Exhibit 13

                 Westborough Financial Services, Inc. [LOGO]

                             2003 ANNUAL REPORT

          "This branch is just the latest example of our commitment
              to provide the best in banking to our customers."

                                                     - Joseph F. MacDonough
                                                          President and CEO
                                     referencing our newest branch location
                                             at 23 Maple Avenue, Shrewsbury

                          [PICTURE OF NEW LOCATION]

<TABLE>
<CAPTION>

                          2003        2002        2001
                          ----        ----        ----
                                  $ in Millions

                        <c>         <c>         <c>
Total Assets            $256,122    $241,273    $225,675
Total Deposits           215,898     202,063     185,098
Total Loans              141,557     132,880     134,957
Stockholders' equity      28,718      27,989      26,912
</TABLE>

                                Total Assets,
                          Total Deposits and Total
                          Loans each reflect growth
                               of more than 6%
                                during 2003.


<PAGE>


To paraphrase the opening words of a famous book, "It is the best of times
and the worst of times." Those words fairly well express my thoughts on the
eve of retirement as Chairman of the Westborough Bank.

Fifty five years ago when I walked into the travertine marbled lobby of
Peoples Savings Bank in Worcester to apply for a job, I was very impressed
by the people who work in banks and the overall atmosphere that they
created. I continue to be impressed and am proud to be a banker.

Ten years later Noah Nason, Ellwood Hennessey and Irving Hulbert took a
chance on an eager young man to be the mortgage department manager,
incidentally, a department of one, at the Westborough Savings Bank. At that
time there were a total of nine full and part time employees and the assets
were slightly over nine million dollars. We have come a long way since then
and I have been privileged to be a part of it.

To say that I am proud of our accomplishments is a gross under-statement.
We deservedly all share in that pride as we travel among our peers,
industry leaders, regulators and our community. We should never lose sight
of our past and our responsibility, as custodians of that legacy, entrusted
to the present day officers and directors.

I offer you my personal thanks and admiration for your interest in this
institution. Its future is in your hands and I have confidence that our
future success will be a result of good planning and dedication to our
mission statement.

Although I will have no official position at the bank after the Annual
Meeting, you can be assured that I will never lose my interest in this
institution in which I have spent the majority of my years and which will
be an integral part of the rest of my life.

Please accept my thanks for your confidence in me.


                                                  /s/ Walter A. Kinell, Jr.

                                                      Walter A. Kinell, Jr.
                                         Chairman Of The Board of Directors
                                                           December 1, 2003

===========================================================================

                                   Mission

Build Relationships
At Westborough Bank, we pledge to continue to build strong, long-term
customer and community relationships.

Provide Solutions
We achieve this by providing superior customer service and a broad range of
financial products and services, responsive to the needs of our customers-
today and tomorrow.

Support Our Communities
As an independent, fiscally sound community bank, our goal is to create
customer loyalty, enhance shareholder value, promote employee satisfaction
and to continue to support the communities we serve.
===========================================================================


<PAGE>


The year 2003 saw continued growth for Westborough Financial Services, Inc.
and its wholly owned subsidiary, Westborough Bank. During the year we
completed the construction of our new branch facility at 23 Maple Avenue in
Shrewsbury. Our plan is to consolidate our Shrewsbury market into this new
3,400 square foot facility, relocating from 900 square feet of retail space
at 19 Maple Ave. and from 450 square feet at Shaw's supermarket. The 19
Maple Ave. site is in the process of being sublet and the Shaw's
supermarket branch is scheduled to close in the spring of 2004.

During the year, the size of our Board of Directors was expanded and we
welcomed three new Directors. Mr. James N. Ball, Mrs. Nancy M. Carlson and
Mr. Benjamin H. Colonero, Jr. each bring a wealth of business experience
and community involvement to the Board and I look forward to working with
them in the years ahead.

Our financial performance in this extremely low interest rate environment
saw our net interest income decline by $294 thousand. However, I am pleased
to report that dilutive earnings per share remained essentially level at
$0.62 per share for the year ended September 30, 2003 compared with $0.63
per share for the year ended September 30, 2002. The decline in net
interest income was primarily the result of the general decline of interest
rates and the desire of loan customers to refinance or renegotiate their
loans to lower rates. Hundreds of our real estate mortgage loan customers
took advantage of the low rate environment and renegotiated rate reductions
on $45.9 million of principal balances.

During the year ending September 30, 2003, bank assets continued to grow.
Total assets grew by $14.8 million or 6.2% to a level of $256.1 million. As
a result of the strong housing market locally, much of the increase in
assets occurred in loans, which increased by $8.7 million or 6.5% to $141.6
million at September 30, 2003. Within the loan category, gross real estate
loans increased by approximately 8%.

Total deposits increased by $13.8 million, or 6.8%, to $215.9 million at
September 30, 2003 from $202.1 million at September 30, 2002. Most of this
increase was attributable to increases in variable-rate tiered, regular
savings and NOW accounts. Certificate of deposit accounts declined during
this period, reflecting customer preference to place their maturing
deposits in non-certificate accounts that offer liquidity.

Total stockholders' equity increased by $729 thousand, or 2.6%, to $28.7
million at September 30, 2003 from $28.0 million at September 30, 2002.
This increase was mainly due to net income of $966 thousand for the year
ended September 30, 2003, less the payment of cash dividends of $0.20 per
share, or a total of $317 thousand. Clearly our challenge going forward is
to insure that the growth we experience and need is profitable.

A year ago I wrote to you about the Sarbanes-Oxley Act and how your Board
of Directors was beginning to evaluate our corporate governance structure
as a result of that new law. I am pleased to report that after months of
research and hard work your Board adopted a comprehensive set of governance
policies at its meeting in September 2003. These policies will help insure
that financial information and Board transactions are transparent to all of
our customers and shareholders.

Elsewhere in this Annual Report you will find a letter from Chairman of the
Board of Directors, Walter A. Kinell, Jr., who is retiring this year after
45 years of service to our companies, customers and communities. It was
Walter's idea to formally tie the bank to the community by the creation of
the Westborough Savings Charitable Foundation, Inc. Since its inception in
1997, the foundation has donated more than $200,000 to local charities.
This is an example of his leadership and dedication that has made this
company one of the premier financial service institutions in Central
Massachusetts. We will miss his counsel and vision.

I would also like to recognize and thank Robert G. Daniel. Bob joined our
bank family in 1963 as a Corporator and has served as a member of our
Executive Committee for 35 years. With both Bob and Walter retiring with a
combined 85 years, we count ourselves fortunate to have had two individuals
of the highest caliber associated with Westborough Bank.

I would like to thank our dedicated Staff for the wonderful service they
provide our customers.

On behalf of the Board of Directors, I want to pledge our continued
commitment to our shareholders, customers and community.


                                                                 Sincerely,

                                                   /s/ Joseph F. MacDonough

                                                       Joseph F. MacDonough
                                                          President and CEO
                                                           December 1, 2003


<PAGE>


         Management's Discussion and Analysis of Financial Condition
                          and Results of Operations

Forward Looking Statements

      Westborough Financial Services, Inc. (the "Company") and The
Westborough Bank (the "Bank") may from time to time make written or oral
"forward-looking statements" which may be identified by the use of such
words as "may," "could," "should," "would," "believe," "anticipate,"
"estimate," "expect," "intend," "plan" and similar expressions that are
intended to identify forward-looking statements.

      Forward-looking statements include statements with respect to the
Company's beliefs, plans, objectives, goals, expectations, anticipations,
estimates and intentions, which are subject to significant risks and
uncertainties. The following factors, many of which are subject to change
based on various other factors beyond the Company's control, and other
factors identified in the Company's filings with the Securities and
Exchange Commission and those presented elsewhere by management from time
to time, could cause its financial performance to differ materially from
the plans, objectives, expectations, estimates and intentions expressed in
such forward-looking statements. Examples of forward-looking statements
include, but are not limited to, estimates with respect to our financial
condition, results of operations and business that are subject to various
factors which would cause actual results to differ materially from these
estimates. These factors include, but are not limited to:

   *  conditions which effect general and local economies;
   *  changes in interest rates, deposit flows, demand for mortgages and
      other loans, real estate values and competition;
   *  changes in accounting principles, policies, or guidelines;
   *  changes in legislation or regulation; and
   *  other economic, competitive, governmental, regulatory, and
      technological factors affecting our operations, pricing, products and
      services.

      This list of important factors is not exclusive. The Company or the
Bank does not undertake to update any forward-looking statement, whether
written or oral, that may be made from time to time by or on behalf of the
Company or the Bank.


<PAGE>  1


General

      The Company is a Massachusetts chartered mid-tier holding company
that completed its initial public offering in February 2000 in the
reorganization of The Westborough Bank (the "Bank") from a Massachusetts
chartered mutual savings bank into the Massachusetts mutual holding company
form of organization. Pursuant to the reorganization, the Bank converted to
a Massachusetts chartered stock savings bank as a wholly-owned subsidiary
of the Company, which is majority owned by Westborough Bancorp, MHC
("MHC"), a Massachusetts chartered mutual holding company. The Company's
common stock is traded on the Over-the-Counter Bulletin Board under the
symbol "WFSM.OB."

      Unless otherwise indicated, the information presented herein
represents the consolidated activity of the Company and its subsidiary. The
following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes that are included
within this report.

      The business of the Bank consists of attracting deposits from the
general public and using these funds to originate various types of loans
primarily in the towns of Westborough, Northborough, Shrewsbury and
Grafton, Massachusetts, including residential and commercial real estate
mortgage loans and, to a lesser extent, consumer and commercial loans.

      The Bank's profitability depends primarily on its net interest
income, which is the difference between the interest income the Bank earns
on its loans and securities portfolio and its cost of funds, which consist
primarily of interest paid on deposits and borrowings from the Federal Home
Loan Bank (the "FHLB"). 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 level of other (non-interest) income and operating expenses also
affects the Bank's profitability. Other income consists primarily of
customer service fees, gains and losses on sales of securities and
mortgages, income from the sale of non-insured investment products and
increases in cash surrender value of bank-owned life insurance. Operating
expenses consist of salaries and benefits, occupancy-related expenses and
other general operating expenses.

      The operations of the Company, and banking institutions in general,
are significantly influenced 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

      In past years, the Bank's primary management strategy has been to
offer savings and certificate of deposit accounts and residential mortgage
loans in the market area of Westborough, Massachusetts and surrounding
communities. In recent years, the Company has adopted a growth-oriented
strategy that has focused on expanding its product lines and services,
providing expanded delivery systems for its customers and extending its
branch network. The Bank believes that this business strategy is best for
its long-term success and viability, and complements its existing
commitment to high quality customer service. In connection with the Bank's
overall growth strategy, it seeks to:


<PAGE>  2


   *  continue to focus on expanding its residential lending and retail
      banking franchise, and increasing the number of households served
      within its market area;
   *  expand its commercial banking products and services for small- and
      medium-sized businesses, as a means to increase the yield on its loan
      portfolio and to attract lower cost transaction deposit accounts;
   *  expand its branch network to increase its market share;
   *  increase the use of alternative delivery channels, such as on-line
      and telephonic banking; and
   *  offer a variety of non-insured investment products and services as a
      means to compete for an increased share of its customers' financial
      service business.

      In order to create a platform for the accomplishment of the Company's
goals, management has made significant investments in its physical
infrastructure and human and technological resources. In particular, the
Bank has completed an addition to its main office and renovated the older
portion of its main office. Additionally, the Bank recently completed
constructing an enlarged Maple Avenue, Shrewsbury branch office. The
previous, 900 square foot 19 Maple Avenue branch has been closed and
customers are utilizing the new, expanded facility. In Spring 2004, our
Shaw's Supermarket branch office in Shrewsbury will be closed and customers
will be encouraged to utilize our new Shrewsbury branch facility. Such
investments have been, and in the future, will be, necessary to ensure that
adequate resources are in place to offer increased products and services.
As a result, for a period of time, the Bank expects operating expenses to
increase and net income to be adversely impacted. Management believes,
however, that its long-term profitability should improve as it realizes the
benefits of diversified product lines and market share growth.

Asset/Liability Management; Market Risk Analysis

      A primary component of the Company's market risk is interest rate
volatility. Fluctuations in interest rates will ultimately impact both the
Bank's level of income and expense recorded on a large portion of its
assets and liabilities. Fluctuations in interest rates will also affect the
market value of all interest-earning assets, other than those that possess
a short term to maturity.

      The primary objective of the Bank's interest rate management strategy
is to optimize its economic value and net income under likely market rate
scenarios. To achieve this objective, the Bank has developed policies and
procedures to assist senior management in evaluating and maintaining
acceptable levels of interest rate risk, liquidity risk and capital. In
particular, the Bank seeks to coordinate asset and liability decisions so
that, under changing interest rate scenarios, earnings will remain within
an acceptable range.

      Due to the nature of the Bank's operations, it is not subject to
foreign currency exchange or commodity price risk. The Bank's real estate
loan portfolio, concentrated in the towns of Westborough, Northborough,
Shrewsbury and Grafton, Massachusetts, is, however, subject to risks
associated with the local economy. Historically, the Bank's lending
activities have emphasized one- to four-family residential mortgage loans,
and the Bank's primary source of funds has been deposits. In recent years,
the Bank has attempted to employ certain strategies to manage the interest
rate risk inherent in this asset/liability mix, including: (a) investing in
securities with relatively short maturities or call dates; (b) maintaining
and promoting, through various programs and strategies, a concentration of
less interest rate sensitive "core deposits;" (c) emphasizing the
origination or purchase and retention of adjustable-rate one- to four-
family loans; (d) emphasizing the origination of commercial loans with
short-term maturities; and (e) borrowing funds from the FHLB, which may be
used to originate or purchase loans with similar anticipated cash flow
characteristics. The Bank believes that the frequent re-pricing of its
adjustable-rate mortgage loans


<PAGE>  3


and short-term securities, which reduces the exposure to interest rate
fluctuations, will help stabilize the Bank's net interest margin.

      The actual amount of time before mortgage loans and mortgage-backed
securities are repaid can be significantly impacted by changes in mortgage
prepayment rates and market interest rates. Mortgage prepayment rates will
vary due to a number of factors, including the regional economy in the area
where the underlying mortgages were originated, seasonal factors,
demographic variables and the assumability of the underlying mortgages.
However, the major factors affecting prepayment rates are prevailing
interest rates, related mortgage refinancing opportunities and competition.
The Bank monitors interest rate sensitivity so that it can make adjustments
to its asset and liability mix on a timely basis.

      Gap 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 a bank's interest rate sensitivity "gap."
An asset or liability is deemed to be interest rate sensitive within a
specific time period if it will mature or re-price within that time period.
The interest rate sensitivity gap is defined as the difference between the
amount of interest-earning assets maturing or re-pricing within a specific
time period and the amount of interest-bearing liabilities maturing or re-
pricing within that same time period.

      At September 30, 2003, the Company's cumulative one-year gap
position, which measures the difference between the amount of interest-
earning assets maturing or re-pricing within one year, and interest-bearing
liabilities maturing or re-pricing within one year, was a negative 16.11%
of total assets. A gap is considered negative when the amount of interest
rate sensitive liabilities exceeds the amount of interest rate sensitive
assets. A gap is considered positive when the amount of interest rate
sensitive assets exceeds the amount of interest rate sensitive liabilities.
Accordingly, during a period of rising interest rates, an institution with
a negative gap position generally would not be in as favorable a position,
compared to an institution with a positive gap, to invest in higher
yielding assets. The resulting yield on an institution's assets generally
would increase at a slower rate than the increase in its cost of interest-
bearing liabilities. Conversely, during a period of falling interest rates,
an institution with a negative gap would tend to experience a re-pricing of
its assets at a slower rate than its interest-bearing liabilities which,
consequently, would generally result in its net interest income growing at
a faster rate than an institution with a positive gap position.

      The following table sets forth interest-earning assets and interest-
bearing liabilities outstanding at September 30, 2003, which is anticipated
by the Company, based upon certain assumptions, to re-price or mature in
each of the future time periods shown. Except as stated below, the amount
of assets and liabilities shown which re-price or mature during a
particular period were determined in accordance with the earlier term to
re-pricing/call date or the contractual maturity of the asset or liability.
The table sets forth an approximation of the projected re-pricing of assets
and liabilities at September 30, 2003, on the basis of contractual
maturities, anticipated prepayments and scheduled rate adjustments within a
three-month period and subsequent projected time intervals. The loan
amounts in the table reflect principal balances expected to be redeployed
and/or re-priced as a result of contractual amortization and as a result of
contractual rate adjustments on adjustable-rate loans.


