Exhibit 13.1

                                                      Westborough Financial
                                                             Services, Inc.


                             Photos illustrating:

       Personal Accounts      Electronic Banking      Business Banking

                  Mortgage Center      Investment Services


                                                       Annual          2005
                                                       Report


<PAGE>


                          Exceeding expectations -
                           one customer at a time.

Directors                                      Employees

James N. Ball                      Michael Allard       Michele Lewis
Nelson P. Ball                     Steven Anderson      Joseph MacDonough
Edward S. Bilzerian                Elizabeth Arsenault  Timothy Maher
Nancy M. Carlson                   Karissa Ayeni        Philip Maio
David E. Carlstrom                 Linda Bilodeau       Laurie Marble
John L. Casagrande                 Glena Borst          Robert McCann
Benjamin H. Colonero, Jr.          Vickie Bouvier       Alexandru Megas
Robert A. Klugman                  Michael Bovenzi      Eileen Messier
Jeffrey B. Leland                  Karen Brooks         Linda Millette
Joseph F. MacDonough               Sandra Bucher        Jay Monfreda
Paul F. McGrath                    Carol Burgoyne       Lois Murphy
Charlotte C. Spinney               Dawn Buzzell         Joseph Normant, Jr.
Phyllis A. Stone                   Jennifer Cardoso     George Panagopoulos
James E. Tashjian (Chairman)       John Casagrande      Tracy Pare'
                                   Amber Clifford       Kimberly Perkins
                                   Lyn Copenhaver       Judith Pfeffer
                                   Margaret Duquette    Francis Randall
Executive Committee                Ann Dussault         Samir Rauf
                                   Margaret Everitt     Kathleen Reilly
Nancy M. Carlson                   Cheryl Fedorczuk     Linda Richard
David E. Carlstrom                 Patricia Flood       Lisa Roberts
Robert A. Klugman                  Patricia Genoa       Suzanne Rost
Joseph F. MacDonough (Chairman)    Alvara Gjylapi       Marites Sabolboro
Paul F. McGrath                    Claire Hart          Annette Sangkhum
James E. Tashjian                  Marion Hartshorn     Iris Shehi
                                   Melissa Havalotti    Edward Stearns, III
                                   Kenneth Hays         Diana Steele
                                   Colleen Horne        Christopher Stevens
                                   Janet Jankowski      Corinne Temple
                                   Yvonne Kaburu        Timothy Thibault
                                   Vivian Kambouris     Linda Tumeinski
                                   Janice Kelley        Catherine
Vallaincourt
                                   Mark Klein           Lucia Visci
                                   Renuka Kulathila     Julie Wagner
                                   Jane LaFlamme        Patricia Wood
                                   Suzanne Laperle      Eugene Zicuis
                                   Erin Lemerise


<PAGE>


Total Assets                   Total Deposits
$ in Millions                  $ in Millions

2003        $256.1             2003        $215.9
2004         264.0             2004         211.7
2005         291.5             2005         210.3


                               Stockholders'
Total Loans                    Equity
$ in Millions                  $ in Millions


2003        $141.6             2003        $28.7
2004         165.3             2004         28.7
2005         200.5             2005         28.6


<PAGE>


Photo of Joeseph MacDonough

Message To Shareholders

For Westborough Financial Services, Inc. and its wholly owned subsidiary
The Westborough Bank, financial performance for fiscal year 2005 was driven
by both local market conditions and national economic trends.  Basic
earnings per share for fiscal year 2005 were $0.58 on net income of $898
thousand as compared to $0.77 on net income of $1.2 million for fiscal year
2004.  Although interest and dividend income increased by $1.1 million
(9.3%) during the year, our interest expense grew by $1.2 million (40.9%)
resulting in a decrease of net interest income of $140 thousand (1.6%).
The increase in our interest expense was directly attributable to a rising
rate environment and fierce local market competition.  As we look forward
to 2006, this extreme pressure on our net interest margin may continue and
negatively impact our earnings which could result in operating losses in
any given period of time.  Management has undertaken a series of changes to
address margin compression in both the near and long term.  In addition, we
have increased our focus and demands for additional fee income and improved
operating efficiencies in order to maintain bottom line profitability.

Other income decreased $102 thousand (8.8%) to $1.1 million for the fiscal
year 2005 from $1.2 million in fiscal 2004 primarily as a result of lower
gains on security sales resulting from the rising rate environment.  For
the fiscal year 2005, operating expenses increased $439 thousand (5.5%) to
$8.3 million from $7.9 million in fiscal year 2004.  As a result of
continued growth, staffing costs (specifically increases in the cost of
health, life and disability insurance as well as retirement benefits)
accounted for more than half of the Bank's increased level of operating
expenses.

Total assets grew by $27.5 million (10.4%) to a level of $291.5 million at
September 30, 2005 from $264.0 million at September 30, 2004.  The growth
of total assets was a result of a significant increase in our loan
portfolio which grew by $35.2 million (21.3%) to $200.5 million at fiscal
year end 2005 compared to $165.3 million at fiscal year end 2004.  Given
the slight decrease in our deposit base (-$1.4 million or -0.7%) this loan
growth was funded primarily by increased borrowings from the Federal Home
Loan Bank of Boston.  While our overall deposits declined, we did see
significant growth in our Shrewsbury market where deposits grew by $4.1
million or 15.1%.  FDIC deposit market share data as of June 30, 2005
showed us increasing our market share in Shrewsbury to 6.73%, Northborough
to 36.8% and Westborough to 27.09%.  As of   June 30, 2005, we were #1 in
market share in Westborough and Northborough.

During fiscal year 2005, we were able to continue to implement various
aspects of our strategic initiative.  In 2005, we introduced IPay, which
enhanced our Internet banking capability and allowed our customers to more
efficiently perform electronic banking from their own P.C.'s.  This upgrade
has helped us increase the number of customers actively using the Internet
product.

Also, as part of our strategic initiatives to better respond to customer
needs, we have realigned our staffing levels and expanded office hours at
all of our retail branch locations.  In the fourth quarter of fiscal 2005,
we began renovations at our main office in Westborough to provide
additional office space that will allow increased convenience and
confidentiality for our customers while transacting their banking business.

Elsewhere in this Annual Report you will find information about the
Westborough Savings Charitable Foundation, Inc., the primary vehicle
through which our Bank makes financial contributions to worthy causes in
the Communities we serve.  In addition to those causes being supported by
Westborough Savings Charitable Foundation, our Bank directly funded a
$10,000 contribution to the Town of Westborough Senior Center to help
purchase two busses that are used by the elderly in Westborough.

I also want to acknowledge and thank many of our officers and staff who
volunteer numerous hours of their time to help support our communities,
whether as elected officials, appointed committee members or volunteers,
leaders and coaches in organizations too numerous to mention.

At our last annual meeting in January 2005, we officially welcomed Jeffrey
B. Leland as a new Director of our Company and the Bank.  Jeff joins
thirteen other dedicated Directors who help develop policy and strategies
that allow us to continue to grow and serve our communities.  On your
behalf, I want to thank our Directors for their dedication and loyalty.
Additionally, on behalf of the Directors, I want to pledge our continued
commitment to you, our customers and our community.

                                       Sincerely,

                                       /s/ Joseph F. MacDonough

                                       Joseph F. MacDonough
                                       President & CEO
                                       December 1, 2005


<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.

      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 and the
Bank do not undertake any obligation 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 (the
"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 consists
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-deposit investment products and
increases in 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 is 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 electronic and traditional 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
            Internet-based and telephonic banking; and
      *     offer a variety of non-deposit investment products and services
            as a means to compete for an increased share of its customers'
            financial service business and improve fee-based income.

      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. The Bank is in the
process of renovating older sections of its Main Office and other branches
to better serve its retail customers. The Bank continues to upgrade its on-
line Internet bill payment and other on-line applications. Such investments
have been necessary to ensure that adequate resources are in place to offer
increased products and services. Management believes that the Company's
long-term profitability is enhanced 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. Interest rate risk is the exposure of the Company's net
interest income to adverse movements in interest rates. Since net interest
income (the difference between interest earned on loans and investments and
interest paid on deposits and borrowings) is the Company's primary source
of revenue, interest rate risk is the most significant non-credit related
market risk to which the Company is exposed. Net interest income is
affected by changes in interest rates as well as fluctuations in the level
and duration of the Company's assets and liabilities. Fluctuations in
interest rates and the relative difference between short-term and longer-
term interest rates will ultimately impact the Bank's level of interest
income and interest expense. Fluctuations in interest rates will also
affect the market value of all interest-earning assets and interest-costing
liabilities, 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 to
minimize the effects of interest rate movements.

      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, primarily 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. More
recently, the Bank has increased its borrowing from the FHLB in order to
fund loan growth. 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 pricing 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


<PAGE>  3


purchase loans with similar anticipated cash flow characteristics. The Bank
believes that the frequent re-pricing of its adjustable-rate mortgage loans
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 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, 2005, 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 12.41%
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 is not in as favorable a position,
compared to an institution with a positive gap, because the resulting yield
on an its 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 tends
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, 2005, which are
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, 2005 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


GAP Table

<TABLE>
<CAPTION>

                                      ---------------------------------------------------------------------------------------------
                                                         Amounts Maturing or Re-pricing as of September 30, 2005
                                      ---------------------------------------------------------------------------------------------
                                      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)            $ 5,384     $      0    $      0    $      0    $      0    $     0    $     0     $  5,384
  Investment securities (3)              11,866        3,695       6,235      19,237         854          0          0       41,887
  Mortgage and asset backed securities        0            0           0       2,953       5,569      2,193     14,304       25,019
  Loans (4)                              19,824        1,213       4,919      22,785      23,913     74,297     54,311      201,262
                                        -------     --------    --------    --------    --------    -------    -------     --------
      Total interest-earning assets      37,074        4,908      11,154      44,975      30,336     76,490     68,615      273,552
                                        -------     --------    --------    --------    --------    -------    -------     --------

Interest-bearing Liabilities:
  NOW accounts (5)                        1,780        1,780       1,780       1,780           0          0     10,680       17,800
  Regular and other savings
   accounts (5)                          10,181       10,183      10,183      10,183           0          0     61,096      101,826
  Money market deposit accounts (5)         516          516         516         516           0          0      3,097        5,161
  Certificate of deposit accounts        14,613       14,178      16,166      17,245       1,047          0          0       63,249
  Federal Home Loan Bank advances (6)     4,000            0       2,500      15,000      22,000      6,500          0       50,000
  Mortgage escrow deposits                  409            0           0           0           0          0          0          409
                                        -------     --------    --------    --------    --------    -------    -------     --------
      Total interest-bearing
       liabilities                       31,499       26,657      31,145      44,724      23,047      6,500     74,873      238,445
                                        -------     --------    --------    --------    --------    -------    -------     --------

Interest sensitivity gap                $ 5,575     $(21,749)   $(19,991)   $    251    $  7,289    $69,990    $(6,258)    $ 35,107
                                        -------     --------    --------    --------    --------    -------    -------     --------
Cumulative interest sensitivity gap     $ 5,575     $(16,174)   $(36,165)   $(35,914)   $(28,625)   $41,365    $35,107
                                        =======     ========    ========    ========    ========    =======    =======

Cumulative interest sensitivity gap
 as a percent of total assets              1.91%       -5.55%     -12.41%     -12.32%      -9.82%     14.19%     12.04%

Cumulative interest sensitivity gap
 as a percent of total interest-
 earning assets                            2.04%       -5.91%     -13.22%     -13.13%     -10.46%     15.12%     12.83%

Cumulative interest sensitivity gap
 as a percent of total interest-
 bearing liabilities                       2.34%       -6.78%     -15.17%     -15.06%     -12.00%     17.35%     14.72%

<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
      is allocated evenly within the four intervals up to and including one
      to three years.
<F6>  Federal Home Loan Bank advances 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, 2005, 2004, and 2003, and reflects the average yield on
assets and average cost of liabilities for the years 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. Loan interest and yield does not include any accrued
interest from non-accrual loans.


