for which federal and state
income taxes have not been provided. Under the provisions of recent federal income tax legislation, if the Company no longer qualifies as a bank as defined in certain provisions of the Internal Revenue Code, this amount will be subject to recapture in
taxable income ratably over six (6) years, subject to a combined federal and state tax rate of approximately 41% based on the effective tax rates of the Company in prior years.

NOTE 10 - EMPLOYEE RETIREMENT, PENSION PLANS AND BENEFITS

Retirement Plan

The Company is a participant in the Cooperative Banks Employee Retirement Association Defined Contribution and Defined Benefit Plans (a multi-employer plan). The plans provide benefits to substantially all of the Company's employees. Benefits under
the defined contribution plan are based on a percentage of employee contributions while benefits under the defined benefit plan are based primarily on years of service and employees' compensation. The Company's funding policy for the defined benefit plan
is to fund amounts required by applicable regulations and which are tax deductible. Amounts charged to retirement fund expense for the years ending September 30, 1999, 1998 and 1997 totaled $110,374, $102,799 and $103,310, respectively.

Employee Stock Ownership Plan

Effective March 1996 the Bank adopted the Falmouth Co-Operative Bank Employee Stock Ownership Plan (ESOP).

On March 26, 1996 the ESOP borrowed $872,850 from Bridgewater Savings Bank ("the old debt") to purchase 87,285 shares of the stock of Falmouth Co-Operative Bank. In the year ended September 30, 1998 the old debt was paid off and replaced by an
inter-company loan by the Company to the ESOP. The loan is secured by a pledge of the stock purchased. The Company makes annual contributions to the ESOP in amounts determined by the Board of Directors. Dividends received by the ESOP may be credited to
participants' accounts or may be used to repay the ESOP's debt.

Any shares of the Company purchased by the ESOP are subject to the accounting specified by the American Institute of CPA's Statement of Position 93-6. Under the statement, as any shares are released from collateral, the Company will report compensation
expense equal to the current market price of the shares and the shares will be outstanding for earnings-per-share computations. Also, as the shares are released, the related dividends will be recorded as a reduction of retained earnings and dividends on
the allocated shares will be recorded as a reduction of debt and accrued interest.

The shares purchased by the ESOP are pledged as collateral for its debt. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the proportion of debt service paid in the year. The old debt of the ESOP
was recorded as debt of the Company. The inter-company loan is eliminated in consolidation. The shares pledged as collateral are reported as unearned ESOP shares in the balance sheet. The ESOP shares were as follows as of September 30:

|                                                                                                   | 1999                                  | 1998                                      
|-------------------------------------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------
|Allocated shares
Committed to be released shares
Unreleased shares
Fair value of unreleased shares | 19,537
8,72856,737
    85,002$851,055 | 11,485
8,72865,465
       85,678$1,063,806

For the old ESOP debt, the interest rate per annum was 8.15%. Interest expense on the old debt was $0, $22,556 and $65,576 for the years ended September 30, 1999, 1998 and 1997, respectively.

Annual contributions to the plan are discretionary. Contributions to the ESOP by the Bank or Company were $88,185, $87,885 and $87,285 for the years ended September 30, 1999, 1998 and 1997, respectively and ESOP compensation expense was $128,137,
$182,511 and $128,389, respectively.

Stock Option Plan

On November 19, 1996, the Bank adopted the 1997 Stock Option Plan for Outside Directors, Officers, and Employees of the Bank. The plan was approved by shareholders effective as of January 21, 1997. The Board of Directors formed an Option Committee
to administer the plan. A total of 145,475 shares were made available for issuance under the plan.

Stock Options Granted to Eligible Directors

The price, at which an option granted to an eligible director may be exercised, is the fair market value of a share on the date on which the option is granted. Such options expire ten years after the grant date. The options are not exercisable in
the first year after grant. In the second through fifth year after the grant, the options are exercisable on a pro rata basis up to 80% of the grant by the fifth year. After the fifth year, 100% of the grant not previously exercised may be exercised.