<PAGE>  4


<TABLE>
<CAPTION>

GAP Table                                               Amounts Maturing or Re-pricing as of September 30, 2003
                                                        -------------------------------------------------------
                                     less than 3   3 to 6     6 months       1 to        3 to      5 to     over
                                       months      months     to 1 year    3 years     5 years   10 years  10 years      Total
                                     -----------   ------     ---------    -------     -------   --------  --------      -----
                                                                            ($ in thousands)


                                    <c>         <c>         <c>         <c>         <c>       <c>        <c>        <c>
Interest-earning Assets (1)
  Short-term investments (2)           $ 7,711     $     0     $     0     $     0     $     0   $     0    $     0    $  7,711
  Investment securities (3)              7,968       3,558       7,100      31,054       8,847       896          0      59,423
  Mortgage and asset
   backed securities                         0           0         156         692       2,728     6,394     19,447      29,417
  Loans (4)                             13,753       2,501       3,828       6,875      14,754    43,412     57,345     142,468
                                        ------     -------     -------     -------     -------   -------    -------    --------

    Total interest-earning assets       29,432       6,059      11,084      38,621      26,329    50,702     76,792     239,019
                                        ------     -------     -------     -------     -------   -------    -------    --------

Interest-bearing Liabilities:
  NOW accounts (5)                       1,909       1,909       1,909       1,910           0         0     11,456      19,093
  Regular and other
   savings accounts (5)                 11,763      11,763      11,763      11,762           0         0     70,577     117,628
  Money market deposit accounts (5)        525         525         525         526           0         0      3,146       5,247
  Certificate of deposit accounts       18,835      13,404      10,305      11,646           0         0          0      54,190
  Federal Home Loan Bank
   borrowings (6)                            0           0       2,500       5,000           0     2,000          0       9,500
  Mortgage escrow deposits                 208           0           0           0           0         0          0         208
                                        ------     -------     -------     -------     -------   -------    -------    --------

    Total interest-bearing
     liabilities                        33,240      27,601      27,002      30,844           0     2,000     85,179     205,866
                                        ------     -------     -------     -------     -------   -------    -------    --------

Interest sensitivity gap              ($ 3,808)   ($21,542)   ($15,918)    $ 7,777     $26,329   $48,702   ($ 8,387)   $ 33,153
                                        ------     -------     -------     -------     -------   -------    -------    --------
Cumulative interest
 sensitivity gap                      ($ 3,808)   ($25,350)   ($41,268)   ($33,491)   ($ 7,162)  $41,540    $33,153
                                        ======     =======     =======     =======     =======   =======    =======

Cumulative interest sensitivity
 gap as a percent of total assets        -1.49%      -9.90%     -16.11%     -13.08%      -2.80%    16.22%     12.94%

Cumulative interest sensitivity
 gap as a percent of total
 interest-earning assets                 -1.59%     -10.61%     -17.27%     -14.01%      -3.00%    17.38%     13.87%

Cumulative interest sensitivity
 gap as a percent of total
 interest-bearing liabilities            -1.85%     -12.31%     -20.05%     -16.27%      -3.48%    20.18%     16.10%


<FN>
-----------------------
<F1>  Interest-earning assets are included in the period in which the
      balances are expected to be redeployed and/or re-priced as a result
      of anticipated prepayments, scheduled rate adjustments, call dates
      and contractual maturities.
<F2>  Short-term Investments include federal funds, money market mutual
      funds and interest-earning amounts in the Federal Home Loan  Bank of
      Boston.
<F3>  Investment securities are at market value. Common stock and stock in
      the Federal Home Loan Bank of Boston is included in the less than 3
      month column.
<F4>  Loans are principal balances, net of deferred loan
      costs/fees/discounts/premiums on purchased loans and unadvanced
      funds.
<F5>  60% of NOW, regular and other savings and money market deposit
      accounts are included in the over ten year period and the  remaining
      allocated evenly within the four intervals up to and including one to
      three years.
<F6>  Federal Home Loan Bank borrowings are categorized by contractual
      maturity date.
</FN>
</TABLE>


<PAGE>  5


      Certain shortcomings are inherent in the method of analysis presented
in the Gap Table. For example, although certain assets and liabilities may
have similar maturities or periods to re-price, they may react in different
degrees to changes in market interest rates. Also, the interest rates on
certain types of assets and liabilities may fluctuate in advance of changes
in market interest rates, while interest rates on other types may lag
behind changes in market rates. Additionally, certain assets such as
adjustable-rate loans have features, which restrict changes in interest
rates both on a short-term basis and over the life of the asset. Further,
in the event of changes in interest rates, prepayment and early
withdrawals, the level would likely deviate significantly from those
assumed in calculating the table. Finally, the ability of many borrowers to
service their adjustable-rate loans may decrease in the event of an
interest rate increase.

      The following table sets forth certain information relating to the
Company's financial condition and net interest income at and for the years
ended September 30, 2003, 2002, and 2001, and reflects the average yield on
assets and average cost of liabilities for the periods indicated. Such
yields and costs are derived by dividing interest and dividend income or
interest expense by the average balance of assets or liabilities,
respectively, for the periods shown. Average balances are derived from
average daily balances. The yields include fees and costs, which are
considered adjustments to yields.


<PAGE>  6


<TABLE>
<CAPTION>

                                                                For the Year Ended September 30,
                                ------------------------------------------------------------------------------------------------
                                             2003                             2002                             2001
                                ------------------------------   ------------------------------   ------------------------------
                                                      Average                          Average                          Average
                                Average               Yield or   Average               Yield or   Average               Yield or
                                Balance    Interest     Cost     Balance    Interest     Cost     Balance    Interest     Cost
                                -------    --------   --------   -------    --------   --------   -------    --------   --------
                                                                        ($ in thousands)


                             <c>        <c>        <c>        <c>        <c>        <c>        <c>        <c>        <c>
Assets:
Interest-earning assets:
  Short-term investments (1)    $ 12,671   $   134      1.06%    $ 11,956   $   209      1.75%    $ 11,781   $   591      5.02%
  Investment securities (2)       87,172     3,983      4.57%      68,194     4,068      5.97%      71,016     4,440      6.25%
  Loans (3)                      133,349     7,983      5.99%     136,118     9,594      7.05%     121,247     9,104      7.51%
                                --------   -------               --------   -------               --------   -------
    Total interest-earning
     assets                      233,192    12,100      5.19%     216,268    13,871      6.41%     204,044    14,135      6.93%
                                           -------                          -------                          -------
  Non-interest-earning
   assets                         17,824                           16,795                          13,708
                                --------                         --------                        --------
    Total assets                $251,016                         $233,063                        $217,752
                                ========                         ========                        ========

Liabilities and Equity:
Interest-bearing
 liabilities:
  NOW accounts                  $ 18,489        29      0.16%    $ 17,032        73      0.43%    $ 16,353        83      0.51%
  Savings accounts (4)           106,868     1,500      1.40%      86,667     1,899      2.19%      74,646     2,344      3.14%
  Money market deposit
   accounts                        5,567        69      1.24%       5,903       101      1.71%       5,196       102      1.96%
  Certificate of deposit
   accounts                       59,911     1,673      2.79%      63,848     2,509      3.93%      61,019     3,345      5.48%
                                --------   -------               --------   -------               --------   -------
    Total interest-bearing
     deposits                    190,835     3,271      1.71%     173,450     4,582      2.64%     157,214     5,874      3.74%
  Borrowed funds                   9,500       610      6.42%      11,677       776      6.65%      16,178     1,053      6.51%
                                --------   -------               --------   -------               --------   -------
    Total interest-bearing
     liabilities                 200,335     3,881      1.94%     185,127     5,358      2.89%     173,392     6,927      4.00%
                                --------   -------               --------   -------               --------   -------
  Non-interest bearing
   deposits                       20,108                           18,156                           16,315
  Other non-interest-bearing
   liabilities                     2,047                            2,517                            2,597
                                --------                         --------                        --------
    Total non-interest-
     bearing liabilities          22,155                           20,673                           18,912
                                --------                         --------                        --------
    Total liabilities            222,490                          205,800                          192,304
    Total stockholders'
     equity                       28,526                           27,263                           25,448
                                --------                         --------                        --------
    Total liabilities and
     stockholders' equity       $251,016                         $233,063                         $217,752
                                ========                         ========                        ========

Net interest income                        $ 8,219                          $ 8,513                          $ 7,208
                                           =======                          =======                          =======
Net interest rate spread (5)                            3.25%                            3.52%                            2.93%
                                                      =======                          =======                          =======
Net interest margin (6)                                 3.52%                            3.94%                            3.53%
                                                      =======                          =======                          =======
Ratio of interest-earning
 assets to interest-bearing
 liabilities                                          116.40%                          116.82%                          117.68%
                                                      =======                          =======                          =======

<FN>
-----------------------
<F1>  Short-term investments include federal funds, money market mutual
      funds and interest earning amounts in the Federal Home Loan Bank of
      Boston.
<F2>  All investment securities are considered available for sale.
<F3>  Loans are net of deferred loan origination costs/fees, allowance for
      loan losses, discount/premium on purchased loans and unadvances
      funds.
<F4>  Savings accounts include the balance in mortgagors' escrow accounts.
<F5>  Net interest rate spread represents the difference between the
      weighted average yield on interest-earning assets and the weighted
      average cost of interest bearing liabilities.
<F6>  Net interest margin represents net interest income as a percentage of
      average interest-earning assets.
</FN>
</TABLE>


<PAGE>  7


The following table presents the extent to which changes in interest rates
and changes in the volume of interest-earning assets and interest-bearing
liabilities have affected our interest income and interest expense during
the years indicated. Information is provided in each category with respect
to:

   *  changes attributable to changes in volume (changes in volume
      multiplied by prior rate);
   *  changes attributable to changes in rate (changes in rate multiplied
      by prior volume); and
   *  the net change.

The changes attributable to the combined impact of volume and rate have
been allocated proportionately to the changes due to volume and the changes
due to rate.

<TABLE>
<CAPTION>

                                         Year Ended September 30, 2003      Year Ended September 30, 2002
                                            Compared to Year Ended             Compared to Year Ended
                                              September 30, 2002                 September 30, 2001
                                              Increase (Decrease)                Increase (Decrease)
                                        ------------------------------     ------------------------------
                                                    Due to                             Due to
                                        ------------------------------     ------------------------------
                                        Volume       Rate        Total     Volume       Rate        Total
                                        ------       ----        -----     ------       ----        -----
                                                                  ($ In thousands)


                                      <c>        <c>         <c>        <c>         <c>         <c>
Interest-earning assets:
  Short-term investments (1)             $ 12       ($  87)     ($  75)    $    9      ($ 391)     ($ 382)
  Investment securities (2)               988       (1,073)        (85)      (173)       (199)       (372)
  Loans (3)                              (192)      (1,419)     (1,611)     1,071        (581)        490
                                         ----        -----       -----     ------       -----       -----
    Total interest-earning assets         808       (2,579)     (1,771)       907      (1,171)       (264)
                                         ----        -----       -----     ------       -----       -----

Interest-bearing liabilities:
  NOW accounts                              6          (50)        (44)         3         (13)        (10)
  Savings accounts (4)                    380         (779)       (399)       338        (783)       (445)
  Money market deposit accounts            (5)         (27)        (32)        13         (14)         (1)
  Certificate of deposit accounts        (147)        (689)       (836)       149        (985)       (836)
                                         ----        -----       -----     ------       -----       -----
    Total interest-bearing deposits       234       (1,545)     (1,311)       503      (1,795)     (1,292)
  Borrowed funds                         (141)         (25)       (166)      (299)         22        (277)
                                         ----        -----       -----     ------       -----       -----
    Total interest-bearing liabilities     93       (1,570)     (1,477)       204      (1,773)     (1,569)
                                         ----        -----       -----     ------       -----       -----
Net change in net interest income        $715      ($1,009)     ($ 294)      $703      $  602      $1,305
                                         ====       ======       =====       ====      ======      ======

<FN>
-----------------------
<F1>  Short-term investments include federal funds, money market mutual
      funds and interest earning amounts in the Federal Home Loan Bank of
      Boston.
<F2>  All investment securities are considered available for sale.
<F3>  Loans are net of deferred loan origination costs/fees, allowance for
      loan losses, discounts/premiums on purchased loans and unadvanced
      funds.
<F4>  Savings accounts include the balance in mortgagors' escrow accounts.
</FN>
</TABLE>


<PAGE>  8


Comparison of Financial Condition at September 30, 2003 and September 30,
2002

      As a result of continued growth in deposits, the Company's total
assets increased by $14.8 million, or 6.2%, to $256.1 million at September
30, 2003 from $241.3 million at September 30, 2002. As a result of a strong
housing market, much of the increase in assets occurred in loans, which
increased by $8.7 million, or 6.5%, to $141.6 million at September 30,
2003. Within the loan category, gross real estate loans increased by
approximately 8%. Securities available for sale and cash and cash
equivalents increased by $4.6 million, or 4.8%, to $99.5 million at
September 30, 2003, compared to $94.9 million at September 30, 2002 due
primarily to the investment of funds provided from deposit growth. The
Company reduced its investments in lower yielding Federal funds sold and
short-term investments and reinvested those funds, along with some funds
provided from the increase in deposits, into securities available for sale.
Banking premises and equipment increased 21.4%, to $6.7 million at
September 30, 2003, from $5.5 million at September 30, 2002, primarily as a
result of the completion of construction of the Bank's new 23 Maple Avenue,
Shrewsbury branch. Asset quality remained strong, with $634 thousand of
non-performing assets at September 30, 2003. During the year, the Bank
relocated its 19 Maple Avenue branch to the newer and larger 23 Maple
Avenue branch.

      Total deposits increased by $13.8 million, or 6.8%, to $215.9 million
at September 30, 2003 from $202.1 million at September 30, 2002. Most of
this increase was attributable to increases in variable-rate tiered,
regular savings and NOW accounts. Certificate of deposit accounts declined
during this period and reflect customer preferences to place their maturing
deposits in non-certificate accounts that offer more liquidity.

      Total stockholders' equity increased by $729 thousand, or 2.6%, to
$28.7 million at September 30, 2003 from $28.0 million at September 30,
2002. This increase was mainly due to net income of $966 thousand for
fiscal year ended September 30, 2003, less the payment of cash dividends of
$.20 per share, or a total of $317 thousand.

Comparison of Financial Condition at September 30, 2002 and September 30,
2001

      As a result of continued growth in deposits, the Company's total
assets increased by $15.6 million, or 6.91%, to $241.3 million at September
30, 2002 from $225.7 million at September 30, 2001. Net loans during this
period declined by $2.1 million, or 1.54%, to $132.9 million at September
30, 2002, from $135.0 million at September 30, 2001. The loan decline was
primarily due to a net decline in fixed-rate mortgage loans on real estate,
as a result of the current low interest rate environment that encouraged
increased loan payoffs and refinancing. Securities available for sale and
cash and cash equivalents increased by $15.4 million, to $94.9 million at
September 30, 2002 as compared to $79.5 million at September 30, 2001 due
primarily to the investment of funds provided from deposit growth. Banking
premises and equipment increased by $2.7 million to $5.5 million at
September 30, 2002 as compared to $2.9 million at September 30, 2001
primarily as a result of the completion of the Company's administrative
office building and progress payments made on the construction of a branch
office in the town of Shrewsbury, Massachusetts.  Asset quality remained
strong, with $140 thousand of non-performing assets at September 30, 2002.

      Total deposits increased by $17.0 million, or 9.17%, to $202.1
million at September 30, 2002 from $185.1 million at September 30, 2001.
Most of this increase was attributable to increases in variable-rate tiered
accounts and regular savings accounts. In the current low interest rate and
volatile investment environment, deposit customers preferred to place their
deposits in stable accounts that offer higher liquidity. As a result of the
payment of outstanding advances from the Federal Home Loan Bank of Boston,
advances declined by $2.5 million during this period.


<PAGE>  9


      Total stockholders' equity increased by $1.1 million, or 4.00%, to
$28.0 million at September 30, 2002 from $26.9 million at September 30,
2001. This increase is mainly due to net income of $979 thousand for fiscal
year ended September 30, 2002, plus a $715 thousand increase in net
unrealized gains on securities considered available for sale.
Alternatively, stockholders' equity was reduced by the payment of cash
dividends $0.20 per share, or a total of $316 thousand and a $475 thousand
purchase of 22,139 shares of the Company's common stock by the Recognition
and Retention Plan ("RRP") Trust.

Comparison of Operating Results for the Years Ended September 30, 2003 and
2002

      Net Income. The Company reported earnings per share (dilutive) for
the fiscal year ended September 30, 2003 of $0.62 on net income of $966
thousand, as compared to $979 thousand, or $0.63 per share (dilutive), for
year ended September 30, 2002. The Company's return on average assets was
..38% for year ended September 30, 2003 as compared to .42% for year ended
September 30, 2002.

      Interest and Dividend Income. Interest and dividend income declined
by $1.8 million, or 12.8%, to $12.1 million for the year ended September
30, 2003 from $13.9 million for the year ended September 30, 2002. The
decrease in interest and dividend income was mainly the result of a decline
in the earnings rate earned on interest-earning assets offset, to a lesser
extent, by an increase in the volume of interest earning assets. The
average rate earned on interest earning assets was 5.19% on average earning
assets of $233.2 million and 6.41% on average interest-earning assets of
$216.3 for the years ended September 30, 2003 and 2002, respectively. The
generally declining interest rate environment translated into reduced rates
earned on loans, investment securities and short-term investments.
Additionally, many loan customers renegotiated their existing loan interest
rate that, accordingly, lowered the interest rate earned by the Company on
those loans.

      The average balance of loans for the year ended September 30, 2003
was $133.3 million, earning 5.99% for the year. This compares to an average
balance of loans for the year ended September 30, 2002 of $136.1 million,
earning 7.05% for the year. The average balance of investment securities
for the year ended September 30, 2003 was $87.2 million, earning 4.57% for
the year. This compares to an average balance of investments for the year
ended September 30, 2002 of $68.2 million, earning 5.97% for the year.
Finally, the average balance of short-term investments for the year ended
September 30, 2003 was $12.7 million, earning 1.06% for the year. This
compares to an average balance of short-term investments for the year ended
September 30, 2002 of $12.0 million, earning 1.75% for the year.

      Interest Expense. Interest expense declined by $1.5 million, or
27.6%, to $3.9 million for the year ended September 30, 2003 from $5.4
million for the year ended September 30, 2002. Interest expense declined
mainly due to a decline in the average rate paid on interest-bearing
liabilities offset, to a lesser extent, by an increase in the average
volume of interest-bearing liabilities. The average volume of interest-
bearing deposits increased to $190.8 million with a cost of 1.71% for the
year ended September 30, 2003 as compared to $173.5 million with a cost of
2.64% for the year ended September 30, 2002. The average volume of borrowed
funds from the FHLB decreased during the year ended September 30, 2003 to
$9.5 million, with a cost of 6.42%, from an average balance of $11.7
million, with a cost of 6.65% for the year ended September 30, 2002.