<PAGE>  6


<TABLE>
<CAPTION>

                                   ------------------------------------------------------------------------------------------------
                                                                   For the Year Ended September 30,
                                   ------------------------------------------------------------------------------------------------
                                                2005                             2004                             2003
                                   ------------------------------------------------------------------------------------------------
                                                         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)       $  4,512   $   108      2.39%    $  5,037   $    47      0.93%    $ 12,671   $   117      0.92%
  Investment securities (2)          73,284     2,896      3.95%      91,511     3,588      3.92%      87,172     3,983      4.57%
  Loans (3)                         180,125     9,560      5.31%     144,942     7,859      5.42%     133,349     7,983      5.99%
                                   --------   -------               --------   -------               --------   -------
      Total interest-earning
       assets                       257,921    12,564      4.87%     241,490    11,494      4.76%     233,192    12,083      5.18%
                                              -------                          -------                          -------
  Non-interest-earning assets        18,810                           17,599                           17,824
                                   --------                         --------                         --------
      Total assets                 $276,731                         $259,089                         $251,016
                                   ========                         ========                         ========

Liabilities and Equity:
Interest-bearing liabilities:
  NOW accounts                     $ 19,189        25      0.13%    $ 19,597        20      0.10%    $ 18,489        29      0.16%
  Savings accounts (4)              109,829     1,469      1.34%     115,483     1,229      1.06%     106,868     1,500      1.40%
  Money market deposit accounts       5,042        52      1.03%       5,325        53      1.00%       5,567        69      1.24%
  Certificate of deposit accounts    55,329     1,434      2.59%      49,443     1,021      2.07%      59,911     1,673      2.79%
                                   --------   -------               --------   -------               --------   -------
      Total interest-bearing
       deposits                     189,389     2,980      1.57%     189,848     2,323      1.22%     190,835     3,271      1.71%
  FHLB Advances                      32,125     1,192      3.71%      16,215       639      3.94%       9,500       610      6.42%
                                   --------   -------               --------   -------               --------   -------
      Total interest-bearing
       liabilities                  221,514     4,172      1.88%     206,063     2,962      1.44%     200,335     3,881      1.94%
                                   --------   -------               --------   -------               --------   -------
  Non-interest bearing deposits      23,369                           22,229                           20,108
  Other non-interest-bearing
   liabilities                        2,979                            2,050                            2,047
                                   --------                         --------                         --------
      Total non-interest-bearing
       liabilities                   26,348                           24,279                           22,155
                                   --------                         --------                         --------
      Total liabilities             247,862                          230,342                          222,490
      Total stockholders' equity     28,869                           28,747                           28,526
                                   --------                         --------                         --------
      Total liabilities and
       stockholders' equity        $276,731                         $259,089                         $251,016
                                   ========                         ========                         ========

Net interest income                           $ 8,392                          $ 8,532                          $ 8,202
                                              =======                          =======                          =======
Net interest rate spread (5)                               2.99%                            3.32%                            3.24%
                                                         ======                           ======                           ======
Net interest margin (6)                                    3.25%                            3.53%                            3.52%
                                                         ======                           ======                           ======
Ratio of interest-earning
 assets to interest-bearing
 liabilities                                             116.44%                          117.19%                          116.40%
                                                         ======                           ======                           ======

<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 unadvanced
      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, 2005    Year Ended September 30, 2004
                                             Compared to Year Ended           Compared to Year Ended
                                               September 30, 2004               September 30, 2003
                                              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)             $   (5)     $  66     $   61     $ (71)     $     1    $ (70)
  Investment securities (2)                (720)        28       (692)      191         (586)    (395)
  Loans (3)                               1,871       (170)     1,701       663         (787)    (124)
                                         ------      -----     ------     -----      -------    -----
      Total interest-earning assets       1,146        (76)     1,070       783       (1,372)    (589)
                                         ------      -----     ------     -----      -------    -----

Interest-bearing liabilities:
  NOW accounts                                0          5          5         2          (11)      (9)
  Savings accounts (4)                      (63)       303        240       114         (385)    (271)
  Money market deposit accounts              (3)         2         (1)       (3)         (13)     (16)
  Certificate of deposit accounts           131        282        413      (262)        (390)    (652)
                                         ------      -----     ------     -----      -------    -----
      Total interest-bearing deposits        65        592        657      (149)        (799)    (948)
Borrowed funds                              592        (39)       553       323         (294)      29
                                         ------      -----     ------     -----      -------    -----
Total interest-bearing liabilities          657        553      1,210       174       (1,093)    (919)
                                         ------      -----     ------     -----      -------    -----
Net change in net interest income        $  489      $(629)    $ (140)    $ 609      $  (279)   $ 330
                                         ======      =====     ======     =====      =======    =====

<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, 2005 and September 30, 2004

      The Company's total assets increased by $27.5 million, or 10.4%, to
$291.5 million at September 30, 2005 from $264.0 million at September 30,
2004. Loans increased by $35.2 million, or 21.3%, to $200.5 million at
September 30, 2005 from $165.3 million at September 30, 2004. Within the
loan portfolio, commercial loans increased by $2.7 million from September
30, 2004 to September 30, 2005. Residential real estate loans (primarily
adjustable-rate) and home equity lines-of-credit increased by $32.4 million
for the same period. The increase in loans was attributed primarily to
relationships the Bank had with various mortgage brokers. Securities
available for sale decreased by $9.0 million, or 12.4%, to $63.9 million at
September 30, 2005 as compared to $73.0 million at September 30, 2004. The
majority of the proceeds from the sale and maturity of securities available
for sale were reinvested in the loan portfolio.

      Deposits declined by $1.4 million, or 0.7%, to $210.3 million at
September 30, 2005, while FHLB advances increased by $28.5 million, or
133%, to $50.0 million at September 30, 2005 from $21.5 million at
September 30, 2004. The increase in FHLB advances was utilized to fund loan
portfolio growth since deposit growth during the year was not sufficient to
fund such loan growth. During the year, the decline in deposits was
primarily confined to interest-rate sensitive savings accounts, while
relatively longer-term certificates of deposits grew.

      Total stockholders' equity declined by $102 thousand, to $28.6
million at September 30, 2005 primarily as a result of a decline in the
after-tax market value of securities available for sale, somewhat offset by
net income of $898 thousand, less dividends paid to stockholders of $382
thousand. Accumulated other comprehensive after-tax income (loss) at
September 30, 2005 was ($714) thousand, as compared to $159 thousand at
September 30, 2004. The Company's securities consist primarily of interest-
rate sensitive securities, whose market value changes inversely with
changes in market interest rates. Interest rates at September 30, 2005 were
generally higher than rates at September 30, 2004, and, accordingly, the
after-tax market value of securities available for sale declined. Deferred
income tax benefits associated with this market value decline were
approximately $438 thousand.

Comparison of Operating Results for the Years Ended September 30, 2005 and 2004

      Net Income. The Company reported earnings per share (dilutive) for
fiscal year ended September 30, 2005 of $0.57 on net income of $898
thousand, as compared to $0.76 per share (dilutive) on net income of $1.2
million for fiscal year ended September 30, 2004. For year ended September
30, 2005, net income declined by $293 thousand, or 24.6% primarily due to a
decline in the Company's net interest margin, an increase in operating
expenses and a decline in other income, offset, to some extent, by a credit
provision for loan losses. The Company's return on average assets was 0.32%
for year ended September 30, 2005 as compared to 0.46% for year ended
September 30, 2004.

      Interest and Dividend Income. Interest and dividend income increased
by $1.1 million, or 9.3%, to $12.6 million for year ended September 30,
2005 from $11.5 million for year ended September 30, 2004. The increase in
interest and dividend income was mainly the result of an increase in the
volume of interest earning assets, as well as an increase in the interest
rates earned on interest-earning assets. The average rate earned on
interest-earning assets was 4.87% on average interest earning assets of
$257.9 million for year ended September 30, 2005 as compared to 4.76% on
average interest-earning assets of $241.5 million for the years ended
September 30, 2004.

      The average balance of loans for year ended September 30, 2005 was
$180.1 million, earning 5.31% for the year. This compares to an average
balance of loans for year ended September 30, 2004 of $144.9 million,
earning 5.42% for the year. During year ended September 30, 2005, the
Company experienced net variable rate, one-to-four family residential loan
growth of $35.6 million and net commercial real estate loan growth of $3.7
million. The decline in the earning rate on loans primarily reflects the
general decline in market interest rates for mortgage loans granted during
the recent year. The


<PAGE>  9


average balance of investment securities for year ended September 30, 2005
was $73.3 million, earning 3.95% for the year. This compares to an average
balance of investment securities for year ended September 30, 2004 of $91.5
million, earning 3.92% for the year. Finally, the average balance of short-
term investments for year ended September 30, 2005 was $4.5 million,
earning 2.39% for the year. This compares to an average balance of short-
term investments for year ended September 30, 2004 of $5.0 million, earning
0.93% for the year. The higher earnings rate on short-term investments
reflects the interest rate increases by the Federal Open Market Committee
(the "FOMC").

      Interest Expense. Interest expense increased by $1.2 million, or
40.9%, to $4.2 million for year ended September 30, 2005 from $3.0 million
for year ended September 30, 2004. Interest expense increased mainly due to
an increase in the average rate paid on interest-bearing liabilities plus
an increase in the average volume of interest-bearing liabilities. The
average volume of interest-bearing liabilities, which includes interest-
bearing deposits and FHLB advances, increased to $221.5 million with a cost
of 1.88% for year ended September 30, 2005 as compared to $206.1 million
with a cost of 1.44% for year ended September 30, 2004. The primary reason
for the increase in costs was due to increased interest expense related to
savings accounts and short-term certificates of deposit due to the Bank's
reaction to higher short-term interest rate decisions of the FOMC.