Stock Options Granted to Eligible Employees

An option granted to an eligible employee must be designated as either an Incentive Stock Option or a Non-Qualifying Stock Option. The price at which an option may be exercised is determined by the Committee, it its discretion; provided, however,
that the exercise price shall not be less than the fair market value of a share on the grant date. These options may be exercised in periods specified by the Committee in the option agreement.

The Company applies APB Opinion 25 and related Interpretations in accounting for its plan. Accordingly, no compensation cost has been recognized for its stock option plan. Had compensation cost for the Company's stock-based compensation plan been
determined based on the fair value at the grant dates for awards under those plans consistent with the method of FASB Statement 123, the Company's net income and earnings per share for the years ended September 30 would have been reduced to the pro forma
amounts indicated below:

|                             |                       | 1999              | 1998                  | 1997             
|---------------------------- | --------------------- | ----------------- | --------------------- | -----------------
|Net income                   | As reported
Pro forma | $968,913
$880,025 | $1,185,076
$1,113,695 | $752,085
$716,394
|Earnings per share - Basic   | As reported
Pro forma | $.78
$.71         | $.86
$.81             | $.55
$.52        
|Earnings per share - Diluted | As reported
Pro forma | $.77
$.70         | $.84
$.79             | $.55
$.52        

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the years ended September 30, 1999, 1998 and 1997:
dividend yield of 2 percent for all years; expected volatility of 25 percent for 1999 and 19 percent for 1998 and 1997; risk-free interest rate of 5.2, 5.8 and 7 percent, respectively; and expected lives of 8 years for all years.

A summary of the status of the Company's stock option plan as of September 30, 1999, 1998 and 1997 and changes during the years ending on those dates is presented below:

|                                                                                                                                                                                                                  | 1999                                            | 1998                                 | 1997                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------ | --------------------------------------------------
|Options                                                                                                                                                                                                           | Shares                                          | Weighted-
AverageExercise Price      | Shares                                            
|Outstanding at beginning of year
Granted
Correction of prior grant
Exercised
Forfeited
Outstanding at end of year
Options exercisable at year-end
Weighted-average fair value of
 options granted during the year | 107,625 
6,331 
(994)(900)112,062
45,127 
$4.86 | $13.414
15.390
13.601
13.375
$13.524 | 109,125 
666 
(666)
0 (1,500)107,625
21,525 
$5.69

The following table summarizes information about stock options outstanding as of September 30, 1999:

|Options Outstanding     | Options Exercisable     
|----------------------- | ------------------------
|Range of
ExercisePrices | NumberOutstanding       
|13.375
15-15.625
19.625 | 105,165
6,231666
112,062

Recognition and Retention Plan

On November 19, 1996, the Bank adopted the 1997 Recognition and Retention Plan for Outside Directors, Officers and Employees of Falmouth Co-operative Bank (the RRP). The Company subsequently adopted and assumed sponsorship of the RRP and appointed
a compensation committee to administer it. The Company established the RRP Trust and contributes, or causes to be contributed, to the RRP Trust, from time to time, such amounts of money or property as determined by the Compensation Committee. In no event
shall the assets of the RRP Trust be used to purchase more than 58,190 shares of Company common stock. In its discretion, the Compensation Committee may grant awards of restricted stock to officers and employees. Each award will become vested and
distributable at a rate of 20% on each anniversary date of the grant and fully vested on the date of the award holder's death or disability. Stock subject to awards is held in the RRP Trust until the award is vested. An individual to whom an award is
granted is entitled to exercise voting rights and receive cash dividends with respect to stock subject to awards granted to him/her whether or not vested. The Compensation Committee exercises voting rights with respect to the shares in the RRP Trust that
have not been allocated as directed by the individuals eligible to participate. On April 15, 1997, 39,000 shares were awarded, with vesting beginning as of February 1, 1998. Compensation expense amounted to $114,417, $67,816 and $100,000 for the years
ending September 30, 1999, 1998 and 1997, respectively. Compensation expense is based on the fair value of the common stock on the grant date. As of September 30, 1999, the RRP Trust had purchased a total of 39,638 shares, and 16,142 vested shares had
been distributed to eligible participants.

