SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON D. C. 20549

                                    FORM 10-Q


                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


  For Quarter Ended September 30, 1998            Commission File Number 0-14550


                       NEW ENGLAND COMMUNITY BANCORP, INC.
                       -----------------------------------

                               DELAWARE 06-1116165



                                OLD WINDSOR MALL
                                  P.O. BOX 130
                           WINDSOR, CONNECTICUT 06095


                            Telephone: (860) 610-3600


Indicate by check mark whether  registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding  twelve  months,   and  (2)  has  been  subject  to  such  filing
requirements for the past 90 days.
YES      X         NO         
     -------          --------


The number of shares of common stock of the registrant outstanding as of October
31, 1998 was 7,027,554.







The total number of pages in this report is 19.





                                    Page -1-


<PAGE>



                       NEW ENGLAND COMMUNITY BANCORP, INC.

                                TABLE OF CONTENTS

Part I.    FINANCIAL INFORMATION                                        Page No.

Item 1.    Financial Statements:

           Consolidated Balance Sheets--September 30, 1998 (unaudited)
           and December 31, 1997                                              3

           Consolidated Statements of Income--three and nine months
           ended September 30, 1998 and 1997 (unaudited)                      4

           Consolidated Statements of Cash Flows--nine months ended
           September 30, 1998 and 1997 (unaudited)                            5

           Notes to Consolidated Financial Statements                         6

Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                          7

Part II.   OTHER INFORMATION                                                 16

Item 1.    Legal Proceedings                                                 16

Item 2.    Changes in Securities                                             16

Item 3.    Defaults Upon Senior Securities                                   16

Item 4.    Submission of Matters to a Vote of Security Holders               16

Item 5.    Other Information                                                 16

Item 6.    Exhibits, Financial Statement Schedules and Reports
           on Form 8-K                                                       16

           SIGNATURES                                                        18


                                    Page -2-


<PAGE>


                          Part I--FINANCIAL INFORMATION

                          Item 1. Financial Statements

                       NEW ENGLAND COMMUNITY BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             September 30,      December 31,
                                                                                      1998              1997
(thousands of dollars)                                                         (Unaudited)                  
============================================================================================================
<S>                                                                             <C>               <C>
ASSETS:
     Cash and due from banks                                                    $   36,696        $   44,338
     Short-term investments                                                          3,027             8,252
     Federal funds sold                                                              5,057             8,725
                                                                                ----------        ----------
         Cash and cash equivalents                                                  44,780            61,315
     Interest bearing deposits with banks                                              693               594
     Securities held-to-maturity                                                     6,634            14,315
     Securities available-for-sale                                                 175,330           163,265
     Federal Home Loan Bank stock                                                    4,881             4,881

     Loans outstanding                                                             523,744           538,182
         Less: allowance for possible loan losses                                  (10,292)          (12,081)
                                                                                ----------        ---------- 
              Net loans                                                            513,452           526,101
     Loans held-for-sale                                                             9,999             2,966
     Accrued interest receivable                                                     5,689             5,480
     Premises and equipment                                                         13,957            13,301
     Other real estate owned                                                         1,936             3,196
     Goodwill                                                                        4,944             5,238
     Other assets                                                                    8,390             7,300
                                                                                ----------        ----------
Total Assets                                                                    $  790,685        $  807,952
                                                                                ==========        ==========

LIABILITIES:
     Deposits:
         Noninterest bearing                                                    $  144,931        $  152,951
         Interest bearing                                                          512,620           541,995
                                                                                ----------        ----------
              Total deposits                                                       657,551           694,946
     Short-term borrowings                                                          28,991            18,469
     Long-term debt                                                                 27,441            20,112
     Other liabilities                                                               4,542             5,039
                                                                                ----------        ----------
Total Liabilities                                                                  718,525           738,566

SHAREHOLDERS' EQUITY:
     Common Stock--$0.10 par value, authorized 20,000,000 shares:
     September 30, 1998, 7,027,554 outstanding; authorized
     10,000,000 shares: 7,042,799 outstanding                                          703               704
     Additional paid-in capital                                                     61,749            62,322
     Retained earnings                                                               7,719             4,974
     Net unrealized gain on securities available-for-sale                            1,989             1,386
                                                                                ----------        ----------
Total Shareholders' Equity                                                          72,160            69,386
                                                                                ----------        ----------
Total Liabilities & Shareholders' Equity                                        $  790,685        $  807,952
                                                                                ==========        ==========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                    Page -3-


<PAGE>


                       NEW ENGLAND COMMUNITY BANCORP, INC.
                   CONSOLIDATED INCOME STATEMENTS (Unaudited)
<TABLE>
<CAPTION>
                                                                       Nine Months Ended                 Three Months Ended
                                                                          September 30,                      September 30,
(thousands of dollars; except per share data)                         1998             1997              1998             1997
==============================================================================================================================
<S>                                                              <C>              <C>               <C>              <C>      
INTEREST INCOME:
     Loans, including fees                                       $  36,027        $  31,863         $  11,829        $  10,904
     Securities:
         Taxable interest                                            8,192            7,653             2,727            2,567
         Interest exempt from federal income taxes                     339              146               200               56
         Dividends                                                     138              294                47              143
     Federal funds sold and other interest                             327              442                99              162
                                                                 ---------        ---------          --------          -------
         Total interest income                                      45,023           40,398            14,902           13,832

INTEREST EXPENSE:
     Deposits                                                       15,229           13,326             4,938            4,561
     Borrowed funds                                                  1,984            1,098               755              450
                                                                 ---------        ---------          --------          -------
         Total interest expense                                     17,213           14,424             5,693            5,011
Net interest income                                                 27,810           25,974             9,209            8,821
Provision for possible loan losses                                   1,192            1,327               387              559
                                                                 ---------        ---------          --------          -------

Net interest income after provision for possible loan losses        26,618           24,647             8,822            8,262

NONINTEREST INCOME:
     Service charges, fees and commissions                           3,047            2,756             1,013              913
     Investment securities gains, net                                1,504              207                87                8
     Gain on the sales of loans, net                                 2,280              613               913              198
     Other                                                             211              247                46               65
                                                                 ---------        ---------          --------          -------
         Total noninterest income                                    7,042            3,823             2,059            1,184

NONINTEREST EXPENSE:
     Salaries and employee benefits                                 11,749            9,950             3,942            3,329
     Occupancy                                                       2,086            2,157               675              700
     Furniture and equipment                                         1,474            1,453               487              584
     Outside services                                                1,571            1,449               573              264
     Postage and supplies                                              854              777               242              236
     Insurance and assessments                                         326              259                99               87
     Losses, writedowns, expenses - other real estate owned           (100)             397                14              185
     Amortization of goodwill                                          294              236                99               79
     Loss on sale of portfolio loans                                   715
     Acquisition expense                                             3,593            1,253             3,593            1,253
     Other                                                           2,756            2,590               651              900
                                                                 ---------        ---------          --------          -------
         Total noninterest expense                                  25,318           20,521            10,375            7,617
                                                                 ---------        ---------          --------          -------
Income before taxes                                                  8,342            7,949               506            1,829
Income taxes                                                         3,637            3,180               426              876
                                                                 ---------        ---------          --------          -------
Net Income                                                       $   4,705        $   4,769          $     80          $   953
                                                                 =========        =========          ========          =======
Net income per share--Basic                                      $    0.67        $    0.69          $   0.01          $  0.14
Net income per share--Diluted                                    $    0.65        $    0.69          $   0.01          $  0.14
Weighted average shares of
  Common Stock outstanding--Basic                                    7,046            6,950             7,038            6,969
Weighted average shares of
  Common Stock outstanding--Diluted                                  7,218            6,950             7,147            6,969
</TABLE>

        The accompanying notes are an integral part of these statements.