      Net Interest Income. Net interest income decreased by $140 thousand
for year ended September 30, 2005, or 1.6%, to $8.4 million for year ended
September 30, 2004. The Company's net interest rate spread, which
represents the difference between the weighted average yield on interest-
earning assets and the weighted average cost of interest-bearing
liabilities, decreased to 2.99% for year ended September 30, 2005 from
3.32% for year ended September 30, 2004. The decrease was attributed to the
combination of an increase of $1.2 million in total interest expense
offset, to a lesser extent, by an increase of $1.1 million in total
interest and dividend income. Continued flattening of interest rates
challenged the Bank by limiting investment opportunities and returns.
Compression of the net interest rate spread can be expected to result in
lower net interest income, and possibly losses, until such time as the
yield curve returns to a more normal, upward slope.

      Provision for Loan Losses. The Company recorded a $173 thousand
credit provision for loan losses for year ended September 30, 2005 as
compared to a $70 thousand provision for loan losses for year ended
September 30, 2004. This primarily reflects an improvement in the credit
quality of specific commercial loans for which a portion of the allowance
for loan losses had been allocated. The provision for loan losses is a
result of management's periodic analysis of risks inherent in the loan
portfolio from time to time, as well as the overall 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 $175 thousand of
non-accrual loans and non-performing assets at September 30, 2005, 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.


<PAGE>  10


      Other Income. Other income declined by 8.8%, or $102 thousand, to
$1.1 million for year ended September 30, 2005. Other income primarily
consists of customer service fees, gains and losses from the sale of
securities and loans and miscellaneous income from bank-owned life
insurance. Income from customer service fees decreased by $58 thousand, or
8.8%, to $603 thousand for year ended September 30, 2005 primarily due to a
decline in prepayment fees on commercial loans. Gains on the sales of
securities declined by $100 thousand, to $59 thousand, for year ended
September 30, 2005 due to a substantially lower volume of security sales.
Additionally, for year ended September 30, 2005 the Company sold fixed rate
mortgage loans, with servicing retained by the Bank, and recognized pre-tax
gains on such sales, including mortgage servicing rights, of $165 thousand,
as compared to $100 thousand for year ended September 30, 2004.

      Operating Expenses. For year ended September 30, 2005, operating
expenses increased by $439 thousand, or 5.5%, to $8.3 million, from $7.9
million for year ended September 30, 2004. Salaries and employee benefits
increased by $215 thousand, or 5.1%, to $4.5 million for year ended
September 30, 2005, from $4.3 million for year ended September 30, 2004 and
primarily reflect increased expenses related to retirement, sales incentive
payments and recruitment. Professional fees increased by $172 thousand, or
68.8%, to $422 thousand for year ended September 30, 2005. Professional
fees increased primarily due to legal and other expenses related to a civil
action filed against the Bank and also due to expenses related to the
examination of various strategic planning projects and initiatives.
Primarily as a result of a higher volume of services provided, data
processing expenses increased by $81 thousand, or 12.3%, to $741 thousand
for year ended September 30, 2005. Occupancy and equipment expenses
declined by $53 thousand, or 4.4%, primarily due to the closing of the
Bank's former Shaw's Supermarket branch in the town of Shrewsbury.

      Income Taxes. The provision for income taxes declined by $145
thousand, to $381 thousand for year ended September 30, 2005, resulting in
an effective income tax rate of 29.8%, as compared to an effective income
tax rate of 30.6% for year ended September 30, 2004. The decline in income
taxes is primarily a result of a decline in the Company's pre-tax income.


<PAGE>  11


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, including during
fiscal 2005, the Bank has utilized borrowing from the FHLB as part of its
management of interest rate risk and to fund loan growth in periods when
deposit growth is not sufficient to meet such loan growth. At September 30,
2005, the Bank had $50.0 million in outstanding borrowings from the FHLB
with a weighted average interest rate of 4.08%, as compared to $21.5
million with a weighted average interest rate of 3.37% at September 30,
2004.

      The Bank generally makes loan commitments to borrowers not exceeding
45 days. At September 30, 2005, the Bank had $12.1 million in loan
commitments outstanding. Unadvanced funds on home equity lines of credit
and commercial lines of credit at September 30, 2005 represented $14.8
million and $2.0 million, respectively. Total deposits declined by $1.4
million during year ended September 30, 2005. During the year, some
primarily tiered-rate and regular savings account customers, chose to move
their funds either to higher rate certificates of deposit or money market
deposit accounts. In order to fund increased loan volume, the Bank
increased low-cost borrowing from the FHLB. The level of deposit flow is
affected by interest rates offered by the Bank, products and rates offered
by competitors and other factors. Certificate of deposit accounts scheduled
to mature within one year were $44.4 million at September 30, 2005. 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 Tier 1 leverage ratio, Tier 1 risk-
based capital and Total risk-based capital ratios, for the Bank and
consolidated Company, at September 30, 2005:


<PAGE>  12


<TABLE>
<CAPTION>

                                        ------------------------------------------------------------------------
                                                                As of September 30, 2005
                                        ------------------------------------------------------------------------
                                                                                         Minimum to be Well
                                                             Minimum for Capital      Capitalized under Prompt
                                              Actual          Adequacy Purposes     Corrective Action Provisions
                                        ------------------------------------------------------------------------
                                        Amount     Ratio     Amount       Ratio           Amount     Ratio
                                        ------------------------------------------------------------------------
                                                                 (Dollars in thousands)


                          <c>        <c>        <c>        <c>         <c>             <c>        <c>
Total risk-based capital     Company    $29,988    19.51%     $12,295     8.00%               N/A      N/A
                             Bank       $29,518    19.22%     $12,286     8.00%           $15,357    10.00%

Tier 1 risk-based capital    Company    $29,203    19.00%     $ 6,147     4.00%               N/A      N/A
                             Bank       $28,733    18.71%     $ 6,143     4.00%           $ 9,214     6.00%

Tier 1 leverage capital      Company    $29,203    10.18%     $11,480     4.00%               N/A      N/A
                             Bank       $28,733    10.09%     $11,387     4.00%           $14,234     5.00%

<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, 2005, the Bank was considered "well capitalized" under
FDIC guidelines.


<PAGE>  13


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, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.

      The following table sets forth information relating to the Company's
payments due under contractual obligations at September 30, 2005:

<TABLE>
<CAPTION>

                                   -------------------------------------------------
                                                 Payments due by period
                                   -------------------------------------------------
                                    Total     <1 yr     1-3 yrs    3-5 yrs    >5 yrs
                                   -------------------------------------------------


                                <c>        <c>       <c>        <c>        <c>
Short-term debt (1)                $ 4,000    $4,000    $     -    $     -    $    -
Long-term debt (2)                  46,000     2,500     15,000     22,000     6,500
Capital lease obligations                -         -          -          -         -
Operating lease obligations (3)          9         7          2          -         -
Purchase obligations                     -         -          -          -         -
Other long-term liabilities
 reflected on the company's
 balance sheet under GAAP                -         -          -          -         -
                                   -------    ------    -------    -------    ------
                                   $50,009    $6,507    $15,002    $22,000    $6,500
                                   =======    ======    =======    =======    ======

<FN>
--------------------
<F1>  Consists of FHLB advances with original maturities less than one
      year.
<F2>  Consists of FHLB advances with original maturities greater than one
year.
      Certain advances are callable in 2005.
<F3>  Pertains to noncancelable lease agreements in effect at September 30,
      2005, pertaining to banking premises and equipment and future minimum
      rent commitments.
</FN>
</TABLE>

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 year
ended September 30, 2005 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>  14


Directors of the Company and the Bank

      James N. Ball is the sole owner and president of Secure Futures, Inc.
He has been in that position since 1984. Mr. Ball is a financial
independence specialist and a member of the National Association of
Securities Dealers as a registered representative. Mr. Ball assists
individuals, families and small business owners to create and maintain
multi-generational wealth. 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 40 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 18
years. Mr. Bilzerian was a member of the Worcester Airport Commission and
was Chairman of the Worcester Health and Hospital Authority.

      Nancy M. Carlson is the owner and president of Suburban Staffing,
Inc., a full-service staffing firm located in Westborough, Massachusetts
since 1968. She purchased the company in 1994 and has grown in size and
services to include consulting services, Human Resources and Management
training, automated data management and conversions

      David E. Carlstrom is formerly the President of Carlstrom Pressed
Metal Co., Inc., a contract manufacturer of metal stampings located in
Westborough for the past 55 years, and now serves as a consultant to the
family owned company. Mr. Carlstrom also served in the United States Air
Force and retired as a Lieutenant Colonel. He served as the President of
the Westborough Rotary Club and is the former Vice Chairman of the CMEA,
The Employers Association.

      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 had served 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 430 seniors.

      Robert A. Klugman, M.D., F.A.C.P. has practiced general medicine in
Westborough, Massachusetts for over 25 years. Dr. Klugman is currently the
Vice Chair of Medicine at the University of Massachusetts Medical School as
well as Medical Director of Managed Care for UMASS/Memorial.

      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.

      Jeffrey B. Leland has practiced estate administration, elder law and
real estate law and other general practices of law at Leland Law
Associates, P.C. for 14 years. At the same time, he has also


<PAGE>  15


served as an insurance broker selling property and casualty insurance
through Leland Insurance Agency, Inc. Both Leland Law Associates, P.C. and
Leland Insurance Agency, Inc. are located in Northborough, Massachusetts.
Mr. Leland is an officer and director of both of the corporations.

      Paul F. McGrath is a certified public accountant and has served as
President of Mottle McGrath Braney & Flynn, P.C. for over fifteen 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. Ms. Spinney
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 served as Vice President and Treasurer of Comey Oil
Co., Inc., located in Westborough, Massachusetts, for 13 years prior to her
retirement in 2001. Ms. Stone served in various other capacities within
Comey Oil for over 30 years. Ms. Stone 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 an attorney engaged in the general practice of
law and is associated with the firm of Tashjian, Simsarian & Wickstrom, LLP
located in Worcester, Massachusetts. He has engaged in the general practice
of law for over 30 years.


<PAGE>  16


                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                    WESTBOROUGH FINANCIAL SERVICES, INC.

Report of Independent Registered Public Accounting Firm              F-1

Consolidated Balance Sheets as of September 30, 2005
 and 2004                                                            F-2
Consolidated Statements of Income for the Years Ended
 September 30, 2005 and 2004                                      F-3 - F-4

Consolidated Statements of Changes in Stockholders' Equity
 for the Years Ended September 30, 2005 and 2004                     F-5
Consolidated Statements of Cash Flows for the
 Years Ended September 30, 2005 and 2004                          F-6 - F-7
Notes to Consolidated Financial Statements                        F-8 - F-43


<PAGE>


           REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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, 2005 and 2004,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for the years then ended. 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 the standards of the Public
Company Accounting Oversight Board (United States). 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, 2005
and 2004, and the results of their operations and their cash flows for the
years then ended in conformity with accounting principles generally accepted
in the United States of America.


/s/ Wolf & Company, P.C.