NOTE 11 - REGULATORY MATTERS

The Company and the Bank are 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 effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Their 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 and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of September 30, 1999, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

As of September 30, 1999 the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank
must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank's category.

The Company's and the Bank's actual capital amounts and ratios are also presented in the table.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Actual:                                                                              | For CapitalAdequacy Purposes:                                                                          | To Be Well
Capitalized Under
Prompt CorrectiveAction Provisions:        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Amount                                                                               | Ratio                                                                                                  | Amount                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | (Dollar amounts in thousands)                                                       
|As of September 30, 1999:
  Total Capital (to Risk Weighted Assets):
    Consolidated
    Falmouth Co-Operative Bank
  Tier 1 Capital (to Risk Weighted Assets):
    Consolidated
    Falmouth Co-Operative Bank
  Tier 1 Capital (to Average Assets):
    Consolidated
    Falmouth Co Operative Bank
As of September 30, 1998:
  Total Capital (to Risk Weighted Assets):
    Consolidated
    Falmouth Co-Operative Bank
  Tier 1 Capital (to Risk Weighted Assets):
    Consolidated
    Falmouth Co-Operative Bank
  Tier 1 Capital (to Average Assets):
    Consolidated
    Falmouth Co-Operative Bank | $19,700
15,880
19,131
15,311
19,131
15,311
22,444
14,631
21,917
14,104
21,917
14,104 | 27.88%
22.98   
27.08   
22.15   
16.52   
13.46   
32.91   
23.31   
32.13   
22.47   
19.59   
13.62 | $5,652
5,529
2,826
2,764
4,632
4,550
5,456
5,022
2,726
2,511
4,475
4,143

The ability of the Company to pay dividends on its common stock is restricted by Massachusetts banking law. No dividends may be paid if such dividends would reduce stockholders' equity of the Company below the amount of the liquidation
account required by Massachusetts conversion regulations and described in Note 16.

NOTE 12 - FINANCIAL INSTRUMENTS

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to originate loans. The instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in the balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company 's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments is represented by the contractual amounts of those instruments. The Company uses the same credit policies in
making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to originate loans are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a
fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the borrower. Collateral held varies, but may include secured interests in mortgages, accounts receivable, inventory,
property, plant and equipment and income-producing properties.

The estimated fair values of the Company 's financial instruments, all of which are held or issued for purposes other than trading, are as follows as of September 30:

|                                                                                                                                                                                                                                                                                                                                                      | 1999                                                                                              | 1998                                                                                             
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                      | CarryingAmount                                                                                    | FairValue                                                                                        
|Financial assets:
  Cash and cash equivalents
  Available-for-sale securities
  Held-to-maturity securities
  Federal Home Loan Bank stock
  Loans
  Accrued interest receivable
  Cooperative Central Bank Reserve Fund Deposit
Financial liabilities:
  Deposits
  Federal Home Loan Bank advances
  Securities sold under agreements to repurchase | $  7,277,360
17,144,442
9,641,817
720,700
80,487,395
729,668
395,395
92,885,708
5,431,290
857,727 | $  7,277,360
17,144,442
9,631,547
720,700
79,613,000
729,668
395,395
92,933,000
5,386,000
857,727

The carrying amounts of financial instruments shown in the above table are included in the balance sheet under the indicated captions. Accounting policies related to financial instruments are described in Note 2.