                                    Page -4-

<PAGE>

                       NEW ENGLAND COMMUNITY BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                     Nine Months Ended
                                                                                       September 30,
(thousands of dollars)                                                                1998        1997
---------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
<S>                                                                                 <C>         <C>
     Net income                                                                     $  4,705    $  4,769
     Adjustment for noncash charges (credits):
       Provision for depreciation and amortization                                     1,173       1,095
       Losses from sale or disposal and provisions to reduce the carrying value
          of other real estate owned, net                                               (257)        145
       Securities gains, net                                                          (1,504)       (208)
       Accretion of discounts and amortization of premiums on bonds, net                 180          58
       Accretion, net of amortization, of purchase accounting adjustments                  9        (160)
       Amortization of goodwill and other intangibles                                    294         236
       Provision for possible loan losses                                              1,192       1,327
       (Gain) loss on sale of portfolio loans, net                                       715         
       (Increase) decrease in accrued interest income and other assets, net           (1,479)        283
       Decrease (increase) in loans held-for-sale                                     (7,033)        531
       (Decrease) increase in accrued interest payable and other liabilities, net     (1,182)     (2,537)
                                                                                    --------    --------
              Net cash provided by (used for) operating activities                    (3,187)      5,539
                                                                                    --------    --------

FINANCING ACTIVITIES:
     Net decrease in noninterest-bearing accounts                                     (8,020)      9,581
     Net (decrease) increase in interest-bearing accounts                            (29,333)     (5,907)
     Net increase in short-term borrowings                                            10,522       8,637
     Net increase in long-term borrowings                                              7,340      14,423
     Proceeds from issuance of common stock                                              437         126
     Cash dividends paid                                                              (1,595)     (1,130)
                                                                                    --------    --------
              Net cash used for financing activities                                 (20,649)     25,730

INVESTING ACTIVITIES:
     Loans originated, net of principal collections                                   (2,604)    (21,487)
     Proceeds from sale of portfolio loans                                            11,988          38
     Net (increase) decrease in interest-bearing time deposits                           (99)        168
     Purchases of Federal Home Loan Bank Stock                                                      (829)
     Purchases of securities available-for-sale                                      (70,773)    (62,904)
     Proceeds from sales of securities available-for-sale                             21,355      31,228
     Proceeds from maturities of securities available-for-sale                        41,591      19,265
     Purchases of securities held-to-maturity                                                     (1,026)
     Proceeds from maturities of securities held-to-maturity                           4,701       3,644
     Proceeds from sales of other real estate owned                                    3,123       3,667
     Purchases of premises and equipment, net                                         (1,755)       (859)
     Sales of premises and equipment                                                      49
     Capitalization of expenditures on other real estate owned                          (275)        (97)
                                                                                    --------    --------
              Net cash provided by (used for) investing activities                     7,301     (29,192)
                                                                                    --------    --------
     Increase (decrease) in cash and cash equivalents                                (16,535)      2,077
     Cash and cash equivalents, beginning of period                                   61,315      50,633
                                                                                    --------    --------
     Cash and cash equivalents, end of period                                       $ 44,780    $ 52,710
                                                                                    ========    ========
Schedule of noncash investing and financing activities
    Loans charged off, net of recoveries                                              $2,981        $642
    Real estate acquired through foreclosure                                           1,331       1,376
    Loans originated to facilitate sales of other real estate owned                      104  
    Income tax paid                                                                    3,097       1,166
    Interest paid                                                                     17,173      14,612
</TABLE>

                                    Page -5-


<PAGE>


                       NEW ENGLAND COMMUNITY BANCORP, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION
------------------------------

     The accompanying  condensed interim financial  statements are unaudited and
include the accounts of New England  Community  Bancorp,  Inc. (the "Company" or
"NECB") and its  subsidiaries,  New England Bank and Trust Company ("New England
Bank"), The Equity Bank ("Equity Bank"),  Community Bank ("Community Bank"), and
Olde  Port  Bank  (together  the  "Subsidiaries").  The  consolidated  financial
statements have been prepared in accordance with generally  accepted  accounting
principles for interim  financial  information and with the  instructions to SEC
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
the  information  and  footnotes  required  by  generally  accepted   accounting
principles for complete financial statements.

     These  financial  statements  reflect,  in the opinion of  Management,  all
adjustments,  consisting of only normal recurring  adjustments,  necessary for a
fair  presentation  of the Company's  financial  position and the results of its
operations  and its  cash  flows  for the  periods  presented.  These  financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's 1997 Annual Report on Form 10-K.

NOTE 2 - MERGERS AND ACQUISITIONS
---------------------------------

     On December 31, 1997,  NECB  acquired  Community  Bank  (formally  known as
Community  Savings Bank) by paying $4,832,000 in cash for all of the outstanding
common shares of Community Bank. The acquisition of Community Bank was accounted
for as a purchase.  Accordingly,  the consolidated  financial  statements of the
Company do not include prior operating results of Community Bank.

     During the third quarter of 1998, NECB completed two acquisitions. On, July
10,  1998,  Olde  Port  Bank & Trust  Company  ("Olde  Port"),  a New  Hampshire
state-chartered  bank and trust  company,  became  NECB's  fourth  wholly  owned
banking  subsidiary.  NECB acquired Olde Port by issuing  585,986  shares of the
Company's common stock for all of the outstanding common shares of Olde Port and
all fully vested and exercisable stock options.

     On August 14, 1998, NECB acquired Bank of South Windsor ("South  Windsor"),
of South  Windsor,  Connecticut,  by issuing  1,270,720  shares of the Company's
common  stock for all of the  outstanding  common  shares of South  Windsor.  In
conjunction  with  the  transaction,   shares  of  South  Windsor  common  stock
beneficially owned by NECB were cancelled and retired.

     The  acquisitions  of Olde Port and South  Windsor  were  accounted  for as
poolings of interests  and, as such, all prior period results have been restated
as though the companies had been combined as of the earliest period presented.


                                    Page -6-


<PAGE>


NOTE 3 - DISCLOSURE FOR STATEMENTS OF CASH FLOWS
------------------------------------------------

Schedule of noncash investing and financing activities:
     Loans charged off, net of recoveries                   $2,981       $642
     Real estate acquired through foreclosure                1,331      1,376
     Income tax paid                                         3,097      1,166
     Interest paid                                          17,173     14,612

                          Part I--FINANCIAL INFORMATION

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

OVERVIEW
--------

     The Company's  earnings are largely  dependent upon net interest income and
noninterest  income from its  community  banking  operations--with  net interest
income providing the majority of the Company's revenues.  Net interest income is
the difference between interest earned on the loan and investment portfolios and
interest  paid on deposits and other  sources of funds.  Noninterest  revenue is
primarily derived from service charges,  fees and commissions related to deposit
accounts and the Company's  serviced loan  portfolio.  As noted in Note 2 above,
the acquisitions of Olde Port and South Windsor were accounted for as pooling of
interests.  As such,  all prior period  results have been restated as though the
companies had been combined as of the earliest period presented.

     NECB reported  record net  operating  income--net  income  before  applying
onetime charges related to mergers--for the third quarter of 1998 of $2,707,000,
or $0.38 per diluted share,  compared to net income of $2,145,000,  or $0.31 per
diluted  share,  reported  in the same  quarter in 1997.  This is an increase of
$562,000 or 26% over net operating  income  reported in the previous year. On an
earnings per share basis,  third quarter 1998 net income  increased 23% over the
third quarter of 1997.  Two important  measures of  performance  also  increased
significantly when compared to the same period last year.  Excluding the onetime
charges,  the ROA and ROE for the third  quarter of 1998 were 1.39% and  14.75%,
respectively,  compared to 1.20% and 12.82%, respectively, for the third quarter
of 1997.

     The  onetime  charges  related to the  acquisitions  of Olde Port and South
Windsor amounted to $2,627,000, net of related tax benefits.  Similarly,  during
the quarter ended  September  30, 1997,  NECB took a net charge of $1,192,000 in
connection with  completing its purchase of First Bank of West Hartford  ("First
Bank").  Charges  to  net  income  for  mergers  and  acquisitions  result  from
post-closing  restructuring  costs  and costs  associated  with  completing  the
transactions--including fees paid to advisors, attorneys and expenses related to
proxy and registration statements. For the third quarter of 1998, net income was
$80,000,  or $0.01 per diluted share compared to $953,000,  or $0.14 per diluted
share, a year earlier. These events are summarized below:

(Amounts in thousands)
                                                     Quarter-ended September 30,
                                                        1998           1997  
                                                      -------        --------
  Results as reported...........................      $    80        $    953
    Less:  merger related charges
     (tax effected)....                                 2,627           1,192
                                                      -------        --------
      Net income form operations................      $ 2,707        $  2,145
                                                      =======        ========

     Net interest  income on a fully-taxable  equivalent  ("FTE")  basis totaled
$9,357,000 for 1998 compared to $8,854,000 in 1997. Despite the continuing trend
toward  lower  market rates  during much of 1998 (e.g.,  the  benchmark  30-year
Treasury  declined  94 basis  points  from  5.92% in  December  1997 to 4.98% in
September 1998),  NECB's consolidated net interest margin remains strong. In the
third quarter of 1998 the margin was 5.23% compared to 5.35% achieved during the
third quarter of 1997.

     The  provisions  for possible loan losses in the third quarter of 1998 were
$387,000  compared  to  $559,000 in the  comparable  period in 1997.  While loan
performance  was  virtually  unchanged  from last  year,  the  increased  use of
government  guaranteed  loan programs slowed the need for new loan loss reserves
in quarter ended  September 30, 1998 compared to last year.  With regard to loan
performance,  the ratio of  nonperforming  assets to total assets remained below
one percent of total assets and equaled  0.98% of total assets at September  30,
1998 compared to 0.95% a year earlier.

     Noninterest  income rose  sharply in the third  quarter of 1998 and totaled
$2,059,000 in 1998 compared to $1,184,000 in the period in 1997--an  increase of
$875,000,  or 74%.  Noteworthy  increases  occurred  in  gains  from the sale of
mortgage loans,  and service charges,  fees and commissions  which rose $715,000
and $100,000, respectively. Significantly, in the aggregate, noninterest sources
of income  accounted  for 18% of  operating  income  (net  interest  income plus
noninterest income) in the third quarter compared to 12% for the same quarter in
1997.


                                    Page -7-


<PAGE>


     Noninterest  expense  totaled  $10,375,000  in the  third  quarter  of 1998
compared to $7,617,000 in 1997. The increase primarily resulted from the onetime
charges--accounting for $2,340,000 of the $2,758,000  increase--and the addition
of Community Bank. Gross  acquisition-related  expense totaled $3,593,000 in the
quarter  ended  September  30, 1998 compared to $1,253,000 in same period a year
earlier.  Excluding these charges,  NECB's efficiency ratio,  which measures how
much a dollar of revenue  costs to produce,  equaled 59.2% for the third quarter
of 1998 compared to 61.0% for the same period in 1997.

     Through the first nine months of 1998,  NECB reported  operating net income
of  $7,332,000  or $1.02 diluted  share,  an increase of $1,371,000  compared to
$5,961,000 or $0.86 per diluted  share for the same period last year.  Excluding
onetime  charges,  returns on average  assets  and  average  equity for the nine
months ended September 30, 1998 were 1.24% and 13.66%, respectively, compared to
1.15% and 12.22%,  respectively,  for the same period a year earlier.  Including
the onetime  charges,  net income  amounted to $4,705,000,  or $0.65 per diluted
share,  compared  to  $4,769,000,  or $0.69 per diluted  share,  during the same
period last year.

     During  the first  nine  months  of 1998,  net  interest  income on a fully
taxable-equivalent  basis totaled  $28,162,000  compared to $26,088,000 in 1997.
Provisions for loan losses were reduced to $1,192,000 from $1,327,000 during the
same period in 1997.  Noninterest income increased $3,219,000,  or more than 84%
above last year's total,  and amounted to $7,042,000  compared to $3,823,000 for
the same  period in 1997.  Gains from the sale of  securities  and gains for the
sale of  mortgage  loans each  increased  significantly  compared to a year ago.
Noninterest expense totaled $25,318,000 in 1998 compared to $20,521,000 in 1997.

     Total  assets  at  September  30,  1998  were   $790,685,000   compared  to
$807,952,000 at December 31, 1997. Total loans at September 30, 1998 amounted to
$523,744,000  compared to  $538,182,000  at December 31, 1997. The effect of the
bulk loan sale completed at the end of the first quarter of 1998,  which totaled
approximately  $12  million,   accounts  for  much  of  the  decrease  in  loans
outstanding.  Total  deposits  amounted to  $657,551,000  at September  30, 1998
compared to $694,946,000  at December 31, 1997.  During the year, NECB increased
its  use of  alternative  funding  sources  by  increasing  its  long-term  debt
outstanding  during the year to  $27,441,000  at September  30, 1998 compared to
$20,112,000  at  year-end  1997.  Short-term  borrowings  (primarily  repurchase
agreements)  also  increased  substantially  totaling  $28,991,000  compared  to
$18,469,000 at December 31, 1997.

     Shareholders'  equity increased $2,774,000 from $69,386,000 at December 31,
1997 to $72,160,000 at  quarter-end.  At September 30, 1998, the ratio of equity
to total assets  equaled  9.13%.  When goodwill  resulting from the Equity Bank,
Manchester  State Bank and Community  Bank  acquisitions  is excluded,  tangible
equity capital is reduced to $67,216,000,or 8.50% of total assets. The resulting
tangible  book value per share  amounted to $9.58 at September 30, 1998 compared
to $9.11 at December 31, 1997.


RESULTS OF OPERATIONS--THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
---------------------------------------------------------------------

     For the three months ended  September  30, 1998,  the Company  reported net
operating income of $80,000,  or $0.01 per diluted share,  compared to $953,000,
or $0.14 per diluted share, for the same period of 1997.

     Growth  in net  income  and  earnings  per  share  reflects,  in part,  the
additional  revenue  and  savings  achieved in  conjunction  with the  Company's
acquisition  of First  Bank  (completed  in  August,  1997) and  Community  Bank
together  with  strong  growth in  noninterest  income.  For the  quarter  ended
September 30, 1998,  noninterest  income  increased 74% over the same quarter in
1997. Also showing  improvement was net interest  income,  which on an FTE basis
increased $503,000,  or 5.7%, from the same period in 1997. Onetime charges, the
acquisition  of  Community  Bank,  increased  commission  payments  and expenses
related  to systems  and  technology  upgrades  served to  increase  noninterest
expense by  $2,758,000,  or 36%,  to  $10,375,000  in the third  quarter of 1998
compared to 1997.


NET INTEREST INCOME
-------------------

     The principal earning asset of the Company is its loan  portfolio--which is
comprised of loans to finance  operations of businesses located primarily within
its market  area,  mortgage  loans to finance  the  purchase or  improvement  of
properties  used by businesses and mortgage and personal  loans to  individuals.
Representing  approximately a quarter of the Company's  earning  assets,  NECB's
investment  portfolio  also plays an  important  part in the  management  of the
Company's  balance sheet.  While providing a source of revenue,  these funds are
used to provide  reserves and meet the  liquidity  needs of the Company.  Excess
reserves  are  available to meet the  borrowing  needs of the  communities  NECB
serves.  For the following  discussion,  interest income is presented on a fully
taxable-equivalent ("FTE") basis. FTE interest income restates reported interest
income on tax exempt loans and  securities as if such interest were taxed at the
statutory Federal income tax rate of 34% for all periods presented.


                                    Page -8-



<PAGE>



(Amounts in thousands)

THREE MONTHS ENDED SEPTEMBER 30,              1998          1997       % CHANGE
-------------------------------------------------------------------------------
Interest income (financial statements)     $  14,902     $ 13,832          7.7%
Tax equivalent adjustment                        148           33        348.5 
                                           ---------     --------              
  Total interest income (on an FTE basis)     15,050       13,865          8.5
Interest expense                              (5,693)      (5,011)        13.6
                                           ---------     --------             
Net interest income (on an FTE basis)      $   9,357     $  8,854          5.7
                                           =========     ========             

     For the third  quarter  of 1998,  net  interest  income on an FTE basis was
$9,357,000,  a 5.7% increase over the  $8,854,000  in the  comparable  period in
1997. A key factor in the $503,000  increase in 1998 was the increase in average
loans outstanding.  Internal growth and the acquisition of Community Bank (which
provided an  additional  $55,000,000  in loans  outstanding)  served to increase
interest  income on portfolio loans by $833,000 during the third quarter of 1998
compared to the same period a year earlier.

     The  net  interest   margin   measures  the  difference  in  the  yield  on
interest-earning assets and interest-bearing  liabilities. As shown in the table
below,  the margin for the quarter ended  September 30, 1998  decreased to 5.23%
from 5.33% in 1997. The yield on the loan portfolio was virtually  unchanged and
equaled 9.08% in the quarter ended  September 30, 1998 compared to 9.09% for the
same  period  a year  ago.  Meanwhile,  the  yield on the  Company's  investment
portfolio  increased to 6.74% in the quarter ended September 30, 1998 from 6.53%
last year. The yield on interest-bearing  liabilities  increased 19 basis points
and equaled 4.04% for the quarter  ended  September 30, 1998 compared to 3.85% a
year earlier. The acquisition of Community Bank, which typically paid depositors
among  the  highest  rates  in  its  market  area,  served  to  increase  NECB's
consolidated yield on interest-bearing liabilities.


                                    Page -9-


<PAGE>


CONSOLIDATED AVERAGE BALANCES/INTEREST EARNED OR PAID/RATES
-----------------------------------------------------------
<TABLE>
<CAPTION>

THREE MONTHS ENDED                                       SEPTEMBER 30, 1998              SEPTEMBER 30, 1997    
-----------------------------------------------------------------------------------------------------------------
                                                      Average            Average      Average             Average
(Amounts in thousands)                                Balance  Interest     Rate      Balance   Interest     Rate
-----------------------------------------------------------------------------------------------------------------
<S>                                                 <C>          <C>        <C>     <C>          <C>         <C>
ASSETS:
   Federal funds sold                               $   7,335   $    99     5.36%   $  12,276    $   162     5.24%
   Investment securities                              183,752     3,122     6.74      170,133      2,799     6.53
   Mortgages held for sale                              7,890       130     6.54        2,031         38     7.42
   Loans (A)                                          511,185    11,699     9.08      474,221     10,866     9.09
                                                    ---------   -------             ---------    -------         
      Total interest-earning assets                   710,162    15,050     8.41%     658,661     13,865     8.35

   Allowance for loan losses                           (9,658)                         (9,733)
   Cash and due from banks                             39,657                          30,800
   Other assets                                        38,176                          30,454
                                                    ---------                       ---------
Total Assets                                        $ 778,337                        $710,182
                                                    =========                        ========

LIABILITIES:
   Regular savings deposits                         $ 160,693   $   964     2.37%   $ 153,101    $   781    2.02%
   NOW account deposits                                66,696       200     1.19       71,749        228    1.26
   Money market deposits                                2,052        13     2.51        3,811         21    2.19
                                                    ---------   -------             ---------    -------        
      Total savings deposits                          229,441     1,172     2.03      228,667      1,030    1.79
   Time deposits                                      275,064     3,766     5.43      254,467      3,531    5.51
   Short-term borrowings                               25,950       312     4.77       21,002        263    4.97
   Long-term borrowings                                28,140       443     6.25       12,353        187    6.01
                                                    ---------   -------             ---------    -------        
      Total interest-bearing liabilities              558,595     5,693     4.04      516,483      5,011    3.85
   Demand deposits                                    136,926                         122,042
   Other liabilities                                    9,424                           4,727
                                                    ---------                       ---------
      Total Liabilities                               704,946                         643,269
   Equity                                              73,391                          66,913
                                                    ---------                       ---------
Total Liabilities & Equity                          $ 778,337                       $ 710,182
                                                    =========                       =========

Net interest income--FTE basis                                    $9,357                           $8,854
                                                                  ======                           ======
Net interest margin                                                         5.23%                           5.33%
Net interest spread                                                         4.36%                           4.50%
</TABLE>

(A) AVERAGE LOANS INCLUDE NONACCRUING LOANS.

RATE/VOLUME ANALYSIS
--------------------
Changes in net  interest  income are divided  into two  components--the  changes
resulting   from  the  changes  in  average   balances  of  earning  assets  and
interest-bearing  liabilities  (or "volume") and the changes in the rates earned
or paid on those balances.  The changes in interest income and interest  expense
attributable  to changes in both volume and rate,  which  cannot be  segregated,
have been allocated proportionately to the absolute values of the changes due to
volume and rate.  The  following  table,  which  compares the three months ended
September 30, 1998 to September 30, 1997, is presented on a FTE basis.


                                   Page -10-


<PAGE>

<TABLE>
<CAPTION>
                                                                            Change due to
                                                             Total            Change in:
                                                          Increase     -------------------------
(Amounts in thousands)                                  (Decrease)       Rate          Volume
------------------------------------------------------------------------------------------------
<S>                                                       <C>          <C>            <C>
INTEREST EARNED ON:
Federal funds sold                                        $    (63)    $      4       $   (67)
Investment securities                                          323           94           229
Mortgages held for sale                                         92           (5)           97
Loans                                                          833          (13)          846
                                                          --------     --------       -------
Total interest-earning assets                                1,185           79         1,106
                                                          --------     --------       -------

INTEREST PAID ON:
Regular savings deposits                                  $    178     $    138       $    40
NOW account deposits                                           (28)         (12)          (16)
Money market deposits                                           (8)           3           (11)
                                                          --------     --------       ------- 
     Total savings deposits                                    142          128            14
Time deposits                                                  235          (48)          283
Short-term borrowings                                           49          (11)           60
Long-term borrowings                                           256            7           249
                                                          --------     --------       -------
Total interest-bearing liabilities                             682           77           605
                                                          --------     --------       -------
Net interest income change                                $    503     $     (2)      $   501
                                                          ========     =========      =======

</TABLE>

NONINTEREST INCOME
------------------

     For the quarter ended  September  30, 1998,  noninterest  income  increased
$875,000 and totaled $2,059,000,  compared to the third quarter in 1997. Much of
this increase,  $715,000,  was the result of increased revenues from origination
and sale of mortgage loans. New England Community Mortgage Corp., a wholly-owned
subsidiary  of New England Bank,  was formed  earlier in the year to take better
advantage of the  Company's  ability to originate  residential  loans within the
communities  served by its  affiliates,  while  allowing  expansion  into  other
communities  not  served  by our  community  banks.  With a  focus  strategy  of
efficiently  serving the home buying  public,  the mortgage  subsidiary  quickly
established itself has one of the top originators in Connecticut.

     Also contributing to the growth in noninterest  income was service charges,
fees and commissions. While the acquisitions have served to increase noninterest
income,  NECB's broader,  more comprehensive  product choices,  delivered with a
commitment to service, have allowed the Company to forge many new small business
relationships.  Reflecting the combined effect of the  acquisitions  and new and
expanded relationships,  service charges, fees and commissions rose $100,000, or
11%, to $1,013,000  in the quarter  ended  September 30, 1998 compared to a year
earlier.

NONINTEREST EXPENSE
-------------------

     Noninterest  expenses  amounted to $10,375,000  during the third quarter of
1998. This is a $2,758,000 increase, or 36%, over $7,617,000 reported during the
same quarter in 1997.  Of this  increase,  $2,340,000  is related to charges for
acquisitions.  Excluding these charges, noninterest expenses increased $418,000,
or 6.6%, over the quarter ended September 30, 1997. The acquisition of Community
Bank,  increased  commission  payments--related  to growth in both the  mortgage
subsidiary and mutual fund sales.


RESULTS OF OPERATIONS--NINE MONTHS ENDED SEPTEMBER 30, 1998
-----------------------------------------------------------

     Through the first nine months of 1998,  NECB reported  operating net income
of  $7,332,000  or $1.02 diluted  share,  an increase of $1,371,000  compared to
$5,961,000 or $0.86 per diluted  share for the same period last year.  Growth in
net operating income and earnings per share during the first nine months of 1998
reflects  new  revenues  and  cost  savings  achieved  in  conjunction  with the
Company's  acquisitions and strong growth in noninterest  income. In particular,
gains from the sale of mortgage loans and gains from investment  securities rose
sharply  compared to the previous  year.  Provisions  for loan losses  decreased
modestly from 1997 and totaled  $1,192,000 in 1998 compared to $1,327,000 a year
earlier. Noninterest expense totaled $25,318,000 in 1998 compared to $20,521,000
in 1997.  Including the onetime charges,  net income amounted to $4,705,000,  or
$0.67 per diluted  share,  compared to  $4,769,000,  or $0.69 per diluted share,
during the same period last year.

     During  the first  nine  months  of 1998,  net  interest  income on a fully
taxable-equivalent  basis increased  $2,074,000 and totaled $28,162,000 compared
to $26,088,000 in 1997.



                                    Page -11-


<PAGE>


Net Interest Income
(amounts in thousands)

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,                                1998         1997      % CHANGE
----------------------------------------------------------------------------------------------
<S>                                                          <C>           <C>         <C>    
Interest income (financial statements)                       $45,023       $40,398      11.45%
Tax equivalent adjustment                                        352           114     208.77%
                                                           ---------     ---------            
Total interest income (on an FTE basis)                       45,375        40,512      12.00%
Interest expense                                             (17,213)      (14,424)     19.33%
                                                           ---------     ---------            
Net interest income (fully taxable equivalent)             $  28,162     $  26,088       7.95%
                                                           =========     =========            
</TABLE>

NONINTEREST INCOME
------------------

     Through the first nine months of 1998, noninterest income increased sharply
and totaled  $7,042,000,  compared to $3,823,000 reported for the same period in
1997. Aided by moderate interest rates (with the bellwether 30-year bond dipping
below 5% in the third  quarter),  demand for home  purchase  financing  remained
strong and enabled  NECB's  subsidiary  to  originate  a record  number of loans
during the first nine  months of 1998.  With the vast  majority  of these  loans
being fixed rate, gains from their sale increased accordingly. Compared to first
nine months of 1997, gains form the sale of mortgage loans more than tripled and
totaled  $2,280,000.  Gains from the sale of securities  also  increase  sharply
compared  to a year ago.  During the first nine  months of 1998,  NECB  realized
gains from the sale of securities of  $1,504,000.  In addition to gains recorded
by the  Subsidiaries,  the parent  company  recorded a gain of $898,000 from the
sale of its own investment securities.

     Service  charges,  fees  and  commissions  also  increased   substantially,
totaling  $3,047,000  through the nine month period  ending  September 30, 1998.
This represents a $291,000, or 11%, increase compared to the $2,756,000 recorded
through the first nine  months of 1997.  This  increase  resulted  from  several
factors:  (i) the  inclusion of Community  Bank (which,  as noted  earlier,  was
accounted for as a purchase),  (ii) selected price increases and (iii) increased
volume of services  provided to our growing base of customers all contributed to
this increase.

NONINTEREST EXPENSE
-------------------

     Noninterest  expenses amounted to $25,318,000  during the first nine months
of 1998.  Excluding  the  charge of  $715,000  related to the bulk sale of loans
(completed at the end of the first quarter) and the acquisition-related  charges
in both 1998 and 1997,  other  noninterest  expenses  increased by $1,742,000 or
9.04% from the same period in 1997.  The  inclusion of the expenses of Community
Bank,  for the first  time,  accounted  for  $1,316,000  of this  increase.  The
remaining $426,000 increase  represented a modest 2% on a year to year basis and
was achieved  through gaining  efficiencies  following the acquisitions of First
Bank and Community Bank within the last 12 months.

FINANCIAL CONDITION
-------------------

     Total  assets at  September  30,  1998 stood at  $790,685,000,  compared to
$807,952,000  at year-end.  During the first nine months of 1998 loan production
remained  strong,   especially  residential  mortgage  loans.  These  loans  are
typically  sold in the secondary  market upon closing and, as such, do not serve
to increase  loans  outstanding.  With the downward  trend in interest  rates in
1998--the majority of which occurred in third quarter--the Company experienced a
moderate rise in prepayments which was accurately  forecasted by NECB's internal
interest  rate risk  models.  Loan demand  typically  softens  during the summer
months,  and this taken  together with increased  prepayments,  served to reduce
loans  outstanding.  On a year to date  basis,  when the effect of the March 30,
1998 bulk loan sale is excluded,  loans  outstanding  decreased  by  $2,438,000.
Loans consisted of the following:

 (Amounts in thousands)
                                                  September 30,    December 31,
                                                      1998             1997    
-------------------------------------------------------------------------------
Commercial and financial                         $   152,293       $   156,686
Real estate:
    Construction                                      22,069            23,914
    Residential                                      129,344           132,124
    Commercial                                       169,157           175,347
Consumer                                              50,881            50,111
                                                 -----------       -----------
Gross loans outstanding                          $   523,744       $   538,182
                                                 ===========       ===========

     Securities  available-for-sale  increased  from December 31, 1997 and ended
the third quarter at $175,330,000 while  held-to-maturity  decreased and totaled
$6,634,000 at quarter end. This compares to  $163,265,000  and  $14,315,000  for
available-for-sale and

                                    Page -12-


<PAGE>


held-to-maturity,  respectively, at year-end. The increase in available-for-sale
resulted   from  the  onetime   re-class  of  securities   held-to-maturity   to
available-for-sale  in conjunction  with the acquisitions of Olde Port and South
Windsor. In addition,  proceeds from the bulk loan sale were largely invested in
available-for-sale securities.

     Federal funds  decreased  $3,668,000 and totaled  $5,057,000 at quarter-end
compared to $8,725,000 at December 31, 1997. Federal  funds--which are overnight
loans to other  banks--represent  excess  reserves that are the  Company's  most
liquid  assets and as such are available to meet  short-term  cash flow needs of
the Company and its customers.

     The  $1,260,000  reduction in other real estate owned  brought this account
down to $1,936,000,  or 0.25% of total assets, at September 30, 1998. During the
first nine months of the year the Company  acquired  properties  with a value of
$1,623,000 through foreclosure and disposed of properties with a market value of
$2,883,000.

     Total  deposits,  which  constitute  the  principal  funding  source of the
Company's assets,  decreased  $37,395,000 from December 31, 1997 and amounted to
$657,551,000  at  September  30,  1998.  Seasonal  cash flows of NECB's  deposit
customers  (especially  noninterest  bearing  deposits) along with the effect of
repricing  acquired  deposits--for   example,   Community  Bank  typically  paid
depositors higher rates than NECB's other  affiliates--caused some depositors to
reduce their balances.

      Total  shareholders'  equity was  $72,160,000  at September  30,  1998, an
increase  of  $2,774,000  over  December  31,  1997.  Equity  was  increased  by
$4,705,000 in net income,  $312,000 from issuance of common stock in conjunction
with employee benefit plans and $603,000 from change in unrealized holding gains
on securities available-for-sale.  Equity was reduced by $1,833,000 in dividends
paid to shareholders and $1,016,000 from common stock retired in connection with
the acquisition of South Windsor.

SECURITIES HELD-TO-MATURITY
---------------------------

     Securities held-to-maturity are shown in the Company's balance sheets on an
amortized  cost basis.  Amortized  cost is the  original  cost  adjusted for the
effect of accumulated  amortization  of premiums and accretion of discounts.  As
summarized  in the  table  below,  investments  in  securities  held-to-maturity
decreased  from  $14,315,000 at December 31, 1997 to $6,634,000 at September 30,
1998.
<TABLE>
<CAPTION>
                                                             SEPTEMBER 30, 1998             DECEMBER 31, 1997   
-----------------------------------------------------------------------------------------------------------------
                                                         Amortized                       Amortized
                                                              Cost           Fair             Cost           Fair
(Amounts in thousands)                                       Basis          Value            Basis          Value
-----------------------------------------------------------------------------------------------------------------
<S>                                                      <C>            <C>              <C>            <C>      
Debt securities issued by the U.S. Treasury
   and other U.S. government agencies                    $   2,399      $   2,425        $   8,798      $   8,811
Debt securities issued by states and
    political subdivisions of the states                     2,839          2,978            2,841          2,944
Mortgage-backed securities                                   1,131          1,141            2,461          2,460
Other debt securities                                          265            271              215            219
                                                         ---------      ---------        ---------      ---------
                                                         $   6,634      $   6,815        $  14,315      $  14,434
                                                         =========      =========        =========      =========
</TABLE>

SECURITIES AVAILABLE-FOR-SALE
-----------------------------

     Securities  available-for-sale are shown in the Company's balance sheets at
fair value.  The unrealized gain or loss resulting from such valuation,  reduced
by the effect of income taxes, is reflected as a separately  disclosed component
of  shareholders'  equity.  At September 30, 1998,  the net  unrealized  gain on
securities  available-for-sale  was  $3,286,000,  while at December 31, 1997 the
unrealized gain was $2,346,000,  representing an increase in unrealized gains of
$940,000.   As  shown   in  the   table   below,   investments   in   securities
available-for-sale   totaled   $172,044,000   at   September   30,  1998  versus
$160,919,000 at December 31, 1997:


                                    Page -13-


<PAGE>

<TABLE>
<CAPTION>
                                                              SEPTEMBER 30 1998              DECEMBER 31, 1997   
-----------------------------------------------------------------------------------------------------------------
                                                         Amortized                       Amortized
                                                              Cost           Fair             Cost           Fair
(amounts in thousands)                                       Basis          Value            Basis          Value
-----------------------------------------------------------------------------------------------------------------
<S>                                                     <C>            <C>              <C>            <C>       
Marketable equity securities                            $   14,196     $   14,163       $   11,214     $   12,323
Debt securities issued by the U.S. Treasury
   and other U.S. government agencies                       99,847        101,981          104,364        105,185
Corporation debt securities                                 10,612         10,870           10,873         10,928
Asset-based securities                                       9,311          9,496              527            527
Mortgage-backed securities                                  38,078         38,820           33,941         34,293
                                                        ----------     ----------       ----------     ----------
                                                        $  172,044     $  175,330       $  160,919     $  163,265
                                                        ==========     ==========       ==========     ==========
</TABLE>

     Note: During the second quarter of 1998 management reclassified  short-term
investments  (e.g.,  money  market  funds)  to cash  and cash  equivalents  from
securities  available-for-sale.  These  short-term  instruments  (with  original
maturities of three months or less) are highly liquid and readily convertible to
known amounts of cash.


NONPERFORMING ASSETS
--------------------

     Nonperforming assets ("NPAs") are assets on which income recognition in the
form of  principal  and/or  interest  has either  ceased or is limited,  thereby
reducing the Company's earnings. Maintaining a low level of NPAs is important to
the ongoing  success of NECB.  The  Company's  comprehensive  credit  review and
approval  process is critical  to the  ability to  minimize  NPAs on a long-term
basis.  In addition to the  negative  impact on net  interest  income and credit
losses,  NPAs also increase  operating expenses due to the costs associated with
collection efforts.

     NPAs  include  nonaccrual  loans  and other  real  estate  owned  ("OREO").
Generally,  loans are placed in nonaccrual status when they are past due greater
than ninety days or the  repayment of interest or principal is  considered to be
in doubt. OREO consists of properties acquired through foreclosure  proceedings.
These  properties are recorded at the lower of the carrying value of the related
loans or the estimated fair market value less estimated  selling costs.  Charges
to the allowance for loan losses are made to reduce the carrying amount of loans
to the fair market value of the properties less estimated  selling expenses upon
reclassification  as OREO.  Subsequent  reductions,  if needed,  are  charged to
operating  income.  In addition to NPAs, the asset quality of the Company can be
measured by the amount of the provision,  charge-offs and several credit quality
ratios presented in the discussion  concerning "Provision and Allowance for Loan
Losses."

(Amounts in thousands)
                                  SEPTEMBER 30, 1998            DECEMBER 31,1997
--------------------------------------------------------------------------------
Nonaccrual loans                          $    5,799                  $    9,729
OREO                                           1,936                       3,196
                                          ----------                  ----------
Total Nonperforming assets                $    7,735                  $   12,925
                                          ==========                  ==========
Loans past due in excess of ninety
 days and accruing interest               $    1,205                  $    1,060

     NPAs  decreased  $5,190,000  or 40% in the nine months ended  September 30,
1998.  Significantly,  at quarter-end  NPAs represented less than one percent of
total assets and equaled 0.98% compared to 1.60% of total assets at December 31,
1997. This decrease in nonperforming  assets primarily resulted from a bulk sale
of loans  completed  at the end of the  first  quarter.  Taking  advantage  of a
favorable  secondary  market for such loans,  NECB sold  $11,988,000  of problem
assets to an investor that  specializes  in workout  loans.  The majority of the
assets  sold had  been  obtained  in  several  recent  acquisitions  (e.g.,  the
Community Bank acquisition  brought with it  approximately  $4,209,000 in NPAs).
The sale had two positive  effects upon NECB: (i) net interest income was helped
by the  reemployment  of the sale proceeds and (ii) certain costs related to the
effort to work-out and/or collect these loans was avoided.

     OREO consists of properties acquired through foreclosure proceedings. These
properties  are recorded at the lower of the carrying value of the related loans
or the estimated fair market value less estimated selling costs.  Charges to the
allowance  for possible  loan losses are made to reduce the  carrying  amount of
such loans to the fair market value of the  properties  less  estimated  selling
expenses upon reclassification as OREO. Subsequent  reductions,  when necessary,
are charged to operating income.




                                   Page -14-


<PAGE>


Activity in Nonperforming Assets
(Amounts in thousands)
NINE MONTHS ENDING SEPTEMBER 30,              1998             1997
-----------------------------------------------------------------------------
December 31, 1997 and 1996                 $  12,925        $  11,701
    Additions                                  7,183            3,149
    Reductions:
      Payments                                  (868)          (2,991)
      Charge-offs and writedowns              (4,056)          (1,483)
      Sales, net                              (7,449)          (3,517)
                                           ---------        --------- 
Ending Balance, September 30,
 1998 and 1997                             $   7,735        $   6,859
                                           =========        =========

PROVISION AND ALLOWANCE FOR LOAN POSSIBLE LOSSES
------------------------------------------------

     NECB's allowance for possible loan losses represents  amounts available for
future  credit  losses.  Management  continually  assesses  the  adequacy of the
allowance  for loan  losses in  response  to current  and  anticipated  economic
conditions,  specific problem loans,  historical net charge-offs and the overall
risk profile of the loan portfolio.  Management allocates specific allowances to
individual  problem  loans  based upon its  analysis of the  potential  for loss
perceived to exist related to such loans. In addition to the specific allowances
for  individual  loans,  a portion of the  allowance is  maintained as a general
allowance.   The  amount  of  the  general   allowance  is  determined   through
management's  analysis  of the  potential  for loss  inherent in those loans not
considered  problem  loans.  Among the factors  considered by management in this
analysis  are the  number and type of loans,  nature  and  amount of  collateral
pledged to secure such loans and current economic conditions.  The allowance for
possible loan losses is not a precise amount but is derived from judgments based
on the above factors.

     The following  table  summarizes the activity in the allowance for possible
loan losses for the quarters ended September 30, 1998 and 1997. The allowance is
maintained  at a  level  consistent  with  identified  loss  potential  and  the
perceived risk in the portfolio.

(In thousands)
NINE MONTHS ENDED SEPTEMBER 30,                     1998               1997
-----------------------------------------------------------------------------
Balance beginning of period                       $ 12,081         $   9,355
Provisions charged to operations                     1,192             1,327
Recoveries on loans previously charged-off             675               601
Charge-offs taken in conjunction with bulk loan
sale (i.e., specific allocated reserves)            (1,392)                0
Loans charged-off                                   (2,264)           (1,243)
                                                   -------          -------- 
Balance end of period                             $ 10,292         $  10,040
                                                  ========         =========

     Provisions  for possible loan losses  charged to  operations  for the first
nine  months  of  1998  were  $135,000  less  than a year  earlier  and  totaled
$1,192,000  compared  to  $1,327,000  for the same  period in 1997.  During  the
nine-month period, total charge-offs increased by $2,413,000 and are largely due
to the bulk loan sale and the addition of Community Bank.

CAPITAL
-------
     The Company  endeavors to maintain an optimal  amount of capital upon which
an attractive  return to  shareholders  will be realized over the short and long
run while meeting all regulatory requirements for minimum levels of capital.

     As of September  30, 1998,  the Company  exceeded  all  regulatory  capital
ratios and the subsidiaries were categorized as "well  capitalized." The various
capital ratios of the Company for September 30, 1998 and 1997 were:

                                       MINIMUM LEVEL        1998          1997
                                       -------------        ----          ----
Total Risk-Based......................       8%            12.06%       13.78%

Tier 1 Risk-Based.....................       4%            13.31%       12.52%

Leverage..............................       4%             8.37%        8.78%


LIQUIDITY
---------

     It is management's  objective to ensure the continuous ability to meet cash
needs as they  arise.  Such  needs  may  occur  from time to time as a result of
seasonal declines in deposit levels,  response to changes in interest rates paid
on deposits and interest rates charged for loans and  fluctuations in the demand
for the  Banks'  various  loan  products.  Accordingly,  the  Company  maintains
liquidity that provides the  flexibility  to meet its cash needs.  The liquidity
objective is achieved  through the maintenance of readily  marketable  assets as
well as a balanced  flow of asset  maturities  and  prudent  pricing on loan and
deposit agreements. The Company has alternative sources of liquidity,  including
repurchase  agreements  and  lines  of  credits  provided  by the  FHLBB  to the
Subsidiaries,  which together  provide the Company with  flexibility in managing
its liquidity position. The maturities of investment securities and


                                   Page -15-


<PAGE>


cash flows from the repayments of outstanding  loans are expected to provide the
Company with adequate liquidity over the coming months.

THE YEAR 2000 PROBLEM
---------------------

     NECB, like all  institutions  that utilize computer  technology,  is facing
challenges  associated with the possibility that some existing  computer systems
will be unable to process  time-sensitive  data accurately  beyond the year 1999
(referred to as the "Year 2000 Problem"). The Year 2000 Problem is the result of
computer  programs  using two digits rather than four in date fields that define
the year. Any computer programs used by NECB that have  time-sensitive  software
may  recognize  a date field  using "00" as the year 1900  rather  than the year
2000. If not modified or replaced, these programs could cause system failures or
miscalculations, which could adversely affect NECB's ability to process customer
transactions or provide customer service.

     NECB  is  performing  a  comprehensive   review  of  both  its  information
technology  ("IT")  and  non-IT  systems  (e.g.,  embedded  technology  such  as
micro-controllers)  to identify those systems that could be affected by the Year
2000 Problem.  Further,  NECB is developing a comprehensive  multi-phase project
management  process to modify or replace  all  affected IT systems and test them
for Year 2000 compliance.  Thus far, NECB has completed detailed written testing
strategies and plans and begun testing.

     NECB  relies  upon  third-party  providers  for  its IT  software.  NECB is
monitoring  the   activities  of  its  providers  to  ensure  that   appropriate
development  and  implementation  plans to address the Year 2000  Problem are in
place.  NECB has taken steps to identify  alternative  vendors in the event that
one or more of these  providers fail to become Year 2000  compliant.  While NECB
expects  its Year  2000  plan to be  completed  on a timely  basis (to allow for
adequate  testing in late 1998 and  1999),  there can be no  assurance  that the
systems  of other  companies  on which  NECB's  systems  may rely  also  will be
completed in a timely fashion. In addition, NECB exchanges data with a number of
other entities, such as credit bureaus and governmental entities. The failure of
these  entities to  adequately  address the Year 2000  Problem  could  adversely
affect NECB's ability to conduct its business.

     Costs associated with modifying existing system  applications have been and
will  continue to be expensed as  incurred.  While some  analysis  remains to be
completed, NECB does not expect incremental costs associated with any IT systems
modifications and/or IT equipment for Year 2000 compliance to be material.

FORWARD LOOKING STATEMENTS
--------------------------

     Certain  statements  contained  in this  Quarterly  Report  on  Form  10-Q,
including those contained in this Item 1, are forward looking  statements within
the meaning of the Private Securities Litigation Reform Act of 1995 and are thus
prospective. Such forward looking statements are subject to risks, uncertainties
and other factors  which could cause actual  results to differ  materially  from
future results express or implied by such statements.  Such factors include, but
are not limited to: changes in interest rates,  regulation,  competition and the
local and regional economy.

Part II: Other Information

Item 1.    Legal Proceedings - None

Item 2.    Changes in Securities - None

Item 3.    Default Upon Senior Securities - None

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

     The Special Meeting of Stockholders of New England Community Bancorp,  Inc.
was held on Tuesday, April 21, 1998.  Stockholders voted on and approved each of
the following proposals:

     1. To adopt a plan and agreement of merger,  dated as of March 19, 1998, by
and among  NECB and Bank of South  Windsor  and the  issuance  of shares of NECB
common stock pursuant thereto:

          FOR APPROVAL               AGAINST APPROVAL                ABSTAIN
          ------------               ----------------                -------
            2,221,661                     38,999                      27,548

Item 5.    Other Information - None

Item 6.    Exhibits, Financial Statement Schedules and Reports on Form 8-K

         (a)      Exhibits


                                   Page -16-


<PAGE>


                  Exhibit Number                        Exhibit

                  27                                    Financial Data Schedule

         (b) Form 8-K;  Current Reports.  The following  reports were filed with
the Securities and Exchange  Commission  during the quarter ended  September 30,
1998:

                  (i)      Olde Port Acquisition

           On July  17,  1998 it was  reported,  under  Item 5,  that  NECB  had
completed its acquisition of Olde Port on July 10, 1998.  Under the terms of the
merger agreement, each share of Olde Port Common Stock outstanding was converted
into the right to receive  8.6674  shares of NECB common stock for each share of
OPBT common stock owned. The resulting  transaction value totaled $13.7 million.
Olde Port continues its corporate  existence as a New Hampshire  state-chartered
bank and trust company and became NECB's fourth wholly owned banking subsidiary.

                 (ii)     South Windsor Acquisition

           On August  26,  1998,  it was  reported  under  Item 2, that NECB has
completed  its  purchase of South  Windsor on August 14,  1998.  Pursuant to the
terms  of the  merger  agreement,  each  share  of South  Windsor  Common  Stock
outstanding  (excluding  shares  held by NECB) was  converted  into the right to
receive  1.3539 shares of NECB common stock.  Each share of South Windsor common
stock which was beneficially  owned by NECB was been cancelled and retired.  The
amount of consideration  paid was $27,533,000 based upon  approximately  986,000
shares of South  Windsor  common  stock  outstanding  and the  closing  price of
$20.625 for NECB common stock. South Windsor was merged with and into NECB's New
England Bank subsidiary.

                 (iii)    South Windsor Acquisition

         On October 19, 1998, NECB amended its Current Report on Form 8-K (filed
on August 26, 1998  presenting the financial  statements and proforma  financial
information.  The 8-K/A also amended the  Original  Form 8-K by  reflecting  the
completion of the  acquisition  by NECB of Olde Port Bank.  Item 7 (b) (ProForma
Financial  Statements) reflected the mergers of both South Windsor and Olde Port
with NECB.

                 (iv)     South Windsor Acquisition

         On  October  21,  1998,  NECB  reported,  under Item 5,  presented  the
combined financial results for the Company and its subsidiaries, including South
Windsor for the quarter  ended  September  30,  1998--which  includes the 30 day
period following the acquisition.




                                   Page -17-


<PAGE>


                       NEW ENGLAND COMMUNITY BANCORP, INC.



                                   Signatures

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


                                           NEW ENGLAND COMMUNITY BANCORP, INC.
                                           ------------------------------------

Date:  October 13, 1998                    By:  s/s ANSON C. HALL              
                                                -------------------------------
                                                Anson C. Hall
                                                Vice President and Treasurer


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