Boston, Massachusetts
November 1, 2005


<PAGE>  F-1


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

                         CONSOLIDATED BALANCE SHEETS

                         September 30, 2005 and 2004

                           (Dollars in thousands)

<TABLE>
<CAPTION>

                                   ASSETS

                                                                           2005         2004
                                                                           ----         ----


                                                                      <c>          <c>
Cash and due from banks                                                  $  3,590     $  4,528
Federal funds sold                                                          1,785        3,584
Short-term investments                                                      3,599        1,059
                                                                         --------     --------
      Total cash and cash equivalents                                       8,974        9,171

Securities available for sale, at fair value                               63,940       72,959
Federal Home Loan Bank stock, at cost                                       2,966        2,042
Loans, net of allowance for loan losses of $785 in 2005
 and $950 in 2004                                                         200,477      165,288
Premises and equipment, net                                                 6,094        6,437
Accrued interest receivable                                                 1,181        1,050
Deferred income taxes                                                       1,135          765
Bank-owned life insurance                                                   6,118        5,746
Other assets                                                                  605          552
                                                                         --------     --------
                                                                         $291,490     $264,010
                                                                         ========     ========

                    LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                 $210,281     $211,710
Short-term borrowings                                                       4,000        3,500
Long-term borrowings                                                       46,000       18,000
Mortgagors' escrow accounts                                                   409          312
Accrued expenses and other liabilities                                      2,197        1,783
                                                                         --------     --------
      Total liabilities                                                   262,887      235,305
                                                                         --------     --------

Commitments and contingencies (Note 13)
Stockholders' equity:
  Preferred stock - $.01 par value, 1,000,000 shares authorized,
   none outstanding                                                             -            -
  Common stock - $.01 par value, 5,000,000 shares authorized,
   1,594,774 and 1,589,574 shares issued and outstanding in 2005
   and 2004, respectively                                                      16           16
  Additional paid-in capital                                                4,990        4,843
  Retained earnings                                                        24,714       24,198
  Accumulated other comprehensive (loss) income                              (714)         159
  Unearned compensation - RRP (7,509 and 10,859 shares, respectively)        (130)        (209)
  Unearned compensation - ESOP (27,255 and 30,202 shares,
   respectively)                                                             (273)        (302)
                                                                         --------     --------
      Total stockholders' equity                                           28,603       28,705
                                                                         --------     --------
                                                                         $291,490     $264,010
                                                                         ========     ========
</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,
                                                                 -------------------------
                                                                      2005        2004
                                                                      ----        ----


                                                                 <c>         <c>
Interest and dividend income:
  Interest and fees on loans                                        $ 9,560     $ 7,859
  Interest and dividends on securities:
    Taxable interest                                                  2,684       3,409
    Non-taxable interest                                                 55          61
    Dividends                                                           157         118
  Interest on federal funds sold                                         75          33
  Interest on short-term investments                                     33          14
                                                                    -------     -------
      Total interest and dividend income                             12,564      11,494
                                                                    -------     -------

Interest expense:
  Interest on deposits                                                2,980       2,323
  Interest on Federal Home Loan Bank advances                         1,192         639
                                                                    -------     -------
      Total interest expense                                          4,172       2,962
                                                                    -------     -------

Net interest income                                                   8,392       8,532
(Credit) provision for loan losses                                     (173)         70
                                                                    -------     -------

Net interest income, after (credit) provision for loan losses         8,565       8,462
                                                                    -------     -------

Other income:
  Customer service fees                                                 603         661
  Gain on sales and calls of securities, net                             59         159
  Gain on sales of mortgages, net                                       165         100
  Miscellaneous                                                         236         245
                                                                    -------     -------
      Total other income                                              1,063       1,165
                                                                    -------     -------

Operating expenses:
  Salaries and employee benefits                                      4,468       4,253
  Occupancy and equipment expenses                                    1,163       1,216
  Data processing expenses                                              741         660
  Marketing and advertising                                             231         216
  Professional fees                                                     422         250
  Other general and administrative expenses                           1,324       1,315
                                                                    -------     -------
      Total operating expenses                                        8,349       7,910
                                                                    -------     -------
</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,
                                                                 -------------------------
                                                                      2005        2004
                                                                      ----        ----


                                                                 <c>         <c>
Income before provision for income taxes                              1,279       1,717
Provision for income taxes                                              381         526
                                                                    -------     -------
Net income                                                          $   898     $ 1,191
                                                                    =======     =======

Earnings per share:
  Basic                                                             $  0.58     $  0.77
  Diluted                                                           $  0.57     $  0.76
</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, 2005 and 2004

                (Dollars in thousands, except per share data)

<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, 2003           $16     $4,706    $23,325      $ 1,290         $(288)         $(331)        $28,718
                                                                                                                    -------

Comprehensive income:
  Net income                              -          -      1,191            -             -              -           1,191
  Change in net unrealized gain/
   loss on securities available
   for sale, after reclassification
   adjustment and tax effects             -          -          -       (1,131)            -              -          (1,131)
                                                                                                                    -------
      Total comprehensive income                                                                                         60
                                                                                                                    -------

Cash dividends declared
 ($0.20 per share)                        -          -       (318)           -             -              -            (318)
ESOP shares released and committed
 to be released (2,947 shares)            -         67          -            -             -             29              96
Amortization of RRP stock
 (3,800 shares)                           -          -          -            -            79              -              79
Issuance of common stock under
 stock option plan, including
 tax benefits of $26                      -         70          -            -             -              -              70
                                        ---     ------    -------      -------         -----          -----         -------

Balance at September 30, 2004            16      4,843     24,198          159          (209)          (302)         28,705
                                                                                                                    -------

Comprehensive income:
  Net income                              -          -        898            -             -              -             898
  Change in net unrealized gain/
   loss on securities available
   for sale, after reclassification
   adjustment and tax effects             -          -          -         (873)            -              -            (873)
                                                                                                                    -------
      Total comprehensive income                                                                                         25
                                                                                                                    -------

Cash dividends declared
 ($0.24 per share)                        -                  (382)           -             -              -            (382)
ESOP shares released and committed
 to be released (2,947 shares)            -         54          -            -             -             29              83
Amortization of RRP stock
 (3,350 shares)                                                                           79                             79
Issuance of common stock under
 stock option plan, including
 tax benefits of $30                      -         93          -            -             -              -              93
                                        ---     ------    -------      -------         -----          -----         -------

Balance at September 30, 2005           $16     $4,990    $24,714      $  (714)        $(130)         $(273)        $28,603
                                        ===     ======    =======      =======         =====          =====         =======
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>  F-5


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (Dollars in thousands)

<TABLE>
<CAPTION>

                                                            Years Ended September 30,
                                                            -------------------------
                                                               2005          2004
                                                               ----          ----


                                                          <c>           <c>
Cash flows from operating activities:
  Net income                                                 $    898      $  1,191
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    (Credit) provision for loan losses                           (173)           70
    Net amortization of securities                                399           522
    Amortization of net deferred loan costs and premiums
     (discounts) on purchased loans and indirect lending          (54)           12
    Depreciation expense                                          482           566
    Gain on sales of mortgages, net                              (165)         (100)
    Gain on sales and calls of securities, net                    (59)         (159)
    (Increase) decrease in accrued interest receivable           (131)          129
    Deferred income tax provision (benefit)                        68           (57)
    ESOP shares released and committed to be released              83            96
    Amortization of RRP stock                                      79            79
    Increase in bank-owned life insurance                        (140)         (214)
    Other, net                                                    361            55
                                                             --------      --------
      Net cash provided by operating activities                 1,648         2,190
                                                             --------      --------

Cash flows from investing activities:
  Activity in available-for-sale securities:
    Sales and calls                                             4,318        30,684
    Maturities                                                  3,700         6,790
    Purchases                                                  (6,284)      (31,237)
    Principal payments                                          5,634         6,285
  Purchase of Federal Home Loan Bank stock                       (924)         (792)
  Loan originations, net                                      (43,011)      (29,335)
  Proceeds from loan sales                                      8,214         5,551
  Purchase of premises and equipment, net                        (139)         (295)
  Premiums paid on bank-owned life insurance                     (232)         (239)
                                                             --------      --------
      Net cash used by investing activities                   (28,724)      (12,588)
                                                             --------      --------
</TABLE>

                                 (continued)

See accompanying notes to consolidated financial statements.


<PAGE>  F-6


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

              CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)

                           (Dollars in thousands)

<TABLE>
<CAPTION>

                                                            Years Ended September 30,
                                                            -------------------------
                                                               2005          2004
                                                               ----          ----


                                                          <c>           <c>
Cash flows from financing activities:
  Net decrease in deposits                                     (1,429)       (4,188)
  Net increase in short-term borrowings                           500         3,500
  Proceeds from Federal Home Loan Bank advances                33,000        11,000
  Repayment of Federal Home Loan Bank advances                 (5,000)       (2,500)
  Net increase in mortgagors' escrow accounts                      97           104
  Issuance of common stock under stock option plan,
   net of tax benefits                                             93            70
  Dividends paid                                                 (382)         (318)
                                                             --------      --------
      Net cash provided by financing activities                26,879         7,668
                                                             --------      --------

Net change in cash and cash equivalents                          (197)       (2,730)

Cash and cash equivalents at beginning of year                  9,171        11,901
                                                             --------      --------

Cash and cash equivalents at end of year                     $  8,974      $  9,171
                                                             ========      ========

Supplemental cash flow information:
  Interest paid on deposits                                  $  2,978      $  2,324
  Interest paid on Federal Home Loan Bank advances              1,110           612
  Income taxes paid                                               329           532
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>  F-7


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   Years Ended September 30, 2005 and 2004
                (Dollars in thousands, except per share data)

1.    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
      wholly-owned subsidiaries are The Hundredth Corporation, which was
      formed to own 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.

      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 and operating segments

      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.

      Management evaluates the Company's performance and allocates resources
      based on a single segment concept. Accordingly, there are no
      separately identified operating segments for which discrete financial
      information is available. The Company does not derive revenues from,
      or have assets located in, foreign countries, nor does it derive
      revenues from any single customer that represents 10% or more of the
      Company's total revenues.

      Reclassifications

      Certain amounts in the 2004 consolidated financial statements have
      been reclassified to conform to the 2005 presentation.


<PAGE>  F-8


             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)

      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. Management
      evaluates securities for other-than-temporary impairment at least on a
      quarterly basis, and more frequently when economic or market concerns
      warrant such evaluation. Consideration is given to (1) the length of
      time and the extent to which the fair value has been less than cost,
      (2) the financial condition and near-term prospects of the issuer, and
      (3) the intent and ability of the Company to retain its investment in
      the issuer for a period of time sufficient to allow for any
      anticipated recovery in fair value. Gains and losses on disposition of
      securities are recorded on the trade date and computed by the specific
      identification method.

      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 and net deferred costs on originated loans.
      Interest income is accrued on the unpaid principal balance. 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.


<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)

      Loans (concluded)

      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.

      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.