Notional amounts of financial instrument liabilities with off-balance sheet credit risk are as follows as of September 30:

|                                                                                                                                                                                                                                             | 1999                                                                 | 1998                                                             
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | -----------------------------------------------------------------
|Commitments to originate loans
Unadvanced funds on construction loans
Unadvanced funds on home equity lines of credit
Unadvanced funds on commercial lines of credit
Unadvanced funds on overdraft lines of credit
Standby letters of credit | $  5,063,000
2,533,119
6,325,811
2,032,516
125,95312,000
$16,092,399 | $  4,509,100
2,538,054
4,746,808
824,316
85,91424,000
$12,728,192

There is no material difference between the notional amount and the estimated fair value of the off-balance sheet liabilities.

The Company has no derivative financial instruments subject to the provisions of SFAS No. 119 "Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments."

NOTE 13 - EMPLOYMENT AGREEMENTS

The Company has employment agreements with its President and Chief Executive Officer and its Vice President and Treasurer. The employment agreements generally provide for the continued payment of specified compensation and benefits for specified
periods after termination, unless the termination is for "cause" as defined in the employment agreements. The employment agreements provide for the payment, under certain circumstances, of lump-sum amounts upon termination following a "change in control"
as defined in the Agreements. The employment agreements also provide for lump-sum payments in the event of the officers' voluntary termination of employment on the occurrence of certain specified events.

NOTE 14 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

Most of the Company's business activity is with customers located within the state. There are no concentrations of credit to borrowers that have similar economic characteristics. The majority of the Company's loan portfolio is comprised of loans
collateralized by real estate located in the state of Massachusetts.

NOTE 15 - EARNINGS PER SHARE (EPS)

Reconciliation of the numerators and the denominators of the basic and diluted per share computations for net income are as follows:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Income(Numerator)                                                | Shares(Denominator)                                                        | Per-ShareAmount                    
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | -------------------------------------------------------------------------- | -----------------------------------
|Year ended September 30, 1999
  Basic EPS
    Net income and income available to common stockholders
    Effect of dilutive securities, options
  Diluted EPS
    Income available to common stockholders and
     assumed conversions
Year ended September 30, 1998
  Basic EPS
    Net income and income available to common stockholders
    Effect of dilutive securities, options
  Diluted EPS
    Income available to common stockholders and
     assumed conversions
Year ended September 30, 1997
  Basic EPS
    Net income and income available to common stockholders
    Effect of dilutive securities, options
  Diluted EPS
    Income available to common stockholders and
     assumed conversions | $   968,913$   968,913$1,185,076$1,185,076$   752,085$   752,085 | 1,243,92516,618
1,260,5431,375,05736,085
1,411,1421,376,1933,636
1,379,829 | $0.78
$0.77
$0.86
$0.84
$0.55
$0.55

NOTE 16 - LIQUIDATION ACCOUNT

At the time of conversion to stock form, the Bank established a liquidation account in an amount equal to the Bank's net worth as of the date of the latest financial statements included in the final Offering Circular used in connection with the
Conversion. In accordance with Massachusetts statutes, the liquidation account is maintained for the benefit of Eligible Account Holders who continue to maintain their accounts in the Bank after the conversion. The liquidation account is reduced annually
to the extent that Eligible Account Holders have reduced their qualifying deposits. Subsequent increases will not restore an Eligible Account Holder's interest in the liquidation account. In the event of a complete liquidation, each Eligible Account
Holder is entitled to receive a distribution from the liquidation account in a proportionate amount to the current adjusted qualifying balances for the account then held. The balance in the liquidation account was $1,414,428 as of September 30, 1999.

NOTE 17 - RECLASSIFICATION

Certain amounts in the prior years have been reclassified to be consistent with the current year's statement presentation.

NOTE 18 - PARENT COMPANY ONLY FINANCIAL STATEMENTS

The following financial statements are presented for Falmouth Bancorp, Inc. (Parent Company) and should be read in conjunction with the consolidated financial statements.