      Net Interest Income. During the year, the Company experienced
interest rate spread compression, where the rates earned on its interest-
earning assets declined more that the rates paid on its interest-bearing
liabilities. The Company's net interest rate spread declined to 3.25% for
the year ended September 30, 2003 from 3.52% for the year ended September
30, 2002. Net interest income declined by $294 thousand for the year ended
September 30, 2003, or 3.5%, to $8.2 million, from $8.5 million, for the
year ended September 30, 2002. The decline was attributed to the
combination of a decrease of $1.8 million in total interest and dividend
income offset, to a lesser extent, by a decrease of $1.5 million in total
interest expense.


<PAGE>  10


      Provision for Loan Losses. The Company's provision for loan losses
for the year ended September 30, 2003 was $0 as compared to an $8 thousand
provision for the year ended September 30, 2002 which management feels is
reasonable considering the general decline in loan balances over the year
and its continued strong loan quality. The provision for loan losses is a
result of management's periodic analysis of risks inherent in its loan
portfolio from time to time, as well as the adequacy of the allowance for
loan losses. It is the Bank's policy to provide valuation allowances for
estimated losses on loans based upon past loss experience, current trends
in the level of delinquent and specific problem loans, loan concentrations
to single borrowers, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral, and
current economic conditions in our market area. Accordingly, the evaluation
of the adequacy of the allowance for loan losses is not based directly on
the level of non-performing loans. The allowance for loan losses, in
management's opinion, is sufficient to cover losses in the Bank's loan
portfolio at this time. As the Bank expands its commercial lending
activities, management believes that growth in the provision for loan
losses may be likely. Additionally, while the Bank believes it continues to
have excellent loan quality, with $634 thousand of non-accrual loans and
non-performing assets at September 30, 2003, the Bank recognizes that it is
located in a market and geographic area that is considered in the high
technology and financial services belt and, most likely, the Bank's
allowance for loan loss will reflect the relative health of these economic
sectors. While Bank management believes that its current level of allowance
for loan losses is adequate, there can be no assurance that the allowance
will be sufficient to cover loan losses or that future adjustments to the
allowance will not be necessary if economic and/or other conditions differ
substantially from the economic and other conditions considered by
management in evaluating the adequacy of the current level of the
allowance.

      Other Income. Other income consists primarily of fee income for bank
services, gains and losses from the sale of securities and income from
bank-owned life insurance. For the year ended September 30, 2003, the
Company reported a net gain on the sale of securities of $121 thousand as
compared to a net loss on the sale of securities of $466 thousand for the
year ended September 30, 2002.  During the quarter ended September 30,
2003, the Company sold, at a capital loss, certain common stock holdings.
The resultant capital loss will receive favorable tax treatment, since the
Company will be able to carry back the current year capital loss three
years, to a period in which it had paid taxes on capital gains. The capital
loss was more than offset by ordinary gains from the sale of certain
corporate and federal agency securities. As a result of the common stock
sales, the Company significantly reduced the balance of marketable equity
securities to $2.5 million at September 30, 2003, from $4.9 million, at
September 30, 2002. Additionally, the unrealized gain on marketable equity
securities at September 30, 2003 was approximately $47 thousand as compared
to an unrealized loss on marketable securities of $666 thousand at
September 30, 2002.

      With regard to the Company's common stock holdings, its internal
investment policy requires it to either write-down to market value, or
sell, any common stock issue that has sustained a continuous decline in
market value of 50% or more, for a period of 9 months or more. At September
30, 2003, no common stock met such criteria. Although the management of the
Bank believes that it has established and maintained an adequate accounting
policy as it relates to investment impairment, such judgments involve a
higher degree of complexity and require management to make difficult and
subjective judgments that often require assumptions or estimates about
highly uncertain matters. Changes in these judgments, assumptions or
estimates could cause reported results to differ materially. This critical
policy and its application are periodically reviewed with the Audit
Committee and our Board of Directors.

      Also, during the year ended September 30, 2003, income from customer
service fees increased by $124 thousand, or 28.2%, to $563 thousand
primarily as a result of an increase in income from the sale of non-deposit
investment products and fees earned on ATM transactions. Gains on the sale
of mortgages increased by $33 thousand and miscellaneous income declined by
$26 thousand to $174 thousand for the year ended September 30, 2003 mainly
due to a decline in rates earned on bank-owned life insurance.


<PAGE>  11


      Operating Expenses. Operating expenses increased by $167 thousand, or
2.2%, to $7.6 million for year ended September 30, 2003 as compared to $7.4
million for year ended September 30, 2002. The primary reasons for this
increase were general salary increases and benefit expenses relating to
retirement and health insurance. In addition to general increases in base
pay, salary expenses and related benefit expense also increased due to a
higher level of incentive compensation paid to commissioned employees from
the sale of non-insured investment products and from the origination of
mortgage loans. The company also offers its employees and retirees medical
and dental insurance and they share in the cost of such insurance premiums.
Premium expense for medical insurance, in particular, increased during the
year.  Also, the Company offers its employees a defined benefit retirement
plan and, as a result of a general decline in the market value of the
underlying retirement assets and other retirement variables, the cost of
offering this retirement plan also increased during the year. In addition,
the Company offers its employees a 401(k) savings plan that encourages
employees to save for their retirements. As part of that encouragement, the
Company increased its match of employee contributions. In January 2003, the
Company contributed 50% of the first 6% of employee contributions to the
plan, up from 25% of the first 4% of employee contributions. Occupancy and
equipment expenses increased by 17.3%, to $1.3 million for the year ended
September 30, 2003 compared to $1.1 million for year ended September 30,
2002. Much of that increase was related to variable expenses relating to
snow removal and landscaping, and some fixed expenses relating real estate
taxes and building and equipment depreciation on the Bank's expanded main
office and new Shrewsbury branch office. Data processing expenses declined
$98 thousand, or 14.0%, to $603 thousand for the year ended September 30,
2003 as compared to $701 thousand for the year ended September 30, 2002 due
primarily to absence of conversion-related expenses in the current year.
Advertising expenses declined $15 thousand, or 6.8%, to $205 thousand for
the year ended September 30, 2003 as compared to $220 thousand for the year
ended September 30, 2002 due primarily to the more effective and timely use
of in-house, computer-based programs for the design and production of
marketing, promotional and advertising media.  Other general and
administrative expenses increased $37 thousand, or 3.0%, to $1.3 million
for the year ended September 30, 2003 due primarily to higher costs
associated with directors and officers, blanket bond and property and
casualty insurance, in addition to general increases in costs associated
with forms, other supplies and inter-branch courier services.

      Income Taxes. Primarily reflecting the higher level of income before
income taxes, the provision for income taxes increased by $278 thousand to
$531 thousand for the year ended September 30, 2003 as compared to $253
thousand for the year ended September 30, 2002, resulting in an effective
income tax rate of 35.47% and 20.54% for the years ended September 30, 2003
and 2002, respectively. The Bank utilizes a security corporation to
substantially reduce state income taxes and receives the benefit of a
dividends received deduction on common stock and receives favorable tax
treatment from the increase in cash surrender value of bank-owned life
insurance. There were a number of factors that caused the increase in the
effective income tax rate. For the recent year ended September 30, 2003,
the Bank continued to reduce its level of common stock investments, and,
therefore, reduced the benefits associated with the dividends received
deduction on common stock and filed amended tax returns with respect to a
dividends received deduction taken in prior years on serial trust preferred
securities. Additionally, during the year ended September 30, 2003, in
response to the general decline in market interest rates, the rate of
increase in cash surrender value of bank-owned life insurance declined,
resulting in a reduction of the favorable tax treatment.


<PAGE>  12


Comparison of Operating Results for the Years Ended September 30, 2002 and
2001

      Net Income. The Company reported earnings per share (dilutive) for
the fiscal year ended September 30, 2002 of $0.63 on net income of $979
thousand. For the year ended September 30, 2001, the Company reported
earnings per share (dilutive) of $0.90 on net income of $1.4 million. The
$419 thousand decline in net income was primarily the result of current
year net losses on the sale of securities, a decline of income from
customer service fees, an increase in operating expenses and a decline in
the cumulative effect of a change in accounting principle. These areas were
offset, to a lesser extent, by an increase in net interest income. The
Company's return on average assets for the year ended September 30, 2002
was 0.42% compared to 0.64% for the year ended September 30, 2001.

      Interest and Dividend Income. Interest and dividend income declined
by $264 thousand or 1.87%, to $13.9 million for the year ended September
30, 2002 from $14.1 million for the year ended September 30, 2001. The
decrease in interest and dividend income was mainly the result of a decline
in the earnings rate earned on interest-earning assets offset, to a lesser
extent, by an increase in the volume of interest-earning assets. The
average rate earned on interest-earning assets was 6.41% on average earning
assets of $216.3 million and 6.93% on average interest-earning assets of
$204.0 for the years ended September 30, 2002 and 2001, respectively. The
Federal Reserve Bank's, Federal Open Market Committee, ("FOMC") reduced the
discount rate by 1.25 percentage points during the fiscal year ended
September 30, 2002. This generally declining interest rate environment
translated into declining rates earned on loans, investment securities and
short-term investments. Additionally, some loan customers renegotiated
existing loan rates that, accordingly, lowered rates earned by the Company
on those loans.

      The average balance of loans for the year ended September 30, 2002
was $136.1 million, earning 7.05% for the year. This compares to an average
balance of loans for the year ended September 30, 2001 of $121.2 million,
earning 7.51% for the year. The average balance of investment securities
for the year ended September 30, 2002 was $68.2 million, earning 5.97% for
the year. This compares to an average balance of investments for the year
ended September 30, 2001 of $71.0 million, earning 6.25% for the year.
Finally, the average balance of short-term investments for the year ended
September 30, 2002 was $12.0 million, earning 1.75% for the year. This
compares to an average balance of short-term investments for the year ended
September 30, 2001 of $11.8 million, earning 5.02% for the year.

      Interest Expense. Interest expense declined by $1.6 million, or
22.65%, to $5.4 million for the year ended September 30, 2002 from $6.9
million for the year ended September 30, 2001. Interest expense declined
mainly due to a decline in the average rate paid on interest-bearing
liabilities offset, to a lesser extent, by an increase in the average
volume of interest-bearing liabilities. The previously mentioned FOMC
interest rate reductions allowed the Company to reduce rates paid on NOW,
savings, money market deposit and certificates of deposit accounts. The
average volume of interest-bearing deposits increased to $173.5 million
with a cost of 2.64% for the year ended September 30, 2002 as compared to
$157.2 million with a cost of 3.74% for the year ended September 30, 2001.
The average volume of borrowed funds from the FHLB decreased during the
year ended September 30, 2002 to $11.7 million, with a cost of 6.65%, from
an average balance of $16.2 million, with a cost of 6.51% for the year
ended September 30, 2001.

      Net Interest Income. Generally declining interest rates resulted in a
decline in the Company's interest expenses on deposits and borrowings and,
to a lesser extent, to a decline in interest income on loans and
investments. Net interest income increased by $1.3 million for the year
ended September 30, 2002, or 18.10%, to $8.5 million from $7.2 million for
the year ended September 30, 2001. The increase is attributed to the
combination of a decrease of $1.6 million in total interest expense offset,
to a lesser extent, by a decrease of $264 thousand in total interest and
dividend income. The Bank's net interest rate spread increased to 3.52% for
the year ended September 30, 2002 from 2.93% for the comparative year ended
September 30, 2001.


<PAGE>  13


      The average yield on interest-earning assets declined to 6.41% for
the year ended September 30, 2002 as compared to 6.93% for the year ended
September 30, 2001 and the average volume of interest-earning assets
increased to $216.3 million for the year ended September 30, 2002 as
compared to $204.0 million for the year ended September 30, 2001. The
average cost of interest-bearing liabilities declined to 2.89% for the year
ended September 30, 2002, from 4.00% for the year ended September 30, 2001.
The average volume of interest-bearing liabilities increased to $185.1
million for the year ended September 30, 2002 as compared to $173.4 million
for the year ended September 30, 2001.

      Provision for Loan Losses. The Company recorded an $8 thousand
provision for loan losses for the year ended September 30, 2002 as compared
to a $48 thousand provision for the year ended September 30, 2001. The
provision for loan losses is a result of management's periodic analysis of
risks inherent in its loan portfolio from time to time, as well as the
adequacy of the allowance for loan losses. It is the Bank's policy to
provide valuation allowances for estimated losses on loans based upon past
loss experience, current trends in the level of delinquent and specific
problem loans, loan concentrations to single borrowers, adverse situations
that may affect the borrower's ability to repay, the estimated value of any
underlying collateral, and current economic conditions in our market area.
Accordingly, the evaluation of the adequacy of the allowance for loan
losses is not based directly on the level of non-performing loans. The
allowance for loan losses, in management's opinion, is sufficient to cover
losses in the Bank's loan portfolio at this time. As the Bank expands its
commercial lending activities, management believes that growth in the
provision for loan losses may be likely. Additionally, while the Bank
believes it has excellent loan quality, with $140 thousand of non-accrual
loans and non-performing assets at September 30, 2002, the Bank recognizes
that it is located in a market and geographic area that is considered in
the high technology and financial services belt. The Bank's loan portfolio
is representative of such demographics. Unemployment rates in Massachusetts
and its area have increased and commercial property vacancy rates have also
risen. While Bank management believes that its current level of allowance
for loan losses is adequate, there can be no assurance that the allowance
will be sufficient to cover loan losses or that future adjustments to the
allowance will not be necessary if economic and/or other conditions differ
substantially from the economic and other conditions considered by
management in evaluating the adequacy of the current level of the
allowance.

      Other Income. Other income consists primarily of fee income for bank
services, gains and losses from the sale of securities and income from
bank-owned life insurance. For the year ended September 30, 2002, the
Company reported a net loss on the sale of securities of $466 thousand as
compared to a net gain on the sale of securities of $710 thousand for the
year ended September 30, 2001. During the quarter ended September 30, 2002,
the Company sold, at a loss, certain common stock holdings of financial
services and technology companies. The resultant capital loss will receive
favorable tax treatment, since the Company will be able to carry back the
current year loss three years, to a period in which it had paid taxes on
capital gains. With regard to the Company's common stock holdings, its
internal investment policy requires it to either write-down to market
value, or sell, any common stock issue that has sustained a continuous
decline in market value of 50% or more, for a period of 9 months or more.
While the aforementioned common stock sales did not meet the criteria for
such write-down or sale at September 30, 2002, the Company felt such common
stock was nearing the 9-month measurement period, and it decided to incur
such losses to utilize the previously mentioned three-year tax loss carry-
back, which would have expired at the end on its September 30, 2002 tax
year. Although the management of the Bank believes that it has established
and maintained an adequate accounting policy as it relates to investment
impairment, such judgments involve a higher degree of complexity and
require management to make difficult and subjective judgments that often
require assumptions or estimates about highly uncertain matters. Changes in
these judgments, assumptions or estimates could cause reported results to
differ materially. This critical policy and its application are
periodically reviewed with the Audit Committee and our Board of Directors.
Also, during the year ended September 30, 2002, income from customer
service fees declined by $219 thousand as compared to the previous year
primarily as a result of a decline in income from the sale of non-deposit
investment products. Miscellaneous income increased by $40


<PAGE>  14


thousand to $200 thousand for the year ended September 30, 2002 mainly due
to an increase in income from bank-owned life insurance.

      Operating Expenses. Operating expenses increased by $469 thousand, to
$7.4 million for the year ended September 30, 2002 as compared to $7.0
million for the previous year ended September 30, 2001 primarily as a
result of increases in salaries and benefits expenses, increases in data
processing expenses relating to the Company's recent conversion to an
enhanced data processing and information system and also due to its move
into the addition to the Bank's main office. These expenses were offset, to
a lesser extent, by a decline in marketing expenses, professional fees and
other general and administrative expenses. Salary and employee benefits
expenses increased by $319 thousand, or 8.93%, to $3.9 million for the year
ended September 30, 2002 as compared to $3.6 million for the year ended
September 30, 2001. Most of this increase was a result of staff additions,
the use of temporary help, normal salary increases for existing staff,
increases in health insurance premiums, incentive payments for staff
involved in the Bank's data processing conversion and increases in
retirement benefit costs. Occupancy and equipment expenses increased by
$117 thousand, or 11.94%, to $1.1 million for the year ended September 30,
2002 as compared to $1.0 million for the year ended September 30, 2001.
During the recent year, the Company moved into its addition to the main
office and, as a result, depreciation, maintenance, equipment, utility and
related costs increased from the previous year. Data processing expenses
increased by $252 thousand, or 56.12%, to $701 thousand for the year ended
September 30, 2002 as compared to $449 thousand for the year ended
September 30, 2001. The Company converted to a new data processing system
in March 2002, and one-time, non-recurring conversion costs of $44 thousand
related to that conversion. Marketing expenses declined by $65 thousand, to
$220 thousand for the year ended September 30, 2002 mainly due to the
increased in-house production of marketing materials. Professional fees
declined by $54 thousand, to $282 thousand for the year ended September 30,
2002 due to a decline in the level of legal expenses. Other general and
administrative expenses declined by $100 thousand, to $1.3 million for the
year ended September 30, 2002 mainly as a result of a decrease in costs
associated with outside consulting services.

      Income Taxes. Reflecting the lower level of income before income
taxes and cumulative change in accounting principle, the provision for
income taxes declined by $223 thousand to $253 thousand for the year ended
September 30, 2002 as compared to $476 thousand for the year ended
September 30, 2001, resulting in an effective tax rate of 20.54% and 27.56%
for the years ended September 30, 2002 and 2001, respectively. The Bank
utilizes security corporations to substantially reduce state income taxes
and receives the benefit of a dividends received deduction on common stock.
Additionally, the Bank receives favorable tax treatment from the increase
in the cash surrender value of bank-owned life insurance.