<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)

      Servicing

      Servicing assets are recognized as separate assets when rights are
      acquired through purchase or through sale of financial assets. For
      sales of mortgage loans, a portion of the cost of originating the loan
      is allocated to the servicing right based on relative fair value. Fair
      value is based on a valuation model that calculates the present value
      of estimated future net servicing income. Capitalized servicing rights
      are reported in other assets and are amortized into non-interest
      income in proportion to, and over the period of, the estimated future
      net servicing income of the underlying financial assets. Servicing
      assets are evaluated for impairment based upon the fair value of the
      rights as compared to amortized cost. Impairment is determined by
      stratifying rights by predominant characteristics, such as interest
      rates and terms. Fair value is based upon discounted cash flows using
      market-based assumptions. Impairment is recognized through a valuation
      allowance for an individual stratum, to the extent that fair value is
      less than the capitalized amount for the stratum.

      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-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)

      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. (Also see
      recent accounting pronouncement.)

      The following table illustrates the effect on net income and earnings
      per share if the Company had applied the fair value recognition
      provisions of SFAS No. 123 to stock-based employee compensation.

<TABLE>
<CAPTION>

                                                   Years Ended September 30,
                                                   -------------------------
                                                        2005       2004
                                                        ----       ----

      
                           <c>                <c>        <c>
      Net income                    As reported        $ 898      $1,191
                                    Pro forma          $ 872      $1,165

      Basic earnings per share      As reported        $0.58      $ 0.77
                                    Pro forma          $0.56      $ 0.76

      Diluted earnings per share    As reported        $0.57      $ 0.76
                                    Pro forma          $0.55      $ 0.75
</TABLE>


<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)

      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.

      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. For
      the years ended September 30, 2005 and 2004, there were no anti-
      dilutive potential common shares. Anti-dilutive potential common
      shares would be excluded from dilutive earnings per share
      calculations.


<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 (concluded)

      Earnings per common share for the year ended September 30, 2005 and
      2004 has been computed based on the following:

<TABLE>
<CAPTION>

                                                                 2005         2004
                                                                 ----         ----

      
                                                     <c>          <c>
      Average number of common shares outstanding             1,553,046    1,541,927
      Effect of dilutive options                                 18,158       21,800
                                                              ---------    ---------
      Average number of common shares outstanding
       used to calculate diluted earnings per common share    1,571,204    1,563,727
                                                              =========    =========
</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.

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

<TABLE>
<CAPTION>

                                                  Years Ended September 30,
                                                  -------------------------
                                                      2005         2004
                                                      ----         ----

      
                                           <c>          <c>
      Change in net unrealized holding gains/
       losses on securities available for sale      $(1,252)     $(1,587)
      Reclassification adjustment for gains
       realized in income                               (59)        (159)
                                                    -------      -------
                                                     (1,311)      (1,746)

      Tax effect                                        438          615
                                                    -------      -------

      Net-of-tax amount                             $  (873)     $(1,131)
                                                    =======      =======
</TABLE>


<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)

      Recent accounting pronouncements

      On December 16, 2004, the Financial Accounting Standards Board
      ("FASB") issued SFAS No. 123R, "Share-Based Payment," which is an
      Amendment of FASB Statement Nos. 123 and 95. SFAS No. 123R changes,
      among other things, the manner in which share-based compensation, such
      as stock options, will be accounted for by public companies. SFAS 123R
      will be effective for public companies that file as small business
      issuers as of the beginning of the annual reporting period that begins
      after December 15, 2005. For public companies, the cost of employee
      services received in exchange for equity instruments including options
      and similar awards generally will be measured at fair value at the
      grant date. The grant date fair value will be estimated using option-
      pricing models adjusted for the unique characteristics of those
      options and instruments, unless observable market prices for the same
      or similar options are available. The cost will be recognized over the
      requisite service period, often the vesting period. The change in
      accounting will replace existing requirements under SFAS No. 123,
      "Accounting for Stock-Based Compensation," and will eliminate the
      ability to account for share-based compensation transactions using APB
      Opinion No. 25, "Accounting for Stock Issued to Employees," which does
      not require companies to expense options if the exercise price is
      equal to the trading price at the date of grant. This Statement is not
      expected to have a material impact on the Company's consolidated
      financial statements.

2.    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, 2005 and 2004, these reserve
      balances amounted to $1,015 and $1,074, respectively.


<PAGE>  F-15


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

3.    SECURITIES AVAILABLE FOR SALE

      The amortized cost and estimated fair value of securities available
      for sale, at September 30, 2005 and 2004, with gross unrealized gains
      and losses, is as follows:

<TABLE>
<CAPTION>

                                                        September 30, 2005
                                         ------------------------------------------------
                                                        Gross         Gross
                                         Amortized    Unrealized    Unrealized     Fair
                                           Cost         Gains         Losses       Value
                                         ---------    ----------    ----------     -----

      
                                 <c>            <c>         <c>          <c>
      Federal agency obligations          $27,917        $  3        $  (446)     $27,474
      Banking and finance obligations       7,801          26           (101)       7,726
      Mortgage-backed securities           25,597          71           (649)      25,019
      Other bonds and obligations           3,711          27            (17)       3,721
                                          -------        ----        -------      -------
            Total debt securities          65,026         127         (1,213)      63,940
      Marketable equity securities              1           -             (1)           -
                                          -------        ----        -------      -------

                                          $65,027        $127        $(1,214)     $63,940
                                          =======        ====        =======      =======

<CAPTION>

                                                        September 30, 2004
                                         ------------------------------------------------
                                                        Gross         Gross
                                         Amortized    Unrealized    Unrealized     Fair
                                           Cost         Gains         Losses       Value
                                         ---------    ----------    ----------     -----

      
                                 <c>            <c>         <c>          <c>
      Federal agency obligations          $21,549        $ 81        $  (116)     $21,514
      Banking and finance obligations      12,442         240            (37)      12,645
      Mortgage-backed securities           33,035         236           (311)      32,960
      Other bonds and obligations           5,299         142             (8)       5,433
                                          -------        ----        -------      -------
            Total debt securities          72,325         699           (472)      72,552
      Marketable equity securities            410          18            (21)         407
                                          -------        ----        -------      -------

                                          $72,735        $717        $  (493)     $72,959
                                          =======        ====        =======      =======
</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 (continued)

      Proceeds from sales and calls of securities amounted to $4,318 and
      $30,684 for the years ended September 30, 2005 and 2004, respectively.
      Gross realized gains amounted to $99 and $244, respectively. Gross
      realized losses amounted to $40 and $85, 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, 2005      September 30, 2004
                                              --------------------    --------------------
                                              Amortized     Fair      Amortized     Fair
                                                Cost        Value       Cost        Value
                                              ---------     -----     ---------     -----

      
                                      <c>         <c>         <c>         <c>
      Within 1 year                            $13,427     $13,375     $ 4,802     $ 4,896
      Over 1 year through 5 years               26,002      25,546      34,123      34,309
      Over 5 years through 10 years                  -           -         365         387
                                               -------     -------     -------     -------
                                                39,429      38,921      39,290      39,592
      Mortgage and asset-backed securities      25,597      25,019      33,035      32,960
                                               -------     -------     -------     -------

                                               $65,026     $63,940     $72,325     $72,552
                                               =======     =======     =======     =======
</TABLE>

      At September 30, 2005 and 2004, a federal agency obligation with a
      carrying value of $1,003 and $1,012, respectively, and fair value of
      $1,005 and $1,000, for 2005 and 2004 respectively, was pledged to
      secure treasury, tax and loan deposits.


<PAGE>  F-17


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      SECURITIES AVAILABLE FOR SALE (concluded)

      Information pertaining to securities with gross unrealized losses at
      September 30, 2005 and 2004, aggregated by investment category and
      length of time that individual securities have been in a continuous
      loss position, follows:

<TABLE>
<CAPTION>

                                                     Less Than Twelve Months     Over Twelve Months
                                                     -----------------------    ---------------------
                                                       Gross                      Gross
                                                     Unrealized       Fair      Unrealized      Fair
                                                       Losses         Value       Losses        Value
                                                     ----------       -----     ----------      -----

      
                                               <c>          <c>          <c>         <c>
      September 30, 2005:

      Federal agency obligations                        $109         $ 8,310      $  337      $16,653
      Banking and finance obligations                      -               -         101        5,200
      Mortgage-backed securities                          47           3,823         602       18,595
      Other bonds and obligations                          -             500          17          762
                                                        ----         -------      ------      -------
            Total debt securities                        156          12,633       1,057       41,210
      Marketable equity securities                         -               -           1            -
                                                        ----         -------      ------      -------

            Total temporarily impaired securities       $156         $12,633      $1,058      $41,210
                                                        ====         =======      ======      =======

      September 30, 2004:

      Federal agency obligations                        $ 88         $11,955      $   28      $ 1,987
      Banking and finance obligations                     27           4,305          10        1,118
      Mortgage-backed securities                         226          20,214          85        4,471
      Other bonds and obligations                          8             789           -            -
                                                        ----         -------      ------      -------
            Total debt securities                        349          37,263         123        7,576
      Marketable equity securities                        21             274           -            -
                                                        ----         -------      ------      -------

            Total temporarily impaired securities       $370         $37,537      $  123      $ 7,576
                                                        ====         =======      ======      =======
</TABLE>

      At September 30, 2005, 71 debt securities have unrealized losses with
      aggregate depreciation of 2.2% from the Company's amortized cost
      basis. These unrealized losses relate principally to the interest rate
      environment. In analyzing an issuer's financial condition, management
      considers whether the securities are issued by the federal government
      or its agencies, whether downgrades by bond rating agencies have
      occurred, and industry analysts' reports. As management has the
      ability to hold these securities for the foreseeable future, no
      declines are deemed to be other than temporary.


<PAGE>  F-18


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

4.    LOANS

      A summary of the balances of loans follows:

<TABLE>
<CAPTION>

                                                                  September 30,
                                                              ---------------------
                                                                2005         2004
                                                                ----         ----

      
                                                     <c>          <c>
      Mortgage loans:
        Fixed rate                                            $ 57,953     $ 64,310
        Variable rate                                          100,365       64,788
        Commercial                                              26,979       23,313
        Home equity lines-of-credit                             15,452       11,295
                                                              --------     --------
            Total mortgage loans                               200,749      163,706
                                                              --------     --------


      Other loans:
        Personal loans                                             198          322
        Deposit secured loans                                      312          297
        Home improvement loans                                       6           85
        Commercial lines-of-credit                                 870          965
        Commercial installment                                   2,534        1,579
                                                              --------     --------
            Total other loans                                    3,920        3,248
                                                              --------     --------

            Total loans                                        204,669      166,954

      Due to borrowers on incomplete loans                      (4,287)      (1,507)
      Net deferred loan costs                                      620          389
      Net premiums on purchased loans and indirect lending         260          402
      Allowance for loan losses                                   (785)        (950)
                                                              --------     --------

            Loans, net                                        $200,477     $165,288
                                                              ========     ========
</TABLE>

      An analysis of the allowance for loan losses follows:

<TABLE>
<CAPTION>

                                            Years Ended September 30,
                                            -------------------------
                                                 2005       2004
                                                 ----       ----

      
                                       <c>        <c>
      Balance at beginning of year              $ 950      $ 911
      (Credit) provision for loan losses         (173)        70
      Charge-offs                                   -        (35)
      Recoveries                                    8          4
                                                -----      -----
      Balance at end of year                    $ 785      $ 950
                                                =====      =====
</TABLE>


<PAGE>  F-19


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      LOANS (concluded)

      The following is a summary of information pertaining to impaired and
      non-accrual loans:

<TABLE>
<CAPTION>

                                                       September 30,
                                                       -------------
                                                       2005     2004
                                                       ----     ----

      
                                              <c>      <c>
      Impaired loans without a valuation allowance     $175     $275

      Impaired loans with a valuation allowance           -       25
                                                       ----     ----

      Total impaired loans                             $175     $300
                                                       ====     ====

      Valuation allowance related to impaired loans    $  -     $ 10
                                                       ====     ====

      Total non-accrual loans                          $175     $121
                                                       ====     ====
</TABLE>

      At September 30, 2005 and 2004, there were no loans past-due ninety
      days or more and still accruing.