FALMOUTH BANCORP, INC.(Parent Company Only)

BALANCE SHEETS

September 30, 1999 and 1998

|ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 1999                                                                                                                                                                                                         | 1998                                                                                                                                                                                                                                             
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cash and due from banks
Federal funds sold
      Cash and cash equivalents
Investment in Falmouth Co-Operative Bank
Investments in available-for-sale securities
Investments in held-to-maturity securities
Loans, net
Accrued interest receivable
Other assets
Prepaid expenses
      Total assetsLIABILITIES AND STOCKHOLDERS' EQUITYAccrued expenses
Other liabilities
      Total liabilities
Stockholders' equity:
  Preferred stock, par value $.01 per share; authorized 500,000 shares; none issued
  Common stock, par value $.01 per share; authorized 2,500,000 shares;
   issued 1,454,750 shares; outstanding, 1,175,744 shares as of September 30, 1999
   and 1,401,784 as of September 30, 1998
  Paid-in capital
  Unallocated Employee Stock Ownership Plan shares
  Retained earnings
  Treasury stock (279,006 shares as of September 30, 1999 and 52,966 shares
   as of September 30, 1998)
  Unearned compensation
  Accumulated other comprehensive income
      Total stockholders' equity
      Total liabilities and stockholders' equity | $         6,417 2,110,2272,116,644 
15,497,511 
1,035,807 
565,853 
67,853 2,328 
$19,285,996$ 26,544 26,54414,547 
23,241,883 
(565,853)
1,484,384 
(4,600,671)
(443,284)128,446 
  19,259,452 
$19,285,996 | $       36,397 1,238,1791,274,576 
14,568,632 
4,480,245 
1,207,113 
594,417 
54,908 
66,761 14,007 
$22,260,659$       16,591 2,578 
         19,16914,547 
23,233,025 
(654,038)
870,726 
(952,668)
(594,417)324,315 
  22,241,490 
$22,260,659
|
|
|
|
|
|
|
|
|
|
|
|
|

FALMOUTH BANCORP, INC.

STATEMENTS OF INCOME

Years Ended September 30, 1999 and 1998

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 1999                                                                                                                  | 1998                                                                                                                
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------
|Interest and dividend income:
  Interest on taxable investment securities
  Interest on loan from subsidiary
  Dividends on Cooperative Bank Investment Fund
  Other interest
      Total interest and dividend income
Other income
Expenses:
  Legal and professional fees
  Securities losses, net
  Other expense
    Total expenses
Income before income tax benefit and equity in undistributed
 net income of subsidiary
Income taxes
Income before equity in undistributed net income of subsidiary
Equity in undistributed net income of subsidiary:
  Falmouth Co-Operative Bank
      Net income | $  97,958
44,487
158,85145,413
  346,709
         10988,605
149,88057,223
  295,70851,11037,00014,110954,803
$968,913 | $   283,474
33,215
178,49120,490
     515,67066,710
53,48230,899
     151,091364,579149,247215,332969,744
$1,185,076

FALMOUTH BANCORP, INC.