Liquidity and Capital Resources

      The term "liquidity" refers to the Bank's ability to generate
adequate amounts of cash to fund loan originations, deposit withdrawals and
operating expenses. The Bank's primary sources of funds are deposits,
scheduled amortization and prepayments of loan principal and mortgage-
backed securities, maturities and calls of investment securities and funds
provided by the Bank's operations. From time to time, the Bank has utilized
borrowing from the FHLB as part of its management of interest rate risk. At
September 30, 2003, the Bank had $9.5 million in outstanding borrowings.

      The Bank generally makes loan commitments to borrowers not exceeding
45 days. At September 30, 2003, the Bank had $7.5 million in loan
commitments outstanding, primarily for the origination of one- to four-
family residential real estate loans, commercial loans and commercial real
estate loans. Unadvanced funds on home equity lines of credit and
commercial lines of credit at September 30, 2003 represented $11.4 million
and $1.2 million, respectively. Total deposits increased $13.8 million,
$17.0 million and $21.7 million, during the years ended September 30, 2003,
2002 and 2001, respectively. The level of deposit flows is affected by
interest rates offered by the Bank, products offered by competitors and
other factors. Certificate of deposit accounts scheduled to mature within
one year were $42.5 million


<PAGE>  15


at September 30, 2003. Based on the Bank's deposit retention experience and
current pricing strategy, the Bank anticipates that a significant portion
of these certificates of deposit will remain with the Bank. The Bank is
committed to maintaining a strong liquidity position; therefore, it
monitors its liquidity position on a daily basis. The Bank also
periodically reviews liquidity information prepared by the Federal Deposit
Insurance Corporation (the "FDIC"), Depositors Insurance Fund and other
available reports that compare the Bank's liquidity with banks in its peer
group. The Bank anticipates that it will have sufficient funds to meet its
current funding commitments. Further, the Bank does not have any balloon or
other payments due on any long-term obligations other than the commitments.

      The following table shows the Leverage ratio, Tier 1 risk-based
capital and Total risk-based capital ratios, for the Bank and consolidated
Company, at September 30, 2003:

<TABLE>
<CAPTION>

                                                     As of September 30, 2003
                                        -------------------------------------------------
                                                                  Minimum
                                         Actual                 For Capital
                                        Capital    Percent of     Adequacy     Percent of
                                         Amount    Assets (1)     Purposes       Assets
                                        -------------------------------------------------
                                                      (Dollars in thousands)


                                     <c>          <c>          <c>            <c>
Total risk-based capital      Bank      $27,286      19.95%       $10,942        8.00%
                              Company   $28,291      20.68%       $10,944        8.00%

Tier 1 risk-based capital     Bank      $26,374      19.28%       $ 5,471        4.00%
                              Company   $27,380      20.02%       $ 5,472        4.00%

Tier 1 leverage capital       Bank      $26,374      10.59%       $ 7,472        3.00%
                              Company   $27,380      10.91%       $10,041        4.00%

<FN>
------------------------
<F1>  For purposes of calculating Total risk-based capital and Tier 1 risk-
      based capital, assets are based on total risk-weighted assets. In
      calculating Tier 1 leverage capital, assets are based on adjusted
      total average assets.
</FN>
</TABLE>


At September 30, 2003, the Bank was considered "well capitalized" under
FDIC guidelines.


<PAGE>  16


Off-Balance Sheet Arrangements

      The Company does not have any off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on the
Company's financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors.

Impact of Inflation and Changing Prices

      The consolidated financial statements and accompanying notes
presented here have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). GAAP generally
requires the measurement of financial position and operating results in
terms of historical dollars without consideration for changes in the
relative purchasing power of money over time due to inflation. The impact
of inflation is reflected in the increased cost of the Company's
operations. Unlike industrial companies, the Company's assets and
liabilities are primarily monetary in nature. As a result, changes in
market interest rates have a greater impact on performance than do the
effects of inflation.

Critical Accounting Policies

      The Notes to our Audited Consolidated Financial Statements for the
year ended September 30, 2003 included in our Annual Report contain a
summary of our significant accounting policies. We believe our policies
with respect to the methodology for our determination of the allowance for
loan losses, asset impairment judgments and other-than-temporary declines
in the value of our securities, involve a higher degree of complexity and
require management to make difficult and subjective judgments, which often
require assumptions or estimates about highly uncertain matters. Changes in
these judgments, assumptions or estimates could cause reported results to
differ materially. The Audit Committee and our Board of Directors
periodically review these critical policies and their application.


<PAGE>  17


Directors of the Company and the Bank

      James N. Ball is the sole owner of Secure Futures, Inc., which has
operated in Westborough for nearly 20 years (as a sole proprietor prior to
1999). Mr. Ball is a financial services specialist and a member of the
National Association of Securities Dealers. Mr. Ball assists individuals
and small business owners in a broad range of financial decision-making.
Mr. Ball is the son of Nelson P. Ball, also a member of the Board of
Directors.

      Nelson P. Ball is the owner of Ball Financial Services, Co., located
in Westborough, Massachusetts. He has served as a financial services
consultant for over 38 years. Mr. Ball is the father of James N. Ball, also
a member of the Board of Directors.

      Edward S. Bilzerian is retired from Bilzerian Consulting Group, Inc.,
a privately held company located in Worcester, Massachusetts, specializing
in small business turnarounds, where he served as President. Prior to that,
he was Vice President of Marketing and Finance at Bay State Abrasive's
Division of Dresser Industries. He has been self-employed for over 17
years. Mr. Bilzerian also serves as a member of the Worcester Airport
Commission and is Chairman of the Worcester Health and Hospital Authority.

      Nancy M. Carlson is the owner and president of Suburban Staffing,
Inc., a staffing firm located in Westborough, Massachusetts. She has worked
at Suburban Staffing, Inc. since 1986 and purchased the company in 1994.
She is also an investment partner and facilitator for Data Transitions,
Inc., a Westborough company that specializes in managing data from
incompatible applications. She has served on the Board of Directors of the
Corridor Nine Area Chamber of Commerce since 1994 and has been President
for two years.

      David E. Carlstrom has served as President of Carlstrom Pressed Metal
Co., Inc. for over 25 years. Carlstrom Pressed Metal is a contract
manufacturer of light and heavy metal stampings located in Westborough,
Massachusetts.

      John L. Casagrande has served as the Senior Vice President and Chief
Financial Officer of Westborough Bank since 1993 and of Westborough
Financial Services since its inception in 2000. He joined Westborough Bank
after having been employed as a senior bank officer and certified public
accountant for over 15 years at various times by several financial
institutions (including mutual and stock institutions) and the accounting
firm of Peat Marwick. Mr. Casagrande has been serving as Clerk of
Westborough Financial Services since 2001. Mr. Casagrande serves as a
director of the Massachusetts Bank Insurance Association, a division of the
Massachusetts Bankers Association.

      Benjamin H. Colonero, Jr. has served as chief financial officer and
executive director in the healthcare industry for over 20 years. Mr.
Colonero is currently the executive director of the Westborough campus of
the Salmons Family of Services, which serves the health and social needs of
over 400 seniors.

      William W. Cotting, Jr. has been an attorney in private practice for
over 20 years. His practice is located in Northborough, Massachusetts.

      Robert G. Daniel was employed in various capacities, including
President and Treasurer, at Carlson Daniel Insurance Agency, Inc., located
in Westborough, Massachusetts from 1958 to 1994. Mr. Daniel sold insurance
from 1994 to 1996 for Allied American Agency following its acquisition of
Carlson Daniel Insurance. From 1996 to 1999, Mr. Daniel served as President
and Treasurer of Westborough Insurance Agency, Inc., a non-active
corporation used as a vehicle for payments from Allied American as
negotiated in connection with the acquisition of Carlson Daniel.
Westborough Insurance Agency, Inc. dissolved in 1999.


<PAGE>  18


      Walter A. Kinell, Jr. has served as Chairman of the Board for
Westborough Bank since 1994 and for Westborough Financial Services since
its inception in 2000. Mr. Kinell joined Westborough Bank in 1959 as an
assistant treasurer, became President and Chief Executive Officer in 1969
and retired from this position in 1994.

      Robert A. Klugman, M.D., F.A.C.P. has practiced general medicine in
Westborough, Massachusetts for over 20 years. Dr. Klugman is currently an
Associate Professor of Clinical Medicine at the University of Massachusetts
Medical School as well as Division Chief of Community Internal Medicine at
the UMASS/Memorial.

      Roger B. Leland has practiced estate, tax and real estate law at
Leland Law Associates for over 30 years. During that time, he also served
as an insurance broker, selling life and casualty insurance products,
through Leland Insurance Agency, Inc. Leland Law Associates and Leland
Insurance Agency are located in Northborough, Massachusetts.

      Joseph F. MacDonough has served as President and Chief Executive
Officer of Westborough Bank since 1994 and of Westborough Financial
Services since its inception in 2000. He joined Westborough Bank in 1981
and served as Vice President and Treasurer until his appointment as
President. Mr. MacDonough serves on the Board of Directors of the
Massachusetts Bankers Association.

      Paul F. McGrath is a certified public accountant and has served as
President of Mottle McGrath Braney & Flynn, P.C. for over ten years. Mottle
McGrath is a certified public accounting firm, located in Worcester,
Massachusetts, that provides accounting, tax and business advisory services
throughout central New England.

      Charlotte C. Spinney is a retired social studies teacher. She taught
at Westborough High School for 41 years and, during that time, she created
the curriculum for the community service component of the school's
Sociology course.

      Phyllis A. Stone had served as Vice President and Treasurer of Comey
Oil Co., Inc., located in Westborough, Massachusetts, for 13 years prior to
her retirement in 2001. She had served in various other capacities within
Comey Oil for over 30 years. She is currently President of Schenker
Properties, Inc., a real estate holding company based in Westborough,
Massachusetts. She is past Treasurer of the Regatta Point Community Sailing
Inc. of Worcester, Massachusetts.

      James E. Tashjian is a partner in the law firm of Tashjian, Simsarian
& Wickstrom, located in Worcester, Massachusetts. He has engaged in the
general practice of law for over 30 years.


<PAGE>  19


                    WESTBOROUGH FINANCIAL SERVICES, INC.

                      CONSOLIDATED FINANCIAL STATEMENTS
                      ---------------------------------

                Years Ended September 30, 2003, 2002 and 2001


                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                    WESTBOROUGH FINANCIAL SERVICES, INC.

Independent Auditors' Report                                       F-1

Consolidated Balance Sheets as of September 30, 2003
 and 2002                                                          F-2

Consolidated Statements of Income for the Years Ended
 September 30, 2003, 2002 and 2001                              F-3 - F-4

Consolidated Statements of Changes in Stockholders' Equity
 for the Years Ended September 30, 2003, 2002 and 2001          F-5 - F-6

Consolidated Statements of Cash Flows for the
 Years Ended September 30, 2003, 2002 and 2001                  F-7 - F-8

Notes to Consolidated Financial Statements                      F-9 - F-41


<PAGE>


                        INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders of
 Westborough Financial Services, Inc.

We have audited the accompanying consolidated balance sheets of Westborough
Financial Services, Inc. and subsidiary as of September 30, 2003 and 2002,
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, 2003.  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 auditing standards generally
accepted in the United States of America.  Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall 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 financial position of
Westborough Financial Services, Inc. and subsidiary as of September 30, 2003
and 2002, and the results of their operations and their cash flows for each
of the years in the three-year period ended September 30, 2003, in
conformity with accounting principles generally accepted in the United
States of America.


/s/ Wolf & Company, P.C.


Boston, Massachusetts
October 30, 2003


<PAGE>  F-1


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

                         CONSOLIDATED BALANCE SHEETS

                         September 30, 2003 and 2002

                           (Dollars in thousands)

<TABLE>
<CAPTION>

                                ASSETS

                                                                             2003         2002
                                                                             ----         ----


                                                                        <c>          <c>
Cash and due from banks                                                    $  4,190     $  5,295
Federal funds sold                                                            6,024       11,136
Short-term investments                                                        1,687        2,822
                                                                           --------     --------
      Total cash and cash equivalents                                        11,901       19,253

Securities available for sale, at fair value                                 87,590       75,638
Federal Home Loan Bank stock, at cost                                         1,250        1,250
Loans, net of allowance for loan losses of $911 in 2003
 and $926 in 2002                                                           141,557      132,880
Banking premises and equipment, net                                           6,708        5,524
Accrued interest receivable                                                   1,179        1,341
Deferred income taxes                                                            93           22
Bank-owned life insurance                                                     4,365        4,122
Other assets                                                                  1,479        1,243
                                                                           --------     --------
                                                                           $256,122     $241,273
                                                                           ========     ========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                   $215,898     $202,063
Federal Home Loan Bank advances                                               9,500        9,500
Mortgagors' escrow accounts                                                     208          198
Accrued expenses and other liabilities                                        1,798        1,523
                                                                           --------     --------
      Total liabilities                                                     227,404      213,284
                                                                           --------     --------

Commitments and contingencies (Note 12)
Stockholders' equity:
  Preferred stock - $.01 par value, 1,000,000 shares authorized,
   none outstanding                                                               -            -
  Common stock - $.01 par value, 5,000,000 shares authorized,
   1,586,174 and 1,581,574 shares issued and outstanding in 2003
   and 2002, respectively                                                        16           16
  Additional paid-in capital                                                  4,706        4,583
  Retained earnings                                                          23,325       22,676
  Accumulated other comprehensive income                                      1,290        1,439
  Unearned compensation - RRP (14,659 and 18,159 shares, respectively)         (288)        (365)
  Unearned compensation - ESOP (33,149 and 36,096 shares,
   respectively)                                                               (331)        (360)
                                                                           --------     --------
      Total stockholders' equity                                             28,718       27,989
                                                                           --------     --------
                                                                           $256,122     $241,273
                                                                           ========     ========
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>  F-2


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF INCOME

                  (Dollars in thousands, except share data)

<TABLE>
<CAPTION>

                                                            Years Ended September 30,
                                                         -------------------------------
                                                          2003        2002        2001
                                                          ----        ----        ----


                                                      <c>         <c>         <c>
Interest and dividend income:
  Interest and fees on loans                             $ 7,983     $ 9,594     $ 9,104
  Interest and dividends on securities:
    Taxable interest                                       3,656       3,659       3,996
    Non-taxable interest                                      70          70          64
    Dividends                                                257         339         380
  Interest on federal funds sold                              93         145         456
  Interest on short-term investments                          41          64         135
                                                         -------     -------     -------
      Total interest and dividend income                  12,100      13,871      14,135
                                                         -------     -------     -------

Interest expense:
  Interest on deposits                                     3,271       4,582       5,874
  Interest on Federal Home Loan Bank advances                610         776       1,053
                                                         -------     -------     -------
      Total interest expense                               3,881       5,358       6,927
                                                         -------     -------     -------

Net interest income                                        8,219       8,513       7,208
Provision for loan losses                                      -           8          48
                                                         -------     -------     -------

Net interest income, after provision for loan losses       8,219       8,505       7,160
                                                         -------     -------     -------

Other income:
  Customer service fees                                      563         439         658
  Gain (loss) on securities, net                             121        (466)        710
  Gain on sales of mortgages                                  33           -           -
  Miscellaneous                                              174         200         176
                                                         -------     -------     -------
      Total other income                                     891         173       1,544
                                                         -------     -------     -------

Operating expenses:
  Salaries and employee benefits                           3,943       3,892       3,573
  Occupancy and equipment expenses                         1,287       1,097         980
  Data processing expenses                                   603         701         459
  Advertising                                                205         220         285
  Professional fees                                          284         282         336
  Other general and administrative expenses                1,291       1,254       1,344
                                                         -------     -------     -------
      Total operating expenses                             7,613       7,446       6,977
                                                         -------     -------     -------
</TABLE>

                                 (continued)

See accompanying notes to consolidated financial statements.


<PAGE>  F-3


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF INCOME (Concluded)

                  (Dollars in thousands, except share data)

<TABLE>
<CAPTION>

                                                            Years Ended September 30,
                                                         -------------------------------
                                                          2003        2002        2001
                                                          ----        ----        ----


                                                      <c>         <c>         <c>
Income before income taxes and cumulative effect of
 change in accounting principle                            1,497       1,232       1,727
Provision for income taxes                                   531         253         476
                                                         -------     -------     -------
Income before cumulative effect of change in
 accounting principle                                        966         979       1,251
Cumulative effect of change in accounting
 for covered call options, net of $76 of tax effects
 ($.09 per dilutive share)                                     -           -         147
                                                         -------     -------     -------

Net income                                               $   966     $   979     $ 1,398
                                                         =======     =======     =======

Earnings per share:
  Basic                                                  $  0.63     $  0.64     $  0.91
  Diluted                                                $  0.62     $  0.63     $  0.90
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>  F-4


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

                    CONSOLIDATED STATEMENTS OF CHANGES IN
                            STOCKHOLDERS' EQUITY

               Years Ended September 30, 2003, 2002, and 2001

                           (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                       Accumulated
                                               Additional                 Other         Unearned        Unearned          Total
                                       Common   Paid-in    Retained   Comprehensive   Compensation-   Compensation-   Stockholders'
                                       Stock    Capital    Earnings   Income (Loss)        RRP            ESOP            Equity
                                       ------  ----------  --------   -------------   -------------   -------------   -------------


                                     <c>     <c>        <c>           <c>              <c>            <c>             <c>
Balance at September 30, 2000           $16     $4,541     $20,931       $ (352)          $   -          $(420)          $24,716
                                                                                                                         -------

Comprehensive income:
  Net income                              -          -       1,398            -               -              -             1,398
  Change in net unrealized gain
   (loss) on securities available
   for sale, after reclassification
   adjustment and tax effects             -          -           -        1,076               -              -             1,076
                                                                                                                         -------
      Total comprehensive income                                                                                           2,474
                                                                                                                         -------
Cash dividends declared
 ($.20 per share)                         -          -        (316)           -               -              -              (316)
ESOP shares released and committed
 to be released (2,947 shares)            -          8           -            -               -             30                38
                                        ---     ------     -------       ------           -----          -----           -------
Balance at September 30, 2001            16      4,549      22,013          724               -           (390)           26,912
                                                                                                                         -------
Comprehensive income:
  Net income                              -          -         979            -               -              -               979
  Change in net unrealized gain
   (loss) on securities available
   for sale, after reclassification
   adjustment and tax effects             -          -           -          715               -              -               715
                                                                                                                         -------
      Total comprehensive income                                                                                           1,694
                                                                                                                         -------
Cash dividends declared
 ($.20 per share)                         -          -        (316)           -               -              -              (316)
ESOP shares released and committed
 to be released (2,947 shares)            -         31           -            -               -             30                61
Purchase of RRP shares
 (22,139 shares)                          -          -           -            -            (431)             -              (431)
Amortization of RRP stock
 (3,980 shares)                           -          -           -            -              66              -                66
Issuance of common stock under
 stock option plan, net of
 tax benefits                             -          3           -            -               -              -                 3
                                        ---     ------     -------       ------           -----          -----           -------

Balance at September 30, 2002            16      4,583      22,676        1,439            (365)          (360)           27,989
                                                                                                                         -------

                                 (continued)

See accompanying notes to consolidated financial statements.


<PAGE>  F-5


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY
                    CONSOLIDATED STATEMENTS OF CHANGES IN
                      STOCKHOLDERS' EQUITY (Concluded)
               Years Ended September 30, 2003, 2002, and 2001
                           (Dollars in thousands)

<CAPTION>

                                                                       Accumulated
                                               Additional                 Other         Unearned        Unearned          Total
                                       Common   Paid-in    Retained   Comprehensive   Compensation-   Compensation-   Stockholders'
                                       Stock    Capital    Earnings   Income (Loss)        RRP            ESOP            Equity
                                       ------  ----------  --------   -------------   -------------   -------------   -------------


                                     <c>     <c>        <c>           <c>              <c>            <c>             <c>
Balance forward at September 30, 2002    16      4,583      22,676        1,439            (365)          (360)           27,989
                                                                                                                         -------

Comprehensive income:
  Net income                                                   966                                                           966
  Change in net unrealized gain
   (loss) on securities available
   for sale, after reclassification
   adjustment and tax effects                                              (149)                                            (149)
                                                                                                                         -------
      Total comprehensive income                                                                                             817
                                                                                                                         -------
Cash dividends declared
 ($.20 per share)                                             (317)                                                         (317)
ESOP shares released and committed
 to be released (2,947 shares)                      48                                                      29                77
Amortization of RRP stock
 (3,500 shares)                                                                              77                               77
Issuance of common stock under
 stock option plan, net of
 tax benefits                                       75                                                                        75
                                        ---     ------     -------       ------           -----          -----           -------

Balance at September 30, 2003           $16     $4,706     $23,325       $1,290           $(288)         $(331)          $28,718
                                        ===     ======     =======       ======           =====          =====           =======
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>  F-6


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                 Years Ended September 30,
                                                            ----------------------------------
                                                              2003         2002         2001
                                                              ----         ----         ----


                                                         <c>          <c>          <c>
Cash flows from operating activities:
  Net income                                                $    966     $    979     $  1,398
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Provision for loan losses                                      -            8           48
    Net amortization (accretion) of securities                   333           95          (32)
    Amortization of net deferred loan costs and premiums
     (discounts)                                                  59          (25)         (20)
    Depreciation and amortization expense                        635          509          401
    Gain on the sales of mortgages                               (33)           -            -
    (Gain) loss on sales and calls of securities, net           (121)         466         (710)
    Decrease (increase) in accrued interest receivable           162          (26)           2
    Deferred income tax provision (benefit)                       20         (116)         (25)
    ESOP shares released and committed to be released             77           61           38
    Amortization of RRP stock                                     77           66            -
    Increase in bank-owned life insurance                       (226)        (181)        (174)
    Other, net                                                    39         (475)         329
                                                            --------     --------     --------
      Net cash provided by operating activities                1,988        1,361        1,255
                                                            --------     --------     --------

Cash flows from investing activities:
  Activity in available-for-sale securities:
    Sales and calls                                           22,875        5,402       19,209
    Maturities                                                 4,955        5,632       10,310
    Purchases                                                (55,022)     (27,585)     (26,499)
    Principal payments                                        14,788        6,892        3,205
  Purchase of Federal Home Loan Bank stock                         -         (150)        (197)
  Loan (originations) principal payments,net                 (12,801)       2,094      (11,942)
  Proceeds from loan sales                                     4,098            -            -
  Loans purchased                                                  -            -       (9,484)
  Purchase of banking premises and equipment, net             (1,819)      (3,174)      (1,068)
  Purchase of bank-owned life insurance                          (17)         (17)      (1,000)
                                                            --------     --------     --------
      Net cash used by investing activities                  (22,943)     (10,906)     (17,466)
                                                            --------     --------     --------
</TABLE>

                                 (continued)

See accompanying notes to consolidated financial statements.


<PAGE>  F-7


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

              CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)

                           (Dollars in thousands)

<TABLE>
<CAPTION>

                                                                 Years Ended September 30,
                                                            ----------------------------------
                                                              2003         2002         2001
                                                              ----         ----         ----


                                                         <c>          <c>          <c>
Cash flows from financing activities:
  Net increase in deposits                                    13,835       16,965       21,693
  Proceeds from Federal Home Loan Bank advances                2,500            -            -
  Repayment of Federal Home Loan Bank advances                (2,500)      (2,500)      (4,500)
  Net increase (decrease) in mortgagors' escrow accounts          10          (31)         (18)
  Purchase of RRP shares, net                                      -         (431)           -
  Issuance of common stock under stock option plan,
   net of tax benefits                                            75            3            -
  Dividends paid                                                (317)        (316)        (316)
                                                            --------     --------     --------
      Net cash provided by financing activities               13,603       13,690       16,859
                                                            --------     --------     --------

Net change in cash and cash equivalents                       (7,352)       4,145          648

Cash and cash equivalents at beginning of year                19,253       15,108       14,460
                                                            --------     --------     --------

Cash and cash equivalents at end of year                    $ 11,901     $ 19,253     $ 15,108
                                                            ========     ========     ========

Supplemental cash flow information:
  Interest paid on deposits                                 $  3,293     $  4,555     $  5,876
  Interest paid on Federal Home Loan Bank advances               619          791        1,072
  Income taxes paid                                              494          556          514
  Due from broker                                                  -            -        1,032
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>  F-8


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                Years Ended September 30, 2003, 2002 and 2001
                (Dollars in thousands, except per share data)

1.    REORGANIZATION AND STOCK OFFERING

Westborough Savings Bank (the "Bank") was founded in 1869 as a Massachusetts
chartered mutual savings bank.  On February 15, 2000, the Bank reorganized
into a two-tiered mutual holding company structure pursuant to the Bank's
Plan of Reorganization from a Mutual Savings Bank to a Mutual Holding
Company and Stock Issuance Plan (the "Reorganization"). In connection with
the Reorganization, (i) the Bank formed Westborough Bancorp, MHC (the
"MHC"), a Massachusetts chartered mutual holding company which is the
majority owner of the Westborough Financial Services, Inc. (the "Company"),
(ii) the Bank converted from mutual to stock form, changing its name from
"Westborough Savings Bank" to "The Westborough Bank," and issued 100% of its
capital stock to the Company; and (iii) the Company issued shares of its
common stock, $0.01 par value per share (the "Common Stock") to the public
at a price of $10.00 per share (the "Stock Offering").  The Company issued
1,581,374 shares of the Common Stock in the Stock Offering, of which 35% of
these shares, or 553,481 shares, were sold to the public, including
depositors of the Bank and the Company's Employee Stock Ownership Plan, and
65% of these shares, or 1,027,893 shares, were issued to the MHC.  Effective
October 23, 2000, the MHC and the Company changed their classification from
bank holding companies to financial holding companies.  Additionally, during
2001 the Company established a Stock Option Plan and a Recognition and
Retention Plan.

As part of the Reorganization, the Bank has established a liquidation
account for the benefit of eligible and supplemental eligible account
holders.  The liquidation account will be reduced annually to the extent
that such account holders have reduced their qualifying deposits as of each
anniversary date.  Subsequent increases will not restore an account holder's
interest in the liquidation account.  In the event of a complete
liquidation, each eligible account holder will be entitled to receive
balances for accounts held by them.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Basis of consolidation and presentation

The consolidated financial statements include the accounts of Westborough
Financial Services, Inc. (the "Company") and its wholly-owned subsidiary,
The Westborough Bank (the "Bank").  The Bank's active wholly-owned
subsidiaries are The Hundredth Corporation, which was formed to own
foreclosed real estate, and the Eli Whitney Security Corporation, which is a
Massachusetts security corporation.  All significant intercompany balances
and transactions have been eliminated in consolidation.


<PAGE>  F-9


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Use of estimates

In preparing consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, management is
required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the consolidated balance sheet
and reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.  The determination of the
allowance for losses on loans is a material estimate that is particularly
susceptible to significant change in the near term.

      Business

The Bank provides a variety of financial services to individuals and small
businesses through its offices in Westborough, Northborough and Shrewsbury,
Massachusetts.  Its primary deposit products are checking, savings and term
certificate accounts and its primary lending product is residential mortgage
loans.

      Reclassifications

Certain amounts in the 2002 and 2001 consolidated financial statements have
been reclassified to conform to the 2003 presentation.

      Cash equivalents

Cash equivalents include amounts due from banks, federal funds sold on a
daily basis and short-term investments which mature within ninety days.

      Securities available for sale

Securities classified as "available for sale" are reflected on the
consolidated balance sheet at fair value, with unrealized gains and losses
excluded from earnings and reported in accumulated other comprehensive
income.

Purchase premiums and discounts are recognized in interest income using the
interest method over the terms of the securities. Declines in the fair value
of securities that are deemed to be other than temporary are reflected in
earnings as realized losses.  In estimating other-than-temporary impairment
losses, management considers independent price quotations and the financial
condition of the issuer.  Gains and losses on disposition of securities are
recorded on the trade date and computed by the specific identification
method.


<PAGE>  F-10


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Loans

The Bank grants mortgage, commercial and consumer loans to its customers.  A
substantial portion of the loan portfolio consists of mortgage loans in
Westborough and the surrounding communities.  The ability of the Bank's
debtors to honor their contracts is dependent upon the local economy and the
local real estate market.

Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-off generally are reported at their
outstanding unpaid principal balances adjusted for the allowance for loan
losses, premiums and discounts on purchased loans and net deferred costs on
originated loans.  Interest income is accrued on the unpaid principal
balance.  Premiums and discounts and net loan origination costs are deferred
and recognized as an adjustment of the related loan yield using the interest
method.

The accrual of interest on mortgage and commercial loans is discontinued
when in the judgment of management the collection of principal or interest
is doubtful.

All interest accrued but not collected for loans that are placed on non-
accrual or charged off is reversed against interest income.  The interest on
these loans is accounted for on the cash-basis until qualifying for return
to accrual.  Loans are returned to accrual status when all the principal and
interest amounts contractually due are brought current and future payments
are reasonably assured.

A loan is considered impaired when, based on current information and events,
it is probable that the Bank will be unable to collect the scheduled
payments of principal or interest when due according to the contractual
terms of the loan agreement.  Impaired loans are generally maintained on a
non-accrual basis.  Impairment is measured on a loan by loan basis by the
fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated
for impairment.  Accordingly, the Bank does not separately identify
individual consumer loans for impairment disclosures.

      Allowance for loan losses

The allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings.  Loan
losses are charged against the allowance when management believes the
uncollectibility of a loan balance is confirmed.  Subsequent recoveries, if
any, are credited to the allowance.


<PAGE>  F-11


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Allowance for loan losses (concluded)

The allowance for loan losses is evaluated on a regular basis by management
and is based upon management's periodic review of the collectibility of the
loans in light of historical experience, the nature and volume of the loan
portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral and prevailing economic
conditions.  This evaluation is inherently subjective as it requires
estimates that are susceptible to significant revision as more information
becomes available.

The allowance consists of allocated, general and unallocated components.
The allocated component relates to loans that are classified as either
doubtful, substandard or special mention.  For such loans that are also
classified as impaired, an allowance is established when the collateral
value of the impaired loan is lower than the carrying value of that loan.
The general component covers non-classified loans and is based on historical
loss experience adjusted for qualitative factors.  An unallocated component
is maintained to cover uncertainties that could affect management's estimate
of probable losses. The unallocated component of the allowance reflects the
margin of imprecision inherent in the underlying assumptions used in the
methodologies for estimating allocated and general losses in the portfolio.

      Banking premises and equipment

Land is carried at cost.  Buildings, leasehold improvements and equipment
are stated at cost, less accumulated depreciation and amortization, computed
on the straight-line method over the estimated useful lives of the assets.

      Retirement plan

The Bank accounts for pension benefits on the net periodic pension cost
method for financial reporting purposes.  This method recognizes the
compensation cost of an employee's pension benefit over the employee's
approximate service period.  Pension costs are funded in the year of accrual
using the aggregate cost method.


<PAGE>  F-12


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Stock compensation plans

Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," encourages all entities to adopt a fair value
based method of accounting for employee stock compensation plans, whereby
compensation cost is measured at the grant date based on the value of the
award and is recognized over the service period, which is usually the
vesting period.  However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," whereby compensation cost is the
excess, if any, of the quoted market price of the stock at the grant date
(or other measurement date) over the amount an employee must pay to acquire
the stock.  Stock options issued under the Company's stock option plan have
no intrinsic value at the grant date, and under Opinion No. 25 no
compensation cost is recognized for them.  The Company has elected to
continue with the accounting methodology in Opinion No. 25 and, as a result,
has provided pro forma disclosures of net income and earnings per share and
other disclosures, as if the fair value based method of accounting had been
applied.  (See Note 11).

      Employee stock ownership plan ("ESOP")

Compensation expense is recognized as ESOP shares are committed to be
released.  Allocated and committed to be released ESOP shares are considered
outstanding for earnings per share calculations based on debt service
payments.  Other ESOP shares are excluded from earnings per share
calculations.  The value of unearned shares to be allocated to ESOP
participants for future services not yet performed is reflected as a
reduction of stockholders' equity.

      Advertising costs

All advertising costs are expensed as incurred.

      Income taxes

Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax assets
or liabilities are expected to be realized or settled.  As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are adjusted
accordingly through the provision for income taxes.  The Bank's base amount
of its federal income tax reserve for loan losses that arose before 1987 is
a permanent difference for which there is no recognition of a deferred tax
liability.  However, the allowance for loan losses maintained for financial
reporting purposes is treated as a temporary difference with allowable
recognition of a related deferred tax asset, if it is deemed realizable.


<PAGE>  F-13


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Earnings per common share

Basic earnings per share represents income available to common stockholders
divided by the weighted-average number of common shares outstanding during
the period.  Diluted earnings per share reflects additional common shares
that would have been outstanding if dilutive potential common shares had
been issued, as well as any adjustment to income that would result from the
assumed issuance.  Potential common shares that may be issued by the Company
relate solely to outstanding stock options and are determined using the
treasury stock method.  At September 30, 2003 and 2002, there were no anti-
dilutive potential common shares.  Anti-dilutive potential common shares
would be excluded from dilutive earnings per share calculations.

Earnings per common share for the year ended September 30, 2003, 2002 and
2001 has been computed based on the following:

<TABLE>
<CAPTION>

                                                           2003         2002         2001
                                                           ----         ----         ----


                                                     <c>          <c>          <c>
Average number of common shares outstanding             1,530,003    1,540,103    1,540,518
Effect of dilutive options                                 18,846       18,519       10,070
                                                        ---------    ---------    ---------
Average number of common shares outstanding
 used to calculate diluted earnings per common share    1,548,849    1,558,622    1,550,588
                                                        =========    =========    =========
</TABLE>

      Comprehensive income

Accounting principles generally require that recognized revenue, expenses,
gains and losses be included in net income.  Although certain changes in
assets and liabilities, such as unrealized gains and losses on securities
available for sale are reported in accumulated comprehensive income/loss in
the consolidated balance sheet, such items, along with net income, are
components of comprehensive income.


<PAGE>  F-14


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)

      Comprehensive income (concluded)

The components of the change in accumulated other comprehensive income and
related tax effects are as follows:

<TABLE>
<CAPTION>

                                                   Years Ended September 30,
                                                  ---------------------------
                                                   2003      2002       2001
                                                   ----      ----       ----


                                               <c>       <c>        <c>
Change in net unrealized holding (gains)
 losses on securities available for sale          $(119)    $  628     $2,407
Reclassification adjustment for (gains) losses
 realized in income                                (121)       466       (710)
                                                  -----     ------     ------
                                                   (240)     1,094      1,697

Tax effect                                           91       (379)      (621)
                                                  -----     ------     ------

Net-of-tax amount                                 $(149)    $  715     $1,076
                                                  =====     ======     ======
</TABLE>


      Change in accounting principle

Adoption of SFAS No. 133, as amended required that changes in derivative
instruments such as the fair value of covered call options be recognized in
net income and resulted in pre-tax earnings in the amount of $223 during the
year ended September 30, 2001.

3.    RESTRICTIONS ON CASH AND DUE FROM BANKS

The Bank is required to maintain average balances on hand or with the
Federal Reserve Bank.  At September 30, 2003 and 2002, these reserve
balances amounted to $998 and $844, respectively.


<PAGE>  F-15


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

4.    SECURITIES AVAILABLE FOR SALE

The amortized cost and estimated fair value of securities available for
sale, at September 30, 2003 and 2002, with gross unrealized gains and
losses, is as follows:

<TABLE>
<CAPTION>

                                                  September 30, 2003
                                   ------------------------------------------------
                                                  Gross         Gross
                                   Amortized    Unrealized    Unrealized     Fair
                                      Cost        Gains         Losses       Value
                                   ---------    ----------    ----------     -----


                                 <c>           <c>           <c>         <c>
Federal agency obligations          $28,806       $  527        $ (38)      $29,295
Banking and finance obligations      18,329          753          (12)       19,070
Mortgage-backed securities           29,052          428          (63)       29,417
Other bonds and obligations           7,030          328            -         7,358
                                    -------       ------        -----       -------
      Total debt securities          83,217        2,036         (113)       85,140
Marketable equity securities          2,403          132          (85)        2,450
                                    -------       ------        -----       -------
      Total securities
       available for sale           $85,620       $2,168        $(198)      $87,590
                                    =======       ======        =====       =======

<CAPTION>

                                                  September 30, 2002
                                   ------------------------------------------------
                                                  Gross         Gross
                                   Amortized    Unrealized    Unrealized     Fair
                                      Cost        Gains         Losses       Value
                                   ---------    ----------    ----------     -----


                                 <c>           <c>           <c>         <c>
Federal agency obligations          $22,830       $  651        $ (30)      $23,451
Banking and finance obligations      15,898        1,092            -        16,990
Mortgage-backed securities           17,442          709            -        18,151
Other bonds and obligations          11,720          482          (28)       12,174
                                    -------       ------        -----       -------
      Total debt securities          67,890        2,934          (58)       70,766
Marketable equity securities          5,538          132         (798)        4,872
                                    -------       ------        -----       -------

      Total securities
       available for sale           $73,428       $3,066        $(856)      $75,638
                                    =======       ======        =====       =======
</TABLE>


<PAGE>  F-16


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      SECURITIES AVAILABLE FOR SALE (concluded)

Proceeds from sales and calls of securities amounted to $22,875, $5,402 and
$19,209 for the years ended September 30, 2003, 2002 and 2001, respectively.
Gross realized gains amounted to $609, $324 and $1,296, respectively.  Gross
realized losses amounted to $488, $790 and $586, respectively.

The amortized cost and estimated fair value of debt securities by
contractual maturity are shown below.  Expected maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>

                                         September 30, 2003      September 30, 2002
                                        --------------------    --------------------
                                        Amortized     Fair      Amortized     Fair
                                           Cost       Value        Cost       Value
                                        ---------     -----     ---------     -----


                                      <c>         <c>         <c>         <c>
Within 1 year                            $ 6,778     $ 6,972     $ 4,962     $ 5,068
Over 1 year through 5 years               44,462      45,688      39,760      41,536
Over 5 years through 10 years              2,925       3,063       5,726       6,011
                                         -------     -------     -------     -------
                                          54,165      55,723      50,448      52,615
Mortgage and asset-backed securities      29,052      29,417      17,442      18,151
                                         -------     -------     -------     -------

                                         $83,217     $85,140     $67,890     $70,766
                                         =======     =======     =======     =======
</TABLE>

At September 30, 2003 and 2002, a federal agency obligation with a carrying
value of $1,018 and $1,030, respectively, and fair value of $1,000, for both
years, was pledged to secure public deposits.


<PAGE>  F-17


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

5.    LOANS

A summary of the balances of loans follows:

<TABLE>
<CAPTION>

                                            September 30,
                                        ---------------------
                                          2003         2002
                                          ----         ----


                                     <c>          <c>
Mortgage loans:
  Fixed rate                            $ 65,170     $ 47,599
  Variable rate                           48,287       54,096
  Commercial                              17,290       20,092
  Home equity lines-of-credit             10,303        8,792
                                        --------     --------

      Total mortgage loans               141,050      130,579
                                        --------     --------

Other loans:
  Personal loans                             564          983
  Deposit secured loans                      358          509
  Home improvement loans                      68          171
  Commercial lines-of-credit               1,824        2,549
  Commercial installment                   1,461        1,182
                                        --------     --------
      Total other loans                    4,275        5,394
                                        --------     --------

      Total loans                        145,325      135,973

Due to borrowers on incomplete loans      (3,550)      (2,866)
Net deferred loan costs                      223          161
Premium on purchased loans, net              470          538
Allowance for loan losses                   (911)        (926)
                                        --------     --------

      Loans, net                        $141,557     $132,880
                                        ========     ========
</TABLE>

An analysis of the allowance for loan losses follows:

<TABLE>
<CAPTION>

                                Years Ended September 30,
                                -------------------------
                                2003      2002       2001
                                ----      ----       ----


                             <c>       <c>        <c>
Balance at beginning of year    $926      $916       $874
Provision for loan losses          -         8         48
Charge-offs                      (19)      (11)       (10)
Recoveries                         4        13          4
                                ----      ----       ----

Balance at end of year          $911      $926       $916
                                ====      ====       ====
</TABLE>


<PAGE>  F-18


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      LOANS (concluded)

The Bank has sold mortgage loans in the secondary mortgage market and has
retained the servicing responsibility and receives fees for the services
provided.  Total loans serviced for others at September 30, 2003 and 2002
amounted to $4,113 and $502, respectively.  Mortgage loans serviced for
others are not included in the accompanying consolidated balance sheets.

The following is a summary of information pertaining to impaired loans:

<TABLE>
<CAPTION>

                                                 September 30,
                                                     2003
                                                 -------------


                                                   <c>
Impaired loans without a valuation allowance          $119

Impaired loans with a valuation allowance              695
                                                      ----

Total impaired loans                                  $814
                                                      ====

Valuation allowance related to impaired loans         $ 99
                                                      ====

<CAPTION>

                                                  Year Ended
                                                 September 30,
                                                     2003
                                                 -------------


                                                   <c>
Average investment in impaired loans                  $407
                                                      ====

Interest income recognized on a cash basis
 on impaired loans                                    $ 15
                                                      ====
</TABLE>

There were no impaired loans at or during the years ended September 30, 2002
and 2001.

At September 30, 2003 and 2002 there were $634 and $140, respectively, in
non-accrual loans.  There were no non-accrual loans at September 30, 2001.


<PAGE>  F-19


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

6.    BANKING PREMISES AND EQUIPMENT

A summary of the cost and accumulated depreciation and amortization of
banking premises and equipment and their estimated useful lives follows:

<TABLE>
<CAPTION>

                                                     September 30,
                                                  -------------------       Estimated
                                                    2003        2002      Useful Lives
                                                    ----        ----      ------------


                                               <c>         <c>         <c>
Banking premises:
  Land                                            $ 1,200     $ 1,179
  Buildings                                         5,097       3,462     5 -40 years
  Leasehold improvements                              256         256     3 - 5 years
Equipment                                           3,912       3,472     3 - 7 years
Construction in progress                                -         370
                                                  -------     -------
                                                   10,465       8,739
Less accumulated depreciation and amortization     (3,757)     (3,215)
                                                  -------     -------

                                                  $ 6,708     $ 5,524
                                                  =======     =======
</TABLE>

Depreciation and amortization expense for the years ended September 30,
2003, 2002 and 2001 amounted to $635, $509 and $401, respectively.

7.    DEPOSITS

A summary of deposit balances, by type, is as follows:

<TABLE>
<CAPTION>

                                              September 30,
                                          --------------------
                                            2003        2002
                                            ----        ----


                                       <c>         <c>
Non-interest bearing accounts             $ 19,740    $ 20,393
NOW accounts                                19,093      17,033
Regular and other savings accounts         117,628      96,306
Money market deposit accounts                5,247       5,259
                                          --------    --------
      Total non-certificate accounts       161,708     138,991
                                          --------    --------

Term certificates of $100,000 and over      11,848      14,723
Term certificates less than $100,000        42,342      48,349
                                          --------    --------
      Total certificate accounts            54,190      63,072
                                          --------    --------

      Total deposits                      $215,898    $202,063
                                          ========    ========
</TABLE>


<PAGE>  F-20


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      DEPOSITS (concluded)

A summary of certificates, by maturity, is as follows:

<TABLE>
<CAPTION>

                               September 30, 2003    September 30, 2002
                               ------------------    ------------------
                                         Weighted              Weighted
                                          Average               Average
                               Amount      Rate      Amount      Rate
                               ------    --------    ------    --------


                            <c>         <c>       <c>         <c>
Within 1 year                  $42,544     2.15%     $53,392     3.27%
Over 1 year through 3 years     11,646     2.82        9,680     3.89
                               -------               -------
                               $54,190     2.29%     $63,072     3.36%
                               =======               =======
</TABLE>

8.    FEDERAL HOME LOAN BANK ADVANCES

Federal Home Loan Bank advances are as follows:

<TABLE>
<CAPTION>

                   Weighted
Maturing During    Average       September 30,
the Year Ending    Interest    -----------------
 September 30,       Rate       2003        2002
---------------    --------     ----        ----

     
           <c>         <c>        <c>
     2003            6.88%     $    -     $2,500
     2004            6.92       2,500      2,500
     2005          4.64/6.95    5,000      2,500
     2009*           4.88       2,000      2,000
                               ------     ------

                               $9,500     $9,500
                               ======     ======
<FN>
*     Represents an advance callable on November 22, 2003.
</FN>
</TABLE>

The Bank also has a $2,999 available line of credit with the Federal Home
Loan Bank of Boston ("FHLB") at an interest rate the adjusts daily.
Borrowings under the line are limited to 2% of the Bank's total assets.  All
borrowings from the FHLB are secured by a blanket lien on qualified
collateral, defined principally as 75% of the carrying value of first
mortgage loans on owner-occupied residential property.  As of September 30,
2003 and 2002, there were no advances outstanding on the line of credit.


<PAGE>  F-21


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

9.    INCOME TAXES

Allocation of federal and state income taxes between current and deferred
portions is as follows:

<TABLE>
<CAPTION>

                                            Years Ended September 30,
                                            -------------------------
                                             2003      2002     2001
                                             ----      ----     ----


                                          <c>      <c>       <c>
Current income tax provision:
  Federal                                    $483     $ 341     $469
  State                                        28        28       32
                                             ----     -----     ----
                                              511       369      501
                                             ----     -----     ----

Deferred income tax provision (benefit):
  Federal                                      43       (88)     (11)
  State                                       (23)      (28)     (14)
                                             ----     -----     ----
                                               20      (116)     (25)
                                             ----     -----     ----

      Total provision for income taxes       $531     $ 253     $476
                                             ====     =====     ====
</TABLE>

The reasons for the differences between the statutory corporate federal
income tax rate and the effective tax rates are summarized as follows:

<TABLE>
<CAPTION>

                                             Years Ended September 30,
                                             -------------------------
                                             2003      2002      2001
                                             ----      ----      ----


                                          <c>       <c>       <c>
Statutory rate                               34.0%     34.0%     34.0%
Increase (decrease) resulting from:
  State taxes, net of federal tax benefit     0.2         -       0.7
  Dividends received deduction               (0.6)     (5.6)     (4.3)
  Officers' life insurance                   (3.3)     (4.2)     (2.4)
  Municipal income                           (1.6)     (1.8)     (0.6)
  Prior year amended returns                  6.7         -         -
  Other, net                                    -      (1.9)      0.2
                                             ----      ----      ----

      Effective tax rates                    35.4%     20.5%     27.6%
                                             ====      ====      ====
</TABLE>


<PAGE>  F-22


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      INCOME TAXES (continued)

The components of the net deferred tax asset are as follows:

<TABLE>
<CAPTION>

                            September 30,
                           ---------------
                            2003      2002
                            ----      ----


                        <c>       <c>
Deferred tax asset:
  Federal                  $ 725     $ 675
  State                      250       233
                           -----     -----
                             975       908
                           -----     -----

Deferred tax liability:
  Federal                   (844)     (835)
  State                      (38)      (51)
                           -----     -----
                            (882)     (886)
                           -----     -----

Net deferred tax asset     $  93     $  22
                           =====     =====
</TABLE>

The tax effects of each type of income and expense item that give rise to
deferred taxes are as follows:

<TABLE>
<CAPTION>

                                                              September 30,
                                                             ---------------
                                                              2003      2002
                                                              ----      ----


                                                          <c>       <c>
Employee benefit plans                                       $ 486     $ 453
Allowance for loan losses                                      449       454
Net unrealized gain/loss on securities available for sale     (680)     (771)
Depreciation and amortization                                  (87)      (46)
Net deferred loan costs                                        (90)      (66)
Other, net                                                      15        (2)
                                                             -----     -----

Net deferred tax asset                                       $  93     $  22
                                                             =====     =====
</TABLE>


<PAGE>  F-23


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      INCOME TAXES (concluded)

A summary of the change in the net deferred tax asset is as follows:

<TABLE>
<CAPTION>

                                                     Years Ended September 30,
                                                     -------------------------
                                                     2003      2002      2001
                                                     ----      ----      ----


                                                  <c>      <c>       <c>
Balance at beginning of year                         $ 22     $ 285     $ 881
Deferred tax provision (benefit)                      (20)      116        25
Deferred tax effect on net unrealized (gain) loss
 on securities available for sale                      91      (379)     (621)
                                                     ----     -----     -----

Balance at end of year                               $ 93     $  22     $ 285
                                                     ====     =====     =====
</TABLE>

The federal income tax reserve for loan losses at the Bank's base year
amounted to $2,423.  If any portion of the reserve is used for purposes
other than to absorb loan losses, approximately 150% of the amount actually
used (limited to the amount of the reserve) would be subject to taxation in
the fiscal year in which used.  As the Bank intends to use the reserve to
only absorb loan losses, a deferred income tax liability of $994 has not
been provided.

10.   STOCKHOLDERS' EQUITY

      Minimum Regulatory Capital Requirements

The Company (on a consolidated basis) 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 and the
Bank's consolidated 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.  The capital amounts
and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.  Prompt
corrective action provisions are not applicable to bank holding companies.


<PAGE>  F-24


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      STOCKHOLDERS' EQUITY (continued)

      Minimum Regulatory Capital Requirements (continued)

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 following table) of total and Tier 1 capital (as defined) to
risk-weighted assets (as defined) and of Tier 1 capital (as defined) to
average assets (as defined).  Management believes, as of September 30, 2003
and 2002, that the Company and the Bank meet all capital adequacy
requirements to which they are subject.

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 following table.  There are no
conditions or events since that notification that management believes have
changed the Bank's category.


<PAGE>  F-25


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      STOCKHOLDERS' EQUITY (continued)

      Minimum Regulatory Capital Requirements (concluded)

The Company's and the Bank's actual and minimum required capital amounts and
ratios as of September 30, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>

                                                                               Minimum
                                                                              To Be Well
                                                          Minimum         Capitalized Under
                                                        For Capital       Prompt Corrective
                                      Actual         Adequacy Purposes    Action Provisions
                                -----------------    -----------------    -----------------
                                 Amount     Ratio     Amount     Ratio     Amount     Ratio
                                 ------     -----     ------     -----     ------     -----


                             <c>        <c>       <c>         <c>      <c>        <c>
September 30, 2003:
  Total capital (to risk
   weighted assets)
    Consolidated                $28,291    20.68%    $10,944     8.00%      N/A       N/A
    Bank                         27,286    19.95      10,942     8.00     $13,677    10.00%

  Tier 1 capital (to risk
   weighted assets)
    Consolidated                 27,380    20.02       5,472     4.00       N/A       N/A
    Bank                         26,374    19.28       5,471     4.00       8,206     6.00

  Tier 1 capital (to average
   assets)
    Consolidated                 27,380    10.91      10,041     4.00       N/A       N/A
    Bank                         26,374    10.59       7,472     3.00      12,453     5.00

September 30, 2002:
  Total capital (to risk
   weighted assets)
    Consolidated                $26,810    19.27%    $11,128     8.00%      N/A       N/A
    Bank                         25,392    18.35      11,069     8.00     $13,837    10.00%

  Tier 1 capital (to risk
   weighted assets)
    Consolidated                 25,884    18.61       5,564     4.00       N/A       N/A
    Bank                         24,466    17.68       5,535     4.00       8,302     6.00

  Tier 1 capital (to average
   assets)
    Consolidated                 25,884    11.11       9,319     4.00       N/A       N/A
    Bank                         24,466    10.47       7,013     3.00      11,687     5.00
</TABLE>


<PAGE>  F-26


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      STOCKHOLDERS' EQUITY (concluded)

      Restrictions on Dividends, Loans and Advances

Federal and state banking regulations place certain restrictions on
dividends paid and loans or advances made by the Bank to the Company.  The
total amount of dividends which may be paid at any date is generally limited
to the retained earnings of the Bank, and loans or advances are limited to
10% of the Bank's capital stock and surplus, as defined, (which for this
purpose represents total capital as calculated under the risk-based capital
guidelines) on a secured basis.

At September 30, 2003 and 2002, the Bank's retained earnings available for
the payment of dividends was $16,344 and $14,323, respectively.
Accordingly, $10,942 and $11,069 of the Company's equity in the net assets
of the Bank was restricted at September 30, 2003 and 2002, respectively.
Funds available for loans or advances by the Bank to the Company amounted to
$1,634 and $1,432 at September 30, 2003 and 2002, respectively.

The Company and the Bank may not declare or pay dividends on, and the
Company may not purchase any of its shares of, its common stock if the
effect thereof would cause stockholders' equity to be reduced below
applicable regulatory capital maintenance requirements or if such
declaration, payment or repurchase would otherwise violate regulatory
requirements.


<PAGE>  F-27


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

11.   EMPLOYEE BENEFIT PLANS

      Pension plan

The Bank provides pension benefits for eligible employees through a defined
benefit pension plan.  Substantially all employees participate in the
retirement plan on a non-contributing basis, and are fully vested after
three years of service.  Information pertaining to the activity in the plan
is as follows:

<TABLE>
<CAPTION>

                                                    Plan Years Ended October 31,
                                                    ----------------------------
                                                           2003        2002
                                                           ----        ----
                                                       (Projected)


                                                      <c>           <c>
Change in plan assets:
  Fair value of plan assets at beginning of year         $2,305        $2,458
  Actual gain (loss) on plan assets                         357          (210)
  Employer contribution                                     182           108
  Benefits paid                                             (23)          (51)
                                                         ------        ------
  Fair value of plan assets at end of year                2,821         2,305
                                                         ------        ------

Change in benefit obligation:
  Benefit obligation at beginning of year                 2,882         2,546
  Service cost                                              203           182
  Interest cost                                             186           169
  Actuarial gain                                            (89)           36
  Benefits paid                                             (23)          (51)
                                                         ------        ------
  Benefit obligation at end of year                       3,159         2,882
                                                         ------        ------

Funded status                                              (338)         (577)
Unrecognized net actuarial (gain) loss                     (139)          125
Transition liability                                         24            26
                                                         ------        ------

Accrued pension cost                                     $ (453)       $ (426)
                                                         ======        ======
</TABLE>


<PAGE>  F-28


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      EMPLOYEE BENEFIT PLANS (continued)

      Pension plan (concluded)

The components of net periodic pension cost are as follows:

<TABLE>
<CAPTION>

                                   Plan Years Ended October 31,
                                  ------------------------------
                                      2003       2002      2001
                                      ----       ----      ----
                                  (Projected)


                                  <c>         <c>       <c>
Service cost                         $ 203       $ 182     $ 168
Interest cost                          186         169       170
Expected return on plan assets        (183)       (197)     (218)
Transition obligation                    2           2         3
Recognized net actuarial loss            1         (25)      (52)
                                     -----       -----     -----

                                     $ 209       $ 131     $  71
                                     =====       =====     =====
</TABLE>

Total pension expense for the years ended September 30, 2003, 2002 and 2001
amounted to $215, $132 and $71, respectively.

For the plan years ended October 31, 2003 and 2002, actuarial assumptions
used in accounting were as follows:

<TABLE>
<CAPTION>

                                                    2003     2002
                                                    ----     ----
                                                     (Projected)


                                                 <c>      <c>
Discount rate on benefit obligations                6.25%    6.75%
Expected long-term rate of return on plan assets    8.00     8.00
Annual salary increases                             4.50     5.00
</TABLE>

      Incentive compensation plan

Management and employees of the Bank participate in an annual incentive
compensation plan which is based on a percentage of the Bank's annual net
profits (as defined) and other factors and objectives set forth and
administered by the Bank's Executive Committee.  Incentive compensation
expense for the years ended September 30, 2002 and 2001 amounted to $64 and
$63, respectively.   There was no incentive compensation expense for the
year ended September 30, 2003.


<PAGE>  F-29


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      EMPLOYEE BENEFIT PLANS (continued)

      401(k) Plan

The Bank has a 401(k) Plan whereby each employee reaching the age of 21 and
having completed at least 1,000 hours of service in a twelve-month period,
beginning with date of employment, automatically becomes a participant in
the Plan.  Employees may contribute up to 75% of their compensation subject
to certain limits based on federal tax laws.  Beginning in January of 2003,
the Bank began matching 50% of the first 6% of an employee's compensation
contributed to the Plan.  Prior to this the Bank made matching contributions
equal to 25% of the first 4% of an employee's compensation contributed to
the Plan.  All participants are fully vested.  For the years ended September
30, 2003, 2002 and 2001, expense attributable to the Plan amounted to $36,
$16 and $17, respectively.

      Supplemental retirement plans

The Bank provides supplemental retirement benefits to certain executive
officers and Directors.  In connection with the supplemental retirement
plans, the Bank has purchased life insurance contracts and has entered into
split-dollar life insurance agreements with certain participants.  At
September 30, 2003 and 2002, the Bank has accrued $703 and $587,
respectively, relating to these plans.  For the years ended September 30,
2003, 2002 and 2001, expenses attributable to the plans amounted to $171,
$177, and $282, respectively.

      Deferred compensation plan

The Company has adopted an Officers' Deferred Compensation Plan whereby
qualified officers may elect to defer all or a portion of their salary.  The
Company pays monthly interest on amounts deferred at an interest rate that
is determined annually.

      Employees' stock ownership plan

The Company established an Employees Stock Ownership Plan (the "ESOP") for
the benefit of each eligible employee that has reached the age of 21 and has
completed at least 1,000 hours of service in the previous twelve-month
period. As part of the Reorganization, the Company provided a loan to the
ESOP which was used to purchase 8%, or 44,200 shares, of the shares sold to
the public in the Company's stock offering.  The loan bears interest equal
to 8% and provides for annual payments of principal and interest for 15
years.


<PAGE>  F-30


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      EMPLOYEE BENEFIT PLANS (continued)

      Employees' stock ownership plan (concluded)

At September 30, 2003, the remaining principal balance is payable as
follows:

<TABLE>
<CAPTION>

       Years Ending
      September 30,    Amount
      -------------    ------

       
              <c>
          2004          $ 20
          2005            22
          2006            24
          2007            26
          2008            28
       Thereafter        266
                        ----

                        $386
                        ====
</TABLE>

The Bank has committed to make contributions to the ESOP sufficient to
support the debt service of the loan.  The loan is secured by the shares
purchased by the ESOP which are held in a suspense account for allocation
among the members as the loans are paid. Total compensation expense
applicable to the ESOP amounted to $77, $61 and $38 for the years ended
September 30, 2003, 2002 and 2001, respectively.

Shares held by the ESOP include the following:

<TABLE>
<CAPTION>

                              September 30,
                            ----------------
                             2003      2002
                             ----      ----


                         <c>       <c>
Allocated                    8,841     5,894
Committed to be released     2,210     2,210
Unallocated                 33,149    36,096
                            ------    ------

                            44,200    44,200
                            ======    ======
</TABLE>

Cash dividends received on allocated shares are allocated to members and
cash dividends received on shares held in suspense are applied to repay the
outstanding debt of the ESOP.

The fair market value of unallocated shares at September 30, 2003 and 2002
was $994 and $805, respectively.


<PAGE>  F-31


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      EMPLOYEE BENEFIT PLANS (continued)

      Stock option plan

On January 25, 2001, the Company's stockholders approved the Westborough
Financial Services, Inc. 2001 Stock Option Plan (the "Stock Option Plan").
Under the Stock Option Plan, the Company may grant options to its directors,
officers and employees for up to 55,348 shares of common stock.  Both
incentive stock options and non-qualified stock options may be granted under
the Stock Option Plan.  The exercise price of each option equals the market
price of the Company's stock on the date of grant and an option's maximum
term is ten years.  Options generally vest over a five-year period.

The Company applies APB Opinion 25 and related Interpretations in accounting
for the Stock Option Plan.  Accordingly, no compensation cost has been
recognized.  Had compensation cost for the Company's Stock Option Plan been
determined based on the fair value at the grant dates for awards under the
plan consistent with the method prescribed by SFAS No. 123, the Company's
net income and earnings per share would have been adjusted to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>

                                             Years Ended September 30,
                                             -------------------------
                                                   2003      2002
                                                   ----      ----


                           <c>                 <c>       <c>
Net income                    As reported         $ 966     $ 979
                              Pro forma           $ 940     $ 957

Basic earnings per share      As reported         $0.63     $0.64
                              Pro forma           $0.61     $0.62

Diluted earnings per share    As reported         $0.62     $0.63
                              Pro forma           $0.61     $0.61
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model.  The weighted-average assumptions
used for grants during the year ended September 30, 2003 were dividend yield
of .86%, expected life of 5 years, expected volatility of 26.71% and a risk-
free interest rate of 3.05%.  The weighted-average assumptions used for
grants during the year ended September 30, 2001 were dividend yield of 1.9%,
expected life of 10 years, expected volatility of 10.6%, and a risk-free
interest rate of 5.2%.


<PAGE>  F-32


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      EMPLOYEE BENEFIT PLANS (continued)

      Stock option plan (concluded)

A summary of the status of the Company's stock option plan is presented
below:

<TABLE>
<CAPTION>

                                              2003                    2002
                                      --------------------    --------------------
                                                  Weighted                Weighted
                                                  Average                 Average
                                                  Exercise                Exercise
                                       Shares      Price       Shares      Price
                                       ------     --------     ------     --------


                                   <c>          <c>        <c>          <c>
Fixed Options:
  Outstanding at beginning of year     41,900      $10.31      42,100      $10.31
  Granted                               3,500       23.25           -           -
  Forfeited                            (2,100)      10.31           -
  Exercised                            (4,600)      10.31        (200)      10.31
                                      -------                 -------

  Outstanding at end of year           38,700      $11.48      41,900      $10.31
                                      =======                 =======

Options exercisable at year-end        11,140      $10.31       9,020      $10.31
Weighted-average fair value of
 options granted during the year      $  6.18                 $     -
</TABLE>

      Recognition and retention plan

On January 25, 2001, the Company's stockholders approved the Company's
adoption of the Westborough Financial Services, Inc. 2001 Recognition and
Retention Plan (the "RRP"), which allows the Company to grant restricted
stock awards ("Awards") to certain officers, employees and outside
directors.  The RRP is authorized to acquire no more than 22,139 shares of
Common stock in the open market.  Shares generally vest at a rate of 20% per
year with the first vesting period ending April 30, 2002.  During the year
ended September 30, 2003, awards were granted with respect to 300 shares.
There were no Awards granted during the year ended September 30, 2002.
During the year ended September 30, 2001, Awards were granted with respect
to 18,100 shares.  The aggregate purchase price of all shares acquired by
the RRP has been reflected as a reduction of stockholders' equity and
amortized to compensation expense as the Company's employees and directors
become vested in their stock awards.  Compensation expense relating to the
RRP amounted to $77, $66 and $44 for the years ended September 30, 2003,
2002 and 2001, respectively.  Compensation expense is based on the fair
value of common stock on the purchase date.


<PAGE>  F-33


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      EMPLOYEE BENEFIT PLANS (concluded)

      Benefit restoration plan

In February 2000, the Company adopted a Benefit Restoration Plan ("BRP") in
order to provide qualified officers with the benefits that would be due them
under the defined benefit pension plan, the 401(k) Plan and the ESOP if such
benefits were not limited under the Internal Revenue Code.  Total expense
related to the BRP amounted to $2 and $1 for the years ended September 30,
2003 and 2002, respectively.  There were no expenses related to the plan
during the year ended September 30, 2001.

12.   COMMITMENTS AND CONTINGENCIES

In the normal course of business, there are outstanding commitments and
contingencies which are not reflected in the accompanying consolidated
balance sheets.

      Loan commitments

The Bank is a 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 extend credit, which
involve elements of credit and interest rate risk in excess of the amount
recognized in the accompanying consolidated balance sheets.  The contract
amount of these instruments reflects the extent of involvement the Bank has
in these particular classes of financial instruments.

The Bank's exposure to credit loss is represented by the contractual amount
of the instruments.  The Bank uses the same credit policies in making
commitments as it does for on-balance sheet instruments.


<PAGE>  F-34


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      COMMITMENTS AND CONTINGENCIES (continued)

      Loan commitments (concluded)

At September 30, 2003 and 2002, financial instruments whose contract
amounts represent credit risk consist of:

<TABLE>
<CAPTION>

                                                     2003       2002
                                                     ----       ----


                                                <c>        <c>
Commitments to grant mortgage loans                $ 7,236    $ 5,656
Unadvanced funds on home equity lines-of-credit     11,843      9,494
Unadvanced funds on commercial lines-of-credit       1,484      2,103
</TABLE>

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Unadvanced funds on lines-of-credit have fixed expiration dates and may
expire without being drawn upon.  Therefore, the total commitment amount
does not necessarily represent future cash requirements.  The Bank
evaluates each customer's creditworthiness on a case-by-case basis.  Except
for commercial lines-of-credit, these financial instruments are secured by
mortgage liens on real estate.

      Operating lease commitments

Pursuant to the terms of noncancelable lease agreements in effect at
September 30, 2003, pertaining to banking premises and equipment, future
minimum rent commitments are as follows:

<TABLE>
<CAPTION>

      Years Ending
      September 30,     Amount
      -------------     ------

          
          <c>
          2004         $40,165
          2005           4,788
          2006           1,197
                       -------

                       $46,150
                       =======
</TABLE>

The leases contain options to extend for periods from two to ten years.
The cost of such rentals is not included above.  Total rent expense for years
ended September 30, 2003, 2002 and 2001 amounted to $110, $122 and $162,
respectively.


<PAGE>  F-35


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      COMMITMENTS AND CONTINGENCIES (concluded)

      Employment and change in control agreements

The Company and the Bank have entered into employment agreements with its
President and Chief Financial Officer which generally provide for a base
salary and the continuation of certain benefits currently received.  The
employment agreements require payments for the remaining base salary due to
the employee for the remaining term of the agreement and the contributions
that would have been made on the employee's behalf to any employee benefit
plans of the Company and the Bank for certain reasons other than cause,
including a "change in control" as defined in the agreement.  However, such
employment may be terminated for cause, as defined, without incurring any
continuing obligations.

      Contingencies

Various legal claims may arise from time to time and, in the opinion of
management, these claims will have no material effect on the Company's
consolidated financial statements.

13.   RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Bank has granted loans to its
Directors.  At September 30, 2003 and 2002, the amount of such loans, which
exceeded $60 in the aggregate to each related party, was approximately
$1,102 and $168, respectively.  Such loans are made in the ordinary course
of business at the Bank's normal credit terms, including interest rate and
collateral requirements, and do not represent more than a normal risk of
collection.  During the years ended September 30, 2003 and 2002, total
principal additions were $941 and $24, respectively, and total principal
payments were $7 and $8, respectively.

14.   FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires disclosure of estimated fair values of all financial instruments
where it is practicable to estimate such values.  In cases where quoted
market prices are not available, fair values are based on estimates using
present value or other valuation techniques.  Those techniques are
significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows.  Accordingly, the derived fair value
estimates cannot be substantiated by comparison to independent markets and,
in many cases, could not be realized in immediate settlement of the
instrument.  SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements.  Accordingly,
the aggregate fair value amounts presented do not represent the underlying
value of the Company.


<PAGE>  F-36


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      FAIR VALUE OF FINANCIAL INSTRUMENTS (continued))

The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments:

      Cash and cash equivalents:  The carrying amounts of cash and due from
      banks, federal funds sold and short-term investments approximate fair
      value.

      Securities available for sale:  Fair values for securities available
      for sale 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.

      Federal Home Loan Bank Stock:  The carrying amount approximates fair
      value based on the redemption provisions of the Federal Home Loan
      Bank.

      Loans:  For variable-rate loans that reprice frequently and with no
      significant change in credit risk, fair values are based on carrying
      values.  Fair values for other types of 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.  Fair values for non-performing loans are estimated using
      discounted cash flow analyses or underlying collateral values, where
      applicable.

      Deposits:  The fair values for non-certificate accounts are, by
      definition, equal to the amount payable on demand at the reporting
      date (i.e., their carrying amounts).  Fair values for certificate
      accounts 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.

      Federal Home Loan Bank advances:  The fair value is based upon the
      Company's current incremental borrowing rate for a similar advance.

      Accrued interest:  The carrying amounts of accrued interest
      approximate fair value.

      Off-balance sheet instruments:  Fair values for off-balance sheet
      lending com-mitments are based on fees currently charged to enter into
      similar agreements, taking into account the remaining terms of the
      agreements and the counterparties' credit standing.  The estimated
      fair value of off-balance sheet financial instruments at September 30,
      2003 and 2002, was immaterial.


<PAGE>  F-37


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      FAIR VALUE OF FINANCIAL INSTRUMENTS (concluded)

The carrying amounts and related estimated fair values of the Company's
financial instruments are as follows:

<TABLE>
<CAPTION>

                                                     September 30,
                                     --------------------------------------------
                                             2003                    2002
                                     --------------------    --------------------
                                     Carrying      Fair      Carrying      Fair
                                      Amount       Value      Amount       Value
                                     --------      -----     --------      -----


                                  <c>         <c>         <c>         <c>
Financial assets:
  Cash and cash equivalents          $ 11,901    $ 11,901    $ 19,253    $ 19,253
  Securities available for sale        87,590      87,590      75,638      75,638
  Federal Home Loan Bank stock          1,250       1,250       1,250       1,250
  Loans, net                          141,557     144,947     132,880     140,105
  Accrued interest receivable           1,179       1,179       1,341       1,341

Financial liabilities:
  Deposits                            215,898     216,258     202,063     202,277
  Federal Home Loan Bank advances       9,500      10,076       9,500      10,221
</TABLE>


<PAGE>  F-38


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

15.   CONDENSED FINANCIAL STATEMENTS OF WESTBOROUGH FINANCIAL SERVICES,
INC.

<TABLE>
<CAPTION>

                                                       September 30,
                                                    ------------------
BALANCE SHEETS                                        2003       2002
--------------                                        ----       ----


                                                 <c>        <c>
Assets
------

Cash and due from bank                              $   234    $   584
Short-term investments                                  240        196
                                                    -------    -------
      Total cash and cash equivalents                   474        780
Investment in subsidiary                             27,666     26,763
Loan receivable - ESOP                                  386        404
Other assets                                            192         42
                                                    -------    -------

      Total assets                                  $28,718    $27,989
                                                    =======    =======

Liabilities and Stockholders' Equity
------------------------------------

Liabilities                                         $     -    $     -
Stockholders' equity                                 28,718     27,989
                                                    -------    -------

      Total liabilities and stockholders' equity    $28,718    $27,989
                                                    =======    =======

<CAPTION>

                                                        Years Ended
                                                       September 30,
                                                    ------------------
STATEMENTS OF INCOME                                  2003       2002
--------------------                                  ----       ----


                                                 <c>        <c>
Income:
  Interest on short-term investments                $     2    $     3
  Interest on loan - ESOP                                24         32
                                                    -------    -------
      Total income                                       26         35
Operating expenses                                      116         89
                                                    -------    -------
Loss before income taxes and equity in
 undistributed net income of subsidiary                 (90)       (54)
Income tax benefit                                      (17)       (27)
                                                    -------    -------
Loss before undistributed net income
 of subsidiary                                          (73)       (27)
Equity in undistributed net income of subsidiary      1,039      1,006
                                                    -------    -------

      Net income                                    $   966    $   979
                                                    =======    =======
</TABLE>


<PAGE>  F-39


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

CONDENSED FINANCIAL STATEMENTS OF WESTBOROUGH FINANCIAL SERVICES, INC.
(concluded)

<TABLE>
<CAPTION>

                                                         Years Ended
                                                        September 30,
                                                      -----------------
STATEMENTS OF CASH FLOWS                               2003       2002
------------------------                               ----       ----


                                                   <c>        <c>
Cash flows from operating activities:
  Net income                                          $  966     $  979
  Adjustments to reconcile net income to net
   cash used by operating activities:
    Decrease (increase) in other assets                   66        (42)
    Equity in undistributed earnings of subsidiary     (1,039)   (1,006)
                                                      -------    -------
      Net cash used by operating activities                (7)      (69)
                                                      -------    -------

Cash flows from investing activities:
  Principal paydowns received on ESOP loan                 18        18
                                                      -------    -------
      Net cash provided in investing activities            18        18
                                                      -------    -------

Cash flows from financing activities:
  Dividends paid                                         (317)     (316)
                                                      -------    -------
      Net cash used by financing activities              (317)     (316)
                                                      -------    -------

Net change in cash and cash equivalents                  (306)     (367)

Cash and cash equivalents at beginning of year            780     1,147
                                                      -------    -------

Cash and cash equivalents at end of year               $  474    $  780
                                                       ======    ======
</TABLE>


<PAGE>  F-40


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
                (Dollars in thousands, except per share data)

16.   QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>

                                                                    Years Ended September 30,
                                       ------------------------------------------------------------------------------------
                                                         2003                                        2002
                                       ----------------------------------------    ----------------------------------------
                                       Fourth      Third     Second      First     Fourth      Third     Second      First
                                       Quarter    Quarter    Quarter    Quarter    Quarter    Quarter    Quarter    Quarter
                                       -------    -------    -------    -------    -------    -------    -------    -------


                                    <c>        <c>        <c>        <c>        <c>        <c>        <c>        <c>
Interest and dividend income           $2,866     $2,877     $3,059     $3,298     $3,466     $3,387     $3,501     $3,517
Interest expense                          822        913      1,004      1,142      1,280      1,267      1,311      1,500
                                       ------     ------     ------     ------     ------     ------     ------     ------

Net interest income                     2,044      1,964      2,055      2,156      2,186      2,120      2,190      2,017
Provision for loan losses                   -          -          -          -          -          -          -          8
                                       ------     ------     ------     ------     ------     ------     ------     ------

Net interest income, after
 provision for loan losses              2,044      1,964      2,055      2,156      2,186      2,120      2,190      2,009

Gain (loss) on securities, net             (8)       132         (7)         4       (460)       (10)       (26)        30
All other income                          162        239        162        207        151        130        157        201
Operating expenses                      1,721      2,008      1,913      1,971      1,828      1,991      1,834      1,793
                                       ------     ------     ------     ------     ------     ------     ------     ------

Income before income taxes                477        327        297        396         49        249        487        447

Provision (credit) for income taxes       195        100        118        118        (17)        45        109        116
                                       ------     ------     ------     ------     ------     ------     ------     ------

Net income                             $  282     $  227     $  179     $  278     $   66     $  204     $  378     $  331
                                       ======     ======     ======     ======     ======     ======     ======     ======

Earnings per common share:
  Basic                                $ 0.18     $ 0.15     $ 0.12     $ 0.18     $ 0.04     $ 0.13     $ 0.25     $ 0.21
                                       ======     ======     ======     ======     ======     ======     ======     ======
  Diluted                              $ 0.18     $ 0.15     $ 0.12     $ 0.18     $ 0.04     $ 0.13     $ 0.24     $ 0.21
                                       ======     ======     ======     ======     ======     ======     ======     ======
</TABLE>


<PAGE>  F-41


                    Westborough Financial Services, Inc.
                          Stockholders Information

                          Common Stock Information

On September 30, 2003 there were 1,586,174 shares of common stock issued
and outstanding and approxi-mately 712 stockholders, not including persons
or entities holding stock in nominee or street name through brokers or
banks. The Company's stock is not actively traded, although the stock is
quoted on the OTC Electronic Bulletin Board under the symbol "WFSM".

                               Annual Meeting

The annual meeting of shareholders will be held on Thursday, January 29,
2004 at 3:00 p.m., local time. The meeting will take place at Wyndham
Westborough Hotel located at 5400 Computer Drive, Westborough, MA, 01581.

                                10-KSB Report
                                -------------

A copy of the form 10-KSB as filed with the Securities and Exchange
Commission will be furnished without charge to stockholders upon written
request. Please write to:

                          John L. Casagrande, Clerk
                    Westborough Financial Services, Inc.
                            100 East Main Street
                            Westborough, MA 01581

                               Transfer Agent
                       Registrar and Transfer Company
                              10 Commerce Drive
                             Cranford, NJ 07016
                           Shareholder Inquiries:
                               (800) 368-5948

                                   Counsel
                        Thacher, Proffitt & Wood LLP
                        1700 Pennsylvania Avenue, NW
                                  Suite 800
                            Washington, DC 20006
                               (202) 347-8400

                            Independent Auditors
                            Wolf & Company, P.C.
                               99 High Street
                              Boston, MA 02110
                               (617) 439-9700

                             Investor Relations
                             John L. Casagrande
                     Senior Vice President and Treasurer
                    Westborough Financial Services, Inc.
                            100 East Main Street
                            Westborough, MA 01581
                               (508) 366-4111

The table below reflects the stock price and dividend payment by quarter of
the Company's stock for fiscal year ended September 30, 2003. The
information set forth below was provided to management of the Company by
certain securities firms effecting transactions in the Company's stock on
an agency basis. The quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual
transactions.

Stock Price and Dividends by Quarter:

<TABLE>
<CAPTION>

                  High Price   Low Price   Average Price   Dividends per share


                 <c>         <c>           <c>          <c>
First Quarter       $24.00      $21.80        $22.58       $0.05
Second Quarter      $23.80      $23.00        $23.53       $0.05
Third Quarter       $30.00      $25.50        $28.85       $0.05
Fourth Quarter      $32.00      $28.65        $29.50       $0.05
</TABLE>

Dividend payment decisions are made with consideration of a variety of
factors, including earnings, financial condition, market considerations and
regulatory restrictions.


<PAGE>


                   OFFICERS AND STAFF OF WESTBOROUGH BANK

<TABLE>
================================================================================================


                      <c>                    <c>                       <c>
Michael D. Allard        Margaret I. Duquette   Jacqueline E. Laslocky    Nilda I. Rodriguez
Steven G. Anderson       Ann Dussault           Michelle Lewis            Marites B. Sabolboro
Elizabeth A. Arsenault   Astrid M. Essex        Patricia L. Loiseau       Annette C. Sangkhum
Karissa Ayeni            Margaret H. Everitt    Joseph F. MacDonough      Cheri A. Scanlon
Jennifer L. Boule        Patricia A. Flood      Philip A. Maio            Mark R. Scheid
Vickie A. Bouvier        Jackie Groccia         Winifred B. Mason         Iris Shehi
Jean A. Breidenbach      Claire Hart            Robert K. McCann          Edward Stearns
Lois M. Brennan          Mary Lynn Hart         Alexandru C. Megas        Paula Stevens
Karen L. Brooks          Marion A. Hartshorn    Linda M. Millette         Corinne M. Temple
Deborah A. Brousseau     Melissa Havalotti      Jay S. Monfreda           Timothy M. Thibault
Sandra J. Bucher         Beth E. Hayden         Lois J. Murphy            Van C. Truong
Carol A. Burgoyne        Amelia Hodgson         Catherine A. Paglieroni   Linda A. Tumeinski
Deborah A. Callahan      Colleen A. Horne       Donald A. Painchaud       Catherine Vaillancourt
Kathleen T. Campanale    Janet L. Jankowski     George T. Panagopoulos    Sheila M. Veideman
John L. Casagrande       Janice A. Kelley       Kimberly S. Perkins       Lucia V. Visci
MaryEllen Comerford      Laura A. Knowles       Judith P. Pfeffer         Ryan M. Vorapeth
Jean M. Costantino       Elizabeth Kut          Samir Rauf                Jean C. Wamback
Janet Daniels            Jane M. Laflamme       Kathleen Reilly           Elena M. Zotos
Erin M. Drummey          Suzanne T. Laperle     Linda M. Richard
Gail O. Duplease         Amanda L. Laraia       Lisa A. Roberts
================================================================================================
</TABLE>

                "Dedicated to delivering the best in banking
                           products and services."


<PAGE>


                           2003 Charitable Giving

This year, as in prior years, Westborough Bank gave back to the communities
that it serves. While some are monetary donations, our officers and staff
also freely give of their time and talent.

Chamber of Commerce School/Business Partnership YMCA of Central Mass.
Northborough Baseball Toys for Tots Shrewsbury Police Union Rotary Clubs of
Shrewsbury, Westborough and Northborough Massachusetts State Police
Shrewsbury Youth Hockey Westborough Education Foundation Westborough Music
Parents Association Westborough Senior Center Symphony Pro Musica
Shrewsbury Senior Center Junior Achievement United Way of Tri-County
Westborough Little League Turf's Up Applefest 2003 Westborough Community
Chorus Masonic Angel Fund Westborough Police Officers Union United Way of
Central Mass. Shrewsbury Firefighters Westborough Players Club Westborough
Athletic Boosters Association Worcester County Food Bank Northborough
Education Foundation Worcester Art Museum Graduates of Westborough Public
Schools Accident Fund Shrewsbury Community Services Westborough Food Pantry
Trinity Free Medical Program Westborough High School's Charlotte Spinney
Vision Scholarship YWCA Capital Campaign Knox Trail Boy Scouts Family
Services of Central Mass. Time Travelers Hillside School Boroughs Branch
YMCA Corridor Nine Chamber of Commerce Shrewsbury Youth Football Shrewsbury
"Good Neighbor" Day Officer Phil Safety Program Westborough Rotary Spring
Festival Walk to Cure Cancer Paton School Community Outreach S.C.O.R.E.
Chamber of Commerce Mini-Grant Program Westborough Women's Club Armstrong
School Playground Fund "Jacob's Journey" Karyn Polito Charity Golf
Tournament Jobs For Bay State Grads Annie Fales School Pan Mass Challenge
St. Mary's School Scholarship Golf Tournament Mill Pond School American
Cancer Society Westborough Country Club Charitable Tournament Project
Graduation Spirit of Shrewsbury Muscular Dystrophy Association M.A.D.D.

[PHOTO] Mike Allard, V.P. (l), pictured with representatives of local
charities. Also pictured, second from right, is Charlotte Spinney,
Director.

[PHOTO] Pictured above are Ken Young and Leonard Anderson, receiving a
check from Peggy Duquette, Director of Human Resources. The check
represents employee contributions from a dress down day.

[PHOTO] Joe MacDonough accepts the United Way Tri-County Bowl in
recognition of the Bank's financial support.


<PAGE>


             Westborough Financial Services, Inc. and Subsidiary
               Selected Consolidated Financial and Other Data

<TABLE>
<CAPTION>

                                                             September 30,
                                                      2003        2002        2001

Consolidated Balance Sheet Data ($ in thousands)


                                                 <c>         <c>         <c>
Total assets                                        $256,122    $241,273    $225,675
Loans, net                                           141,557     132,880     134,957
Investment securities                                 88,840      76,888      65,514
Total deposits                                       215,898     202,063     185,098
Federal Home Loan Bank advances                        9,500       9,500      12,000
Stockholders' equity                                  28,718      27,989      26,912
Allowance for loan losses                                911         926         916
Non-accrual loans                                        634         140           0
Non-performing assets                                    634         140           0
</TABLE>

<TABLE>
<CAPTION>

Consolidated Statement of Income                                                   Years Ended
($ in thousands, except per share data)                                  2003         2002         2001


                                                                    <c>          <c>          <c>
Total interest and dividend income                                       $12,100      $13,871      $14,135
Total interest expense                                                     3,881        5,358        6,927
                                                                         -------      -------      -------
Net interest income                                                        8,219        8,513        7,208
Provision for loan losses                                                      0            8           48
                                                                         -------      -------      -------
Net interest income, after provision for loan losses                       8,219        8,505        7,160
                                                                         -------      -------      -------
Customer service fees                                                        563          439          658
Income from covered call options                                               0            0           16
Gain (loss) on sales of securities available for sale, net                   121         (466)         710
Gain on sales of mortgages                                                    33            0            0
Miscellaneous                                                                174          200          160
                                                                         -------      -------      -------
Total other income                                                           891          173        1,544
                                                                         -------      -------      -------
Total operating expenses                                                   7,613        7,446        6,977
                                                                         -------      -------      -------
Income before provision for income taxes and
 cumulative effect of change in accounting principle                       1,497        1,232        1,727
Provision for income taxes                                                   531          253          476
                                                                         -------      -------      -------
Income before cumulative effect of change in accounting principle            966          979        1,251
Cumulative effect of change in accounting for covered call options,
 net of $76 of tax effects ($.09 per dilutive share)                           0            0          147
                                                                         -------      -------      -------
Net income                                                               $   966      $   979      $ 1,398
                                                                         =======      =======      =======

Basic number of weighted average shares outstanding                    1,530,003    1,540,103    1,540,518
Dilutive number of weighted average shares outstanding                 1,548,849    1,558,622    1,550,588
Basic earnings per share                                                   $0.63        $0.64        $0.91
Dilutive earnings per share                                                $0.62        $0.63        $0.90
Dividends declared per share                                               $0.20        $0.20        $0.20
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                                                 Years Ended
                                                                        2003        2002        2001


                                                                    <c>         <c>         <c>
Performance Ratios:
Return on average assets                                                 0.38%       0.42%       0.64%
Return on average stockholders' equity                                   3.39%       3.59%       5.49%
Dividend payout ratio (1)                                               32.07%      31.84%      22.18%
Average stockholders' equity to average assets                          11.36%      11.70%      11.69%
Net interest rate spread (2)                                             3.25%       3.52%       2.93%
Net interest margin (3)                                                  3.52%       3.94%       3.53%
Operating expenses as a percent of average assets                        3.03%       3.19%       3.20%
Average interest-bearing assets to average
 interest-bearing liabilities                                          116.40%     116.82%     117.68%
Efficiency ratio (4)                                                    85.00%      81.36%      86.93%

<FN>
<F1>  Dividend payout ratio represents dividends declared per share divided
      by dilutive earnings per share.
<F2>  Net interest rate spread represents the difference between the
      weighted average yield on interest-earning assets and the weighted
      average cost of interest-bearing liabilities.
<F3>  Net interest margin represents net interest income as a percentage of
      average interest-earning assets.
<F4>  Efficiency ratio represents total operating expenses divided by the
      sum of net interest income, customer service fees and miscellaneous
      income.
</FN>
</TABLE>

<TABLE>
<CAPTION>

                                                                  September 30,
                                                         2003          2002          2001


                                                   <c>           <c>           <c>
Asset Quality Ratios:
Non-performing loans as a percent of loans                 0.45%         0.11%         0.00%
Non-performing assets as a percent of total assets         0.25%         0.06%         0.00%
Allowance for loan losses as a percent of total
 loans before the allowance for loan losses                0.64%         0.69%         0.67%

Capital Ratio and other data:
Equity to assets at end of period                         11.21%        11.60%        11.93%
Number of shares outstanding at end of period         1,586,174     1,581,574     1,581,374

Number of:
Full-service offices (1)                                      5             5             5
Full-time equivalent employees                               74            76            70

<FN>
<F1>  The number of full service offices does not include our branch at the
      Willows.
</FN>
</TABLE>


<PAGE>

Financial
Services For
Every
Phase Of
Every
Life

*  Personal Checking
*  Savings
*  Mortgages
*  Home Equity Lines/Loans
*  Commercial Lending
*  Business Checking
*  Retirement Accounts
*  508 366-4111

Westborough Bank [LOGO]
Incorporated 1869
_____________________________
Full Service. Full Attention.

Member FDIC
Member DIF
Equal Housing Lender

<TABLE>


                      <c>                       <c>                     <c>                      <c>
     Main Office                                                                                     Shaw's Supermarket
 100 East Main Street       53 W. Main Street         23 Maple Avenue        33 W. Main Street       White City (Rte. 9)
Westborough, MA 01581    Northborough, MA 01532    Shrewsbury, MA 01545    Westborough, MA 01581    Shrewsbury, MA 01545
 Tel. (508) 366-4111       Tel. (508) 393-2434      Tel. (508) 845-6244     Tel. (508) 366-4236      Tel. (508) 755-2015
</TABLE>


<PAGE>