<TABLE>
<CAPTION>

                                                    Years Ended September 30,
                                                    -------------------------
                                                          2005     2004
                                                          ----     ----

      
                                                 <c>      <c>
      Average investment in impaired loans                $191     $660
                                                          ====     ====

      Interest income recognized on a cash basis
       on impaired loans                                  $ 32     $ 23
                                                          ====     ====
</TABLE>

      No additional funds are committed to be advanced in connection with
      impaired loans.

5.    SERVICING

      The Bank has sold mortgage loans, without recourse, 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, 2005 and 2004 amounted to $14,673 and $8,499,
      respectively. Mortgage loans serviced for others are not included in
      the accompanying consolidated balance sheets.

      At September 30, 2005 and 2004, $113 and $58, respectively, of
      capitalized servicing rights are included in other assets. During the
      years ended September 30, 2005 and 2004, $114 and $71, respectively,
      of servicing rights were capitalized and $30 and $13, respectively, of
      servicing rights were amortized. The carrying value of servicing
      rights approximates fair value.


<PAGE>  F-20


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

6.    PREMISES AND EQUIPMENT

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

<TABLE>
<CAPTION>

                                          September 30,
                                       -------------------    Estimated
                                         2005        2004     Useful Lives
                                         ----        ----     ------------
      
                              <c>         <c>        <c>
      Premises:
        Land                           $ 1,200     $ 1,200
        Buildings                        5,159       5,134    5 - 40 years
      Equipment                          4,196       4,083       3-7 years
                                       -------     -------
                                        10,555      10,417
      Less accumulated depreciation     (4,461)     (3,980)
                                       -------     -------

                                       $ 6,094     $ 6,437
                                       =======     =======
</TABLE>

      Depreciation expense for the years ended September 30, 2005 and 2004
      amounted to $482 and $566, respectively.

7.    DEPOSITS

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

<TABLE>
<CAPTION>

                                                    September 30,
                                                --------------------
                                                  2005        2004
                                                  ----        ----

      
                                       <c>         <c>
      Non-interest bearing accounts             $ 22,245    $ 25,131
      NOW accounts                                17,800      20,044
      Regular and other savings accounts         101,826     112,174
      Money market deposit accounts                5,161       6,139
                                                --------    --------
            Total non-certificate accounts       147,032     163,488
                                                --------    --------

      Term certificates of $100,000 and over      18,598      10,812
      Term certificates less than $100,000        44,651      37,410
                                                --------    --------
            Total certificate accounts            63,249      48,222
                                                --------    --------

            Total deposits                      $210,281    $211,710
                                                ========    ========
</TABLE>


<PAGE>  F-21


             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, 2005     September 30, 2004
                                     -------------------    -------------------
                                                Weighted               Weighted
                                                Average                Average
                                      Amount      Rate       Amount      Rate
                                      ------    --------     ------    --------

      
                            <c>          <c>       <c>          <c>
      Within 1 year                  $44,371      2.97%     $34,183      1.84%
      Over 1 year through 3 years     17,831      3.46       12,090      2.63
      Over 3 years                     1,047      4.05        1,949      3.28
                                     -------      ----      -------      ----

                                     $63,249      3.13%     $48,222      2.10%
                                     =======      ====      =======      ====
</TABLE>

8.    SHORT-TERM BORROWINGS

      At September 30, 2005 and 2004, short-term borrowings consist of
      advances from the Federal Home Loan Bank of Boston ("FHLB") with
      original maturities of less than one year at a weighted average
      interest rate of 4.21% and 1.92%, respectively.

      The Bank also has a $2,999 available line of credit with the FHLB at
      an interest rate that 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, 2005 and
      2004, there were no advances outstanding on the line of credit.


<PAGE>  F-22


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

9.    LONG-TERM BORROWINGS

      Long-term borrowings consist of Federal Home Loan Bank advances as
      follows:

<TABLE>
<CAPTION>

                                               Weighted Average Rate
      Maturing During       September 30,          September 30,
      the Year Ending    ------------------    ---------------------
      September 30,        2005       2004        2005      2004
      ---------------      ----       ----        ----      ----

           
           <c>        <c>           <c>       <c>
           2005          $     -    $ 5,000          -%     4.64%
           2006            2,500      2,500       2.91      2.95
           2007            8,000      3,000       3.06      2.32
           2008            7,000      2,500       3.91      3.76
           2009*           7,000      5,000       3.81      3.61
           2010           15,000          -       4.56         -
           2011            6,500          -       4.62         -
                         -------    -------

                         $46,000    $18,000
                         =======    =======

      *     Includes advances callable on November 22, 2005 and April 3,
            2006.
</TABLE>

10.   INCOME TAXES

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

<TABLE>
<CAPTION>

                                                  Years Ended September 30,
                                                  -------------------------
                                                        2005     2004
                                                        ----     ----

      
                                               <c>      <c>
      Current income tax provision:
        Federal                                         $291     $546
        State                                             22       37
                                                        ----     ----
                                                         313      583
                                                        ----     ----

      Deferred income tax provision (benefit):
        Federal                                           51      (43)
        State                                             17      (14)
                                                        ----     ----
                                                          68      (57)
                                                        ----     ----

            Total provision for income taxes            $381     $526
                                                        ====     ====
</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 (continued)

      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,
                                                   -------------------------
                                                        2005      2004
                                                        ----      ----

      
                                               <c>       <c>
      Statutory rate                                    34.0%     34.0%
      Increase (decrease) resulting from:
        State taxes, net of federal tax benefit          2.0       0.9
        Dividends received deduction                    (0.6)     (0.3)
        Officers' life insurance                        (4.4)     (2.8)
        Municipal income                                (1.2)     (1.2)
                                                        ----      ----

            Effective tax rates                         29.8%     30.6%
                                                        ====      ====
</TABLE>

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

<TABLE>
<CAPTION>

                                   September 30,
                                 -----------------
                                  2005       2004
                                  ----       ----

      
                        <c>        <c>
      Deferred tax asset:
        Federal                  $1,239     $  818
        State                       307        282
                                 ------     ------
                                  1,546      1,100
                                 ------     ------

      Deferred tax liability:
        Federal                    (334)      (288)
        State                       (77)       (47)
                                 ------     ------
                                   (411)      (335)
                                 ------     ------

      Net deferred tax asset     $1,135     $  765
                                 ======     ======
</TABLE>


<PAGE>  F-24


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      INCOME TAXES (concluded)

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

<TABLE>
<CAPTION>

                                                                     September 30,
                                                                   -----------------
                                                                    2005       2004
                                                                    ----       ----

      
                                                          <c>        <c>
      Employee benefit plans                                       $  697     $ 583
      Allowance for loan losses                                       397       465
      Net unrealized gain/loss on securities available for sale       373       (65)
      Depreciation and amortization                                   (54)      (60)
      Net deferred loan costs                                        (253)     (159)
      Other, net                                                      (25)        1
                                                                   ------     -----

      Net deferred tax asset                                       $1,135     $ 765
                                                                   ======     =====
</TABLE>

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

<TABLE>
<CAPTION>

                                                    Years Ended September 30,
                                                    -------------------------
                                                          2005      2004
                                                          ----      ----

      
                                                <c>        <c>
      Balance at beginning of year                       $  765     $ 93
      Deferred tax (provision) benefit                      (68)      57
      Deferred tax effect on net unrealized loss
       on securities available for sale                     438      615
                                                         ------     ----

Balance at end of year                                   $1,135     $765
                                                         ======     ====
</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.


<PAGE>  F-25


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

11.   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.

      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, 2005 and 2004, 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-26


             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, 2005 and 2004 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, 2005:
        Total capital (to risk
         weighted assets)
        Consolidated                  $29,988    19.51%    $12,295     8.00%        N/A      N/A
        Bank                           29,518    19.22      12,286     8.00     $15,357    10.00%

        Tier 1 capital (to risk
         weighted assets)
        Consolidated                   29,203    19.00       6,147     4.00         N/A      N/A
        Bank                           28,733    18.71       6,143     4.00       9,214     6.00

        Tier 1 capital (to average
         assets)
        Consolidated                   29,203    10.18      11,480     4.00         N/A      N/A
        Bank                           28,733    10.09      11,387     4.00      14,234     5.00

      September 30, 2004:
        Total capital (to risk
         weighted assets)
        Consolidated                  $29,496    20.97%    $11,253     8.00%        N/A      N/A
        Bank                           28,662    20.54      11,165     8.00     $13,957    10.00%

        Tier 1 capital (to risk
         weighted assets)
        Consolidated                   28,546    20.29       5,626     4.00         N/A      N/A
        Bank                           27,712    19.86       5,583     4.00       8,374     6.00

        Tier 1 capital (to average
         assets)
        Consolidated                   28,546    10.79      10,578     4.00         N/A      N/A
        Bank                           27,712    10.48      10,575     4.00      13,219     5.00
</TABLE>


<PAGE>  F-27


             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, 2005 and 2004, the Bank's retained earnings available
      for the payment of dividends was $17,232 and $17,497, respectively.
      Accordingly, $12,286 and $11,165 of the Company's equity in the net
      assets of the Bank was restricted at September 30, 2005 and 2004,
      respectively. Funds available for loans or advances by the Bank to the
      Company amounted to $1,723 and $1,750 at September 30, 2005 and 2004,
      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-28


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

12.   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,
                                                          ----------------------------
                                                                 2005        2004
                                                                 ----        ----
                                                             (Projected)

      
                                                      <c>          <c>
      Change in plan assets:
        Fair value of plan assets at beginning of year         $2,693       $2,801
        Actual gain on plan assets                                202          273
        Employer contribution                                     187           86
        Benefits paid                                            (429)        (467)
                                                               ------       ------
        Fair value of plan assets at end of year                2,653        2,693
                                                               ------       ------

      Change in benefit obligation:
        Benefit obligation at beginning of year                 3,253        3,073
        Service cost                                              201          194
        Interest cost                                             187          192
        Actuarial loss (gain)                                    (212)         261
        Benefits paid                                            (429)        (467)
                                                               ------       ------
        Benefit obligation at end of year                       3,000        3,253
                                                               ------       ------

      Funded status                                              (347)        (560)
      Unrecognized net actuarial (gain) loss                     (181)          18
      Transition liability                                         18           20
                                                               ------       ------

      Accrued pension cost                                     $ (510)      $ (522)
                                                               ======       ======

      Accumulated benefit obligation                           $2,070       $2,147
                                                               ======       ======
</TABLE>

      At October 31, 2005 and 2004, the assumptions used to determine the
      benefit obligation are as follows:

<TABLE>
<CAPTION>

                                       2005     2004
                                       ----     ----

      
                              <c>      <c>
      Discount rate                    5.75%    5.75%
      Rate of compensation increase    4.50%    4.50%
</TABLE>


<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)

      Pension plan (continued)

      The components of net periodic pension cost are as follows:

<TABLE>
<CAPTION>

                                              Plan Years Ended October 31,
                                              ----------------------------
                                                     2005         2004
                                                 (Projected)
      
                                           <c>          <c>
      Service cost                                  $ 201        $ 194
      Interest cost                                   187          192
      Expected return on plan assets                 (215)        (224)
      Transition obligation                             2            2
      Recognized net actuarial loss (gain)              1          (10)
                                                    -----        -----

                                                    $ 176        $ 154
                                                    =====        =====
</TABLE>

      Total pension expense for the years ended September 30, 2005 and 2004
      amounted to $184 and $173, respectively.

      For the plan years ended October 31, 2005 and 2004, actuarial
      assumptions used in accounting were as follows:

<TABLE>
<CAPTION>

                                                             2005        2004
                                                             ----        ----
                                                          (Projected)
      
                                                    <c>         <c>
      Discount rate on benefit obligations                   5.75%       6.25%
      Expected long-term rate of return on plan assets       8.00        8.00
      Annual salary increases                                4.50        4.50
</TABLE>

      In general, the Bank has selected their assumption with respect to the
      long term rate of return based on prevailing yields on high quality
      fixed income investments increased by a premium for equity return
      expectations.


<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)

      Pension plan (concluded)

      The Bank's pension plan weighted average asset allocation at September
      30, 2005 and 2004, are as follows:

<TABLE>
<CAPTION>

                              Percentage
                            of Plan Assets
                           at September 30,
                           ----------------
      Asset Category        2005      2004
      --------------        ----      ----

      
                  <c>       <c>
      Fixed income          34.2%     29.2%
      Equity securities     65.8      70.8
                           -----     -----

                           100.0%    100.0%
                           =====     =====
</TABLE>

      SBERA offers a common and collective trust as the underlying
      investment structure for pension plans. The target allocation mix for
      the common and collective trust portfolio calls for an equity-based
      investment range from 55% to 75% of total portfolio assets. The
      Trustees of SBERA, through the Investment Committee, select investment
      managers for the common and collective trust portfolio. A professional
      investment advisory firm is retained by the Investment Committee to
      provide allocation analysis, performance measurement and to assist
      with manager searches. The overall investment objective is to
      diversify equity investments across a spectrum of investment types
      (e.g., small cap, large cap, international, etc) and styles (e.g.,
      growth, value, etc.).

      The Bank expects to contribute $192 to its pension plan in fiscal
      2006.

      Estimated future benefit payments, which reflects expected future
      service, as appropriate, are as follows:

<TABLE>
<CAPTION>

      Years Ending
       October 31,    Amount
      ------------    ------

        
           <c>
           2006       $  131
           2007            8
           2008           23
           2009           86
           2010          302
        2011-2015      2,304
</TABLE>


<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)

      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 year ended September
      30, 2005 and 2004 amounted to $50 and $70, respectively.

      401(k) Plan

      The Bank has a 401(k) Plan whereby each employee reaching the age of
      21 and having completed at least three months of service, 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. The Bank matches 50% of
      the first 6% of an employee's compensation contributed to the Plan.
      All participants are fully vested. For the years ended September 30,
      2005 and 2004, expense attributable to the Plan amounted to $53 and
      $48, 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 as a
      funding source. At September 30, 2005 and 2004, the Bank has accrued
      $854 and $911, respectively, relating to these plans. For the years
      ended September 30, 2005 and 2004, expenses attributable to the plans
      amounted to $114 and $208, respectively. Prior to fiscal 2005, the
      supplemental retirement liability for certain executive officers was
      based on the present value of the future payments and was accrued over
      the executive's employment. During 2005, a plan of deferred
      compensation ("Plan") was adopted which covers the executive officers.
      The previous agreements were terminated and new agreements were
      entered into under the Plan. The Plan is accounted for under SFAS No.
      87.


<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)

      Supplemental retirement benefits (continued)

      According to the Company's actuary, the funded status of the Plan as
      of September 30, 2005 is as follows:

<TABLE>

      
                                       <c>
      Benefit obligation                        $1,359
      Fair value of plan assets                      -
                                                ------

      Funded status                             $1,359
                                                ======

      Accumulated benefit obligation            $1,065
                                                ======

      Accrued supplemental pension cost         $  350
      Additional minimum liability                 715
                                                ------

      Accrued supplemental pension liability    $1,065
                                                ======

      Intangible asset                          $  715
                                                ======
</TABLE>

      The following assumptions were used to determine the benefit
      obligation and the net periodic pension cost at or for the year ended
      September 30, 2005:

<TABLE>

      
                              <c>
      Discount rate                    6.50%
      Rate of compensation increase    5.00%
</TABLE>

      The Company does not expect to make any contributions to the Plan in
      fiscal 2006.


<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 (continued)

      Supplemental retirement benefits (concluded)

      Estimated future benefit payments, which reflect expected future
      services, as appropriate, are as follows:

<TABLE>
<CAPTION>

       Year Ending
      September 30,        Amount
      -------------        ------
                       (In thousands)

        
                <c>
           2006            $    -
           2007               559
           2008                 -
           2009                 -
           2010             1,144
        2011-2015               -
</TABLE>

      Expense related to the Plan amounted to $222,000 for the year ended
      September 30, 2005.

      The Company purchased bank-owned life insurance ("BOLI") on the lives
      of certain officers and has entered into agreements with certain
      executives to provide their beneficiaries certain benefits upon death
      from the proceeds of the BOLI. The BOLI is carried at cash surrender
      value on the balance sheet, which is less than the face value of the
      policy less benefits to be paid to beneficiaries.

      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 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. In
      addition, 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-34


             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, 2005, the remaining principal balance is payable as
      follows:

<TABLE>
<CAPTION>

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

        
             <c>
           2006         $ 24
           2007           26
           2008           28
           2009           30
           2010           32
        Thereafter       203
                        ----

                        $343
                        ====
</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 $83 and $96 for the years
      ended September 30, 2005 and 2004, respectively.

      Shares held by the ESOP include the following:

<TABLE>
<CAPTION>

                                    September 30,
                                  ----------------
                                   2005      2004
                                   ----      ----

      
                         <c>       <c>
      Allocated                   14,735    11,788
      Committed to be released     2,210     2,210
      Unallocated                 27,255    30,202
                                  ------    ------

                                  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, 2005 and
      2004 was $763 and $911, respectively.


<PAGE>  F-35


             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

      A summary of the status of the Company's stock option plan for the
      years ended September 30, 2005 and 2004 is presented below:

<TABLE>
<CAPTION>

                                                    2005                   2004
                                            -------------------    -------------------
                                                       Weighted               Weighted
                                                       Average                Average
                                                       Exercise               Exercise
                                            Shares      Price      Shares      Price
                                            ------     --------    ------     --------

      
                                   <c>         <c>        <c>         <c>
      Fixed Options:
        Outstanding at beginning of year    33,900      $11.38     37,300      $11.53
        Granted                                  -                      -
        Forfeited                             (200)      10.31          -
        Exercised                           (5,200)      12.05     (3,400)      12.98
                                            ------      ------     ------      ------

        Outstanding at end of year          28,500      $11.27     33,900      $11.38
                                            ======      ======     ======      ======
      Options exercisable at year-end       19,880      $10.31     17,260      $10.31
      Weighted-average fair value of
       options granted during the year           -                      -
</TABLE>

      The fair value of each option grant when applicable is estimated on
      the date of grant using the Black-Scholes option-pricing model.

      Information pertaining to stock options outstanding at September 30,
      2005 is as follows:

<TABLE>
<CAPTION>

                                    Options Outstanding                         Options Exercisable
                                    --------------------------------------    -----------------------
                                                     Weighted
                                                     Average      Weighted                   Weighted
                                                    Remaining     Average                    Average
                                       Number      Contractual    Exercise       Number      Exercise
            Exercise Price          Outstanding        Life        Price      Exercisable     Price
            --------------          -----------    -----------    --------    -----------    --------

      
                              <c>          <c>            <c>           <c>          <c>
          $10.31                       26,400       5.0 years      $10.31        19,880       $10.31
           23.25                        2,100       6.0             23.25             -
                                       ------                                    ------

      Outstanding at end of year       28,500       5.1 years                    19,880
                                       ======                                    ======
</TABLE>


<PAGE>  F-36


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      EMPLOYEE BENEFIT PLANS (concluded)

      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. There were no Awards granted during the years ended
      September 30, 2005 and 2004. 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 $79 for the years
      ended September 30, 2005 and 2004. Compensation expense is based on
      the fair value of common stock on the purchase date.

13.   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-37


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

      COMMITMENTS AND CONTINGENCIES (concluded)

      Loan commitments (concluded)

      At September 30, 2005 and 2004, financial instruments whose contract
      amounts represent credit risk consist of:

<TABLE>
<CAPTION>

                                                        2005       2004
                                                        ----       ----

      
                                             <c>        <c>
      Commitments to grant loans                      $12,094    $ 6,204
      Unadvanced funds on home equity and personal
       lines-of-credit                                 14,810     14,223
      Unadvanced funds on commercial loans and
       lines-of-credit                                  1,978      1,455
</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.

      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.


<PAGE>  F-38


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

14.   RELATED PARTY TRANSACTIONS

      In the ordinary course of business, the Bank has granted loans to its
      Directors. At September 30, 2005 and 2004, the amount of such loans,
      which exceeded $60 in the aggregate to each related party, was
      approximately $1,776 and $1,732, 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, 2005 and 2004, total principal additions were $129
      and $272, respectively, and total principal payments were $85 and $80,
      respectively.

15.   FAIR VALUE OF FINANCIAL INSTRUMENTS

      The fair value of a financial instrument is the current amount that
      would be exchanged between willing parties, other than in a forced
      liquidation. Fair value is best determined based upon quoted market
      prices. However, in many instances, there are no quoted market prices
      for the Company's various financial instruments. 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
      fair value estimates may not be realized in an immediate settlement of
      the instrument. Certain financial instruments and all nonfinancial
      instruments are excluded from disclosure requirements. Accordingly,
      the aggregate fair value amounts presented may not necessarily
      represent the underlying fair value of the Company.

      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.


<PAGE>  F-39


             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)

            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.

            Short-term borrowings and long-term borrowings: 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, 2005 and 2004, was immaterial.

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

<TABLE>
<CAPTION>

                                                         September 30,
                                         --------------------------------------------
                                                 2005                    2004
                                         --------------------    --------------------
                                         Carrying      Fair      Carrying      Fair
                                          Amount       Value      Amount       Value
                                         --------      -----     --------      -----

      
                                <c>         <c>         <c>         <c>
      Financial assets:
        Cash and cash equivalents        $  8,974    $  8,974    $  9,171    $  9,171
        Securities available for sale      63,940      63,940      72,959      72,959
        Federal Home Loan Bank stock        2,966       2,966       2,042       2,042
        Loans, net                        200,477     200,780     165,288     170,037
        Accrued interest receivable         1,181       1,181       1,050       1,050
                                         --------    --------    --------    --------
      Financial liabilities:
        Deposits                          210,281     209,984     211,710     211,657
        Short-term borrowings               4,000       4,000       3,500       3,499
        Long-term borrowings               46,000      45,542      18,000      18,157
</TABLE>


<PAGE>  F-40


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                (Dollars in thousands, except per share data)

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

<TABLE>
<CAPTION>

                                                  September 30,
                                               ------------------
      BALANCE SHEETS                             2005       2004
      --------------                             ----       ----

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

      Cash and due from bank                   $   667    $ 1,109
      Short-term investments                       359        301
                                               -------    -------
            Total cash and cash equivalents      1,026      1,410
      Investment in subsidiary                  27,230     26,868
      Loan receivable - ESOP                       343        365
      Other assets                                   4         62
                                               -------    -------

            Total assets                       $28,603    $28,705
                                               =======    =======

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

      Stockholders' equity                     $28,603    $28,705
                                               =======    =======

            Total liabilities and
             stockholders' equity              $28,603    $28,705
                                               =======    =======
</TABLE>

<TABLE>
<CAPTION>

                                                             Years Ended
                                                            September 30,
                                                          ----------------
      STATEMENTS OF INCOME                                2005        2004
      --------------------                                ----        ----

      
                                                 <c>       <c>
      Income:
        Interest on short-term investments                $   9     $    4
        Interest on loan - ESOP                              28         37
                                                          -----     ------
            Total income                                     37         41
      Operating expenses                                    161        130
                                                          -----     ------
      Loss before income taxes and equity in
       undistributed net income of subsidiary              (124)       (89)
      Income tax benefit                                    (42)       (30)
                                                          -----     ------
      Loss before undistributed net income
       of subsidiary                                        (82)       (59)
      Equity in undistributed net income of subsidiary      980      1,250
                                                          -----     ------

            Net income                                    $ 898     $1,191
                                                          =====     ======
</TABLE>


<PAGE>  F-41


             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                                   2005        2004
      ------------------------                                   ----        ----
      
                                                       <c>        <c>
      Cash flows from operating activities:
        Net income                                              $  898     $ 1,191
        Adjustments to reconcile net income to net
         cash provided (used) by operating activities:
          Decrease in other assets                                  58         130
          Equity in undistributed earnings of subsidiary          (980)     (1,250)
                                                                ------     -------
            Net cash provided (used) by operating activities       (24)         71
                                                                ------     -------

      Cash flows from investing activities:
        Principal paydowns received on ESOP loan                    22          21
                                                                ------     -------
            Net cash provided by investing activities               22          21
                                                                ------     -------

      Cash flows from financing activities:
        Intercompany cash transfer                                   -       1,162
        Dividends paid                                            (382)       (318)
                                                                ------     -------
            Net cash provided (used) by financing activities      (382)        844
                                                                ------     -------

      Net change in cash and cash equivalents                     (384)        936

      Cash and cash equivalents at beginning of year             1,410         474
                                                                ------     -------

      Cash and cash equivalents at end of year                  $1,026     $ 1,410
                                                                ======     =======
</TABLE>


<PAGE>  F-42


             WESTBOROUGH FINANCIAL SERVICES, INC. AND SUBSIDIARY

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)

                (Dollars in thousands, except per share data)

17.   QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>

                                                                     Years Ended September 30,
                                       ------------------------------------------------------------------------------------
                                                         2005                                        2004
                                       ----------------------------------------    ----------------------------------------
                                       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           $3,324     $3,173     $3,080     $2,987     $2,938     $2,838     $2,749     $2,969
Interest expense                        1,262      1,113        983        814        769        734        700        759
                                       ------     ------     ------     ------     ------     ------     ------     ------

Net interest income                     2,062      2,060      2,097      2,173      2,169      2,104      2,049      2,210
(Credit) provision for loan losses          -          -        (48)      (125)         -         30         10         30
                                       ------     ------     ------     ------     ------     ------     ------     ------

Net interest income, after (credit)
 provision for loan losses              2,062      2,060      2,145      2,298      2,169      2,074      2,039      2,180

Gain (loss) on securities, net             10          -         47          2         69         31         60         (1)
All other income                          191        338        254        221        241        202        329        234
Operating expenses                      2,143      2,136      2,045      2,025      2,002      2,014      1,997      1,897
                                       ------     ------     ------     ------     ------     ------     ------     ------

Income before income taxes                120        262        401        496        477        293        431        516

Provision for income taxes                 19         91        114        157        144         83        132        167
                                       ------     ------     ------     ------     ------     ------     ------     ------

Net income                             $  101     $  171     $  287     $  339     $  333     $  210     $  299     $  349
                                       ======     ======     ======     ======     ======     ======     ======     ======

Earnings per common share:
  Basic                                $ 0.06     $ 0.11     $ 0.18     $ 0.22     $ 0.21     $ 0.14     $ 0.19     $ 0.23
                                       ======     ======     ======     ======     ======     ======     ======     ======
  Diluted                              $ 0.06     $ 0.11     $ 0.18     $ 0.22     $ 0.21     $ 0.13     $ 0.19     $ 0.23
                                       ======     ======     ======     ======     ======     ======     ======     ======
</TABLE>


<PAGE>  F-43


                    Westborough Financial Services, Inc.
                          Stockholders Information

                          Common Stock Information

On September 30, 2005 there were 1,594,774 shares of common stock issued
and outstanding and approximately 652 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.OB".

                               Annual Meeting

The annual meeting of shareholders will be held on Thursday, January 26,
2006 at 3:00 p.m., local time.  The meeting will take place at Indian
Meadows Country Club, 275 Turnpike Road, 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, 2005. 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       $32.00        $30.10         $30.98            $0.06
  Second Quarter      $32.00        $27.20         $29.44            $0.06
  Third Quarter       $27.20        $24.00         $24.79            $0.06
  Fourth Quarter      $29.19        $25.20         $27.77            $0.06
</TABLE>

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


<PAGE>


As it approaches its                       Westbourough Savings
tenth year of giving, the                  Charitable Foundation, Inc.
Westborough Savings                        -------------------------------
Charitable Foundation                      Our Communities, Our Commitment
continues its support
of many charitable
organizations in our
area.


                                   Photos


                                                 Nearly $220,000
                                                 has been
                                                 disbursed to local
                                                 charities since
                                                 the Foundation's
                                                 inception.


<PAGE>


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


                                                           at September 30,
Consolidated Balance Sheet Data ($ in thousands)           2005        2004

Total assets                                           $291,490    $264,010
Loans, net                                              200,477     165,288
Investment securities                                    66,906      75,001
Total deposits                                          210,281     211,710
Federal Home Loan Bank advances                          50,000      21,500
Stockholders' equity                                     28,603      28,705
Allowance for loan losses                                   785         950
Non-accrual loans                                           175         121
Non-performing assets                                       175         121

                                                              Years Ended
Consolidated Statement of Income                             September 30,
($ in thousands, except per share data)                    2005        2004

Total interest and dividend income                      $12,564     $11,494
Total interest expense                                    4,172       2,962
                                                        -------     -------
Net interest income                                       8,392       8,532
Provision for loan losses                                  (173)         70
                                                        -------     -------
Net interest income, after provision for loan losses      8,565       8,462
                                                        -------     -------
Customer service fees                                       603         661
Gain on sales and calls of securities available
 for sale, net                                               59         159
Gain on sales of mortgages, net                             165         100
Miscellaneous                                               236         245
                                                        -------     -------
Total other income                                        1,063       1,165
                                                        -------     -------
Total operating expenses                                  8,349       7,910
                                                        -------     -------
Income before provision for income taxes                  1,279       1,717
Provision for income taxes                                  381         526
                                                        -------     -------
Net income                                                 $898      $1,191
                                                        =======     =======

Basic number of weighted average shares outstanding   1,553,046   1,541,927
Dilutive number of weighted average shares
 outstanding                                          1,571,204   1,563,727
Basic earnings per share                                  $0.58       $0.77
Dilutive earnings per share                               $0.57       $0.76
Dividends declared per share                              $0.24       $0.20


<PAGE>


                                                              Years Ended
                                                             September 30,

Performance Ratios:                                        2005        2004
Return on average assets                                  0.32%       0.46%
Return on average stockholders' equity                    3.11%       4.14%
Dividend payout ratio (1)                                41.99%      26.23%
Average stockholders' equity to average assets           10.43%      11.10%
Net interest rate spread (2)                              2.99%       3.32%
Net interest margin (3)                                   3.25%       3.53%
Operating expenses as a percent of average assets         3.02%       3.05%
Average interest-earning assets to average
 interest-bearing liabilities                           116.44%     117.19%
Efficiency ratio (4)                                     90.45%      83.81%

(1)   Dividend payout ratio represents dividends declared per share divided
      by dilutive earnings per share.
(2)   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.
(3)   Net interest margin represents net interest income as a percentage of
      average interest-earning assets.
(4)   Efficiency ratio represents total operating expenses divided by the
      sum of net interest income, customer service fees and miscellaneous
      income.


                                                           at September 30,
                                                           2005        2004
Asset Quality Ratios:
Non-performing loans as a percent of loans                0.09%       0.07%
Non-performing assets as a percent of total assets        0.06%       0.05%
Allowance for loan losses as a percent of total loans     0.39%       0.57%

Capital Ratio and other data:
Equity to assets at end of period                         9.81%      10.87%
Number of shares outstanding at end of period         1,594,774   1,589,574

Number of:
Full-service offices (1)                                      4           4
Full-time equivalent employees                               75          68

(1)   The number of full service offices does not include our branch at the
      Willows.


<PAGE>


VISION

                 Westborough Bank will be a value leader in
                 providing financial services to individuals
                 and businesses in central Massachusetts.

MISSION
STATEMENT

                           WESTBOROUGH BANK WILL:

                             Build Relationships
         Westborough Bank is committed to building strong, long-term
                      relationships with our customers.

                              Provide Solutions
     We will offer a broad range of financial products and services that
     are responsive to the needs of our customers - today and tomorrow.

                         Deliver Outstanding Service
         We will treat our customers as we would want to be treated
      ourselves, with respect, courtesy, and friendliness. We will earn
       their trust and loyalty by actively listening and responding to
                                their needs.

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


[LOGO]

Westborough
Bank  Incorporated 1869

Member FDIC                    Member DIF              Equal Housing Lender


<PAGE>