STATEMENTS OF CASH FLOWS

Years Ended September 30, 1999 and 1998

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 1999                                                                                                                                                                                                                                                        | 1998                                                                                                                                                                                                                                               
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Cash flows from operating activities:
  Net income
  Adjustments to reconcile net income to net cash provided
   by operating activities:
    Amortization net of accretion of investment securities
    Undistributed net income of subsidiary
    Increase in accrued expenses
    Losses on sales of available-for-sale securities
    (Increase) decrease in prepaid expenses
    Decrease in interest receivable
    Increase in other assets
    Increase (decrease) in other liabilities
  Net cash provided by operating activities
Cash flows from investing activities:
  Purchases of available-for-sale securities
  Proceeds from sales of available-for-sale securities
  Proceeds from maturities of available-for-sale securities
  Purchases of held-to-maturity securities
  Proceeds from maturities of held-to-maturity securities
  Loan granted to ESOP
  Net cash provided by investing activities
Cash flows from financing activities:
  Purchase of stock for RRP
  Purchases of treasury stock
  Cash received from subsidiary on reorganization
  Dividends paid
  Proceeds from exercise of stock options
  Unallocated ESOP shares released
  Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure:
  Securities received from subsidiary on reorganization | $   968,913 
6,116 
(954,803)
9,953 
149,880 
11,679 
54,908 
(15,720)(2,578)228,348 
(599,998)
3,440,987 
500,000 
(999,234)
2,200,000 
                   4,541,755 
(9,558)
(3,665,778)
(355,194)
14,310 88,185 (3,928,035)
842,068 1,274,576 $2,116,644 | $1,185,076 
25,485 
(969,744)
16,591 
53,482 
(14,007)
13,657 
(19,613)2,578 
     293,505(2,541,391)
3,984,951 
1,000,000 
1,200,000 (741,923)2,901,637(751,433)
(952,668)
10,000 
(314,350)87,885 
 (1,920,566)
1,274,576 0 
$1,274,576$9,389,377
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Directors and Officers of Falmouth Bancorp, Inc.
and Falmouth Co-operative Bank

Directors

Walter A. MurphyChairman of the Board
Retired President, Falmouth Co-operative Bank

Santo P. PasqualucciPresident and Chief Executive Officer

John W. Holland, Jr.Attorney at Law

James A. KeefePrincipal, Falmouth Ford

Wayne C. LamsonTreasurer/Comptroller, Woods Hole, Martha's Vineyard and Nantucket Steamship Authority

Gardner L. LewisRetired, Former Owner, The Pancake Man Family Restaurant

John J. Lynch, Jr.President, Paul Peters Insurance Agency

Ronald L. McLaneRetired building contractor

Eileen C. Miskell, CPACPA, Principal and Treasurer, Wood Lumber Company

Robert H. MooreAgent, Paul Peters Insurance Agency

William E. NewtonPrincipal, C. H. Newton Builders, Inc.

Executive Officers

Santo P. PasqualucciPresident and Chief Executive Officer

George E. Young, IIIVice President, Chief Financial Officer and Treasurer

Jeanne E. AlvesSecretary

Ronald GarciaVice President/Senior Loan Officer

Sharon L. ShonerVice President/Audit/Compliance Officer

Corporate InformationTransfer Agent and RegistrarInquiries regarding stockholder administration and services should be directed to:

Registrar and Transfer Company
      10 Commerce Drive
      Cranford, New Jersey 07016-3572
      (800) 368-5948

Independent AuditorsShatswell MacLeod & Co., P.C.
83 Pine Street
West Peabody, MA 01960-3635
(978) 535-0206

Special Legal CounselThacher Proffitt & Wood
1700 Pennsylvania Avenue, N.W., Suite 800
Washington, D.C. 20006
(202) 347-8400

Stock InformationThe Company's Common Stock trades on the American Stock Exchange under the symbol "FCB." Prices for the stock are reported in the American Stock Exchange Composite Transactions section of The Wall Street Journal and other major newspapers
as "FalmthBcp."

Investor RelationsInquiries regarding Falmouth Co-operative Bank and Falmouth Bancorp, Inc. should be directed to:

Santo P. Pasqualucci
      Falmouth Co-operative Bank
      20 Davis Straits
      Falmouth, MA 02540
      (508) 548-3500

Annual Meeting of StockholdersThe Company's Annual Meeting of Stockholders will be held at 4:30 p.m. Eastern Standard time on Tuesday, January 18, 2000, at Falmouth Co-operative Bank, 20 Davis Straits, Falmouth, Massachusetts. Holders of common stock as of December 7, 1999
will be eligible to vote.

FALMOUTH BANCORP, INC.
20 Davis Straits, Falmouth, Massachusetts 02540
508-548